Benefits To CEOs With Outside Board Seats
May 23 2011 by ChiefExecutive.net
CEOs sometimes have seats on multiple boards of directors. In recent years, many CEOs have cut down on outside board participation voluntarily, while some company boards have limited their own CEO from such participation (62 percent of companies limit the number of boards on which their CEO can serve and 4 percent ban any such outside participation at all). They may want to rethink those choices.
While it might initially appear that such involvement would take away from a CEO’s own corporate duties, a recent study by Boston College management professor Marta Geletkanycz and Arizona State University professor Brian Boyd says otherwise. The new study shows that CEOs involved in outside boards have the same return on assets as CEOs who do not. In fact, in some instances, having outside board positions actually had a positive effect on a company’s return on assets.
Companies in undiversified markets, low-growth industries, or intensely competitive markets whose CEOs served on outside boards see concrete benefits from such participation. These CEOs had returns on assets that were 15 percent higher than their rivals whose CEOs did not serve on outside boards. The idea is that CEOs are able to learn from the other companies with which they are affiliated — they may gain insight and strategies for how to deal with their own challenges.
Don’t be wary of serving on an outside board if you are asked (and your company allows you). You just might learn something valuable for your own company.