ISS has prepared a whitepaper that analyzes trends in director overboarding. The whitepaper notes that in the 2019 proxy season, “overboarding” became a center-stage issue for many companies and investors. Several large asset managers, including Vanguard, BlackRock, and LGIM, enhanced their voting guidelines to apply stricter criteria, while some directors serving on multiple public company boards faced significant opposition to their elections.
ISS tested the potential impact of overboarding on company performance using several different scenarios. ISS used its proprietary EVA based methodology in the tests. ISS used two metrics of profitability based on this methodology: EVA Margin and EVA Momentum over a three-year period. Companies that had at least one overboarded director (in either of the two categories) above) for the past three consecutive years exhibited median EVA Margin and EVA Momentum levels at approximately half of companies with no overboarded directors in 2019.