The size of the board is more and more important, especially considering the most recent legislative developments requiring or recommending gender diversity, solid experience for being the chair of audit committee, or other specific skills.
In many listed companies, the solution identified by the board is to increase the number of members of the board, increasing the costs of the companies, instead of replacing some of the members of the board.
In certain countries (as Germany) there are clear legal requirements related to the minimum number of the members of the board, and many times the board room is too crowded.
Even though boards are playing a very important role in corporate governance, institutional investors in listed companies are not comfortable with large boards, stating that large boards may reduce the company’s performance.
The size of the board depends on the type of the management: dualist or unitary system. However, a board with over 12 members is difficult to be managed from administrative point of view and tends to be weak as the opinions may be diluted.
The table below presents the board’s size for the most important companies listed on Bucharest Stock Exchange.
Do you think that there are boards that should have a different number of members?