The impact of board size on firm performance: evidence from the UK

We examine the impact of board size on firm performance for a large sample of 2746 UK listed firms over 1981-2002. The UK provides an interesting institutional setting, because UK boards play a weak monitoring role and therefore any negative effect of large board size is likely to reflect the malfunction of the board's advisory rather than monitoring role. We find that board size has a strong negative impact on profitability, Tobin's Q and share returns. This result is robust across econometric models that control for different types of endogeneity. We find no evidence that firm characteristics that determine board size in the UK lead to a more positive board size-firm performance relation. In contrast, we find that the negative relation is strongest for large firms, which tend to have larger boards. Overall, our evidence supports the argument that problems of poor communication and decision-making undermine the effectiveness of large boards

Does the composition and practice of boards of directors bear any relationship to the performance of their companies?

Board composition data and evaluations about how listed-company boards actually performed in 1997 were related to the performance of their companies over the ensuing three years. Statistical analyses were conducted on the relationships between Board Composition, Practice and Potential in 1997 and subsequent Company Performance, based on measures of Cash Flow Return on Total Assets (CFROTA) and Sales Turnover. Hypotheses were formulated in relation to three theories of the board and to various principles of the Combined Code and recommendations of the Higgs Review. Most were not supported and the results generally provide scant support for the main theories of the board. Board practice on the tasks was generally "not" linked to company performance, whereas board potential "was" significantly related on six of the 16 tasks of the board. Possible explanations for these findings are discussed. Copyright Blackwell Publishing Ltd. 2004.

The Contribution, Power and Influence of Part-time Board Members

The paper compares the contribution, power and influence of non-executive directors and part-time chairpersons within large UK PLC's, using interview data collected for a pilot study. Two questions are addressed: What contribution, if any, is made by non-executive directors and part-time chairmen? How, if at all, do part-time chairpersons exercise power and influence? The paper reveals that part-time chairmen and non-executive directors claim to contribute to a broad range of issues, ranging from the strategy of the firm, to the appointment, selection and dismissal of board members. Contribution is made by part-time chairmen and non-executive directors converting power sources into influence. A variety of influence methods are used by part-time chairmen and non-executive directors to contribute as board members. Part-time chairmen influence most by assertiveness, using the authority that comes with leading the board. Non-executive directors influence most through persuasion and coalition formation. Non-executive directors less on their positional authority to exert influence, and more on their personal knowledge, experience and expertise, as well as their ability to form relationships with individuals both inside and outside of the boardroom