Private Equity Billionaire Wilbur L. Ross: Man 'Over Board'?

NEW YORK ( The Deal) -- Late last year private equity billionaire  Wilbur L. Ross Jr. -- best known for restructuring failed companies in the steel industry and other sectors -- was elected as vice chairman of the Bank of Cypress.

Ross joined a newly constituted board to help the embattled institution complete a turnaround after Cypress was rocked by a Greek debt crisis. His buyout shop, WL Ross & Co. LLC, owns a 19% stake.

In a statement, Ross noted at the time that due to "new European rules" limiting directorships of bank officers that he was resigning from the boards of several other companies including Assured Guaranty, International Automotive Components Group, International Textile Group ( ITXN), Navigator Holdings ( NVGS), Talmer Bancorp  ( TLMR) and embattled mortgage debt collector Ocwen Financial  ( OCN). 

However, according to a compilation of data by Deal affiliate BoardEx, Ross still sits on at least five public company boards: ArcelorMittal ( MT), the world largest steel company, the Bank of Cypress, Exco Resources  ( XCO), Sun National Bank ( SNBC) and a special purpose acquisition company, or SPAC, for WL Ross Holding  ( WLRHU
 
At the same time he is executive director or supervisory director at privately held Diamond Shipping, a tanker company where WL Ross is a major stakeholder and he holds the non-executive chairman position. 
 
On top of that, Ross is a member of the investment committee for Asia-focused activist investor The Taiyo Fund LP, a joint venture between WL Ross, the California Public Employees' Retirement System and a team investing in Japan. He also is a trustee at the Brookings Institution, a Washington think tank, the Palm Beach Civic Association, and the board of the Yale School of Management, where he studied, as well as several other other non-profits. In all, BoardEx reports that Ross serves roughly 17 boards, committees and clubs, a number that is substantial though significantly down from a few years ago.

That's still too many, according to governance experts and restructuring specialists. Kurt S. Schulzke, director of law ethics and regulation at the Kennesaw State University Corporate Governance Center, said there is no question that Ross is over-boarded. "There is plenty of data out there to support the notion that for a top executive to sit on more than two or three boards is excessive," Schulzke said. "There is no way one can absorb, synthesize and analyze the company when you are sitting on so many boards."  

Ross defends his directorships, telling The Deal that all the for-profit boards he sits on represent present or former portfolio companies. He added that participating on boards and influencing the direction of companies is an important component of the business model for WL Ross & Co., the private equity firm he founded in 2000. "In some particularly active situations I might be on the phone or in physical meetings with management several times a week," Ross told The Deal. "We also interact informally with managements between meetings."

Invesco ( IVZ), a money manager based in Atlanta acquired WL Ross in 2006. Ross stepped down from day-to-day management of WL Ross & Co. last year and is currently chairman and Chief Strategy Officer, clearly still a top position at the firm. The buyout shop has two senior managing directors that are co-leaders of the firm , which no longer employs the CEO title.

"Now that I am less involved in the day to day affairs of the [WL Ross] business I have even more time available," Ross said.

Ross suggested that there is a big difference between a top executive of a public company sitting on a number of other boards and his situation, where WL Ross owns stakes in public and private companies. "We are major stakeholders in companies and are active, not passive managers," Ross said. "An executive from a non-private equity firm would not have as much time to devote to boards as I do because for such a person an outside directorship is just a side line."

Being on multiple boards, Ross added, exposes individuals to a wide range of management practices and relationships between board and management. "You can perhaps imagine the breadth of experience that serving on so many and such diverse boards enables me to bring to portfolio companies," he said.

However, governance experts said they don't buy that "richer knowledge base" justification for multiple board seats. Schulzke acknowledges that many individuals who have multiple directorships make the argument that being a director at so many companies allows them to work from a broader grasp of the markets and corporations in general. He argues that the individual still has to physically spend the time to understand and provide adequate oversight to each of the companies. "Unless you have a deal with Dr. Who to let you travel back in time it is a mystery to me how someone can serve on five or six or seven public company boards and do their job effectively," Schulzke said.

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