Size and Composition of a Board of Directors
The minimum and maximum size of a board is usually determined by the company’s articles, which may be changed by the members’ meeting.
The size of a board will influence its style. Small boards tend to act cohesively: large boards may find sectional interests and cliques developing, and there may be a call for standing committees to handle matters of detail.
But of more importance than the absolute size of the board is its structure – the types of director, balance between interests, experience and backgrounds represented.
The way the board is structured has implications for corporate governance and the work of the director. The key distinction is between executive directors, who are also managers, and non-executive or outside directors, who are not. Boards can vary considerably in the balance between the two.
The UK Corporate Governance Code requires boards to have a strong presence of both executive and non-executive directors so that no individual or small group can dominate its decision making. At least half the board, not counting the chairman, should be independent non-executive directors.
This means that a board of nine, for example, needs to have at least four independent non-executives to balance four executive directors, with the chairman being the ninth director. Smaller companies should have at least two independent non-executive directors.