The answer is not that it matters, but as a matter of financial and legal controls they need to know and approve. Do they care? They probably are delighted, but also want to get all the paperwork set up to avoid problems.

The space this comes from is the legal undue influence side where they need to give notice to shareholders about potential conflicts of interest, and it needs to be in the form of having a clear positive audit trail that they have told people to follow a clear policy with no grey area so that any deviation is an accident not willful failure to get people to tell them.

Another way to frame that question is: Should we remove the right for people to enter into such contracts?

Legally, yes. I mean it still depends on a lot of things but mostly at will employment contracts will have clauses about such things. You will have to get approval from legal before you can get on a board of even a dog rescue or a glove repair company. A practical consideration is simple like if you are a google exec and you are on board of a dog rescue company and that company gets hit with allgeations that you are just shooting all the dogs and selling their meat to some foreign nation. News will cover it as "Google Exec on Board of Evil Dog Rescue Company" so you extend that repuation risk to Google as well since you are actively employed there. Obviously an extereme example but that's the kind of logic they think of.

Morals imo often have nothing to do with law, but fairness does.

The obvious answer is that "obvious lines" aren't at all obvious at the scale of Google.

Googlers are well paid, and that pay reflects this.