We live in a world of constant distraction – from the sound of a new text message to yet another email marked “URGENT!” And while there have been a few studies debunking the value of multi-tasking, a new paper has shown that it could actually affect corporate profitability, at least as it applies to overly stretched directors. In a paper called “Preoccupied Independent Directors,” PhD student Emma Jincheng Zhang from the University of New South Wales identifies a new group of directors who are too busy to effectively do their jobs and monitor effectively. The study looks at empirical data that looks at the nature of director “busy-ness and independence” alongside the priority a director assigns to a directorship and finds that preoccupied directors have a higher meeting absence and “a higher likelihood of relinquishing a relatively less prestigious directorship.”
While that might not be a big surprise to anyone who’s dealt with a board, the impact of overly busy directors on firm performance. Here, Zhang finds that a higher proportion of preoccupied directors leads to lower firm value and poorer M&A performance.