Smaller boards found to work better

COMPANIES WITH smaller boards and a higher percentage of female directors are likely to perform better, according to research from the international legal firm Eversheds.

The study on the impact of board composition on company performance analysed the board composition and share price performance of more than 240 companies across the world between 2007 and 2009.

The research found that European companies had larger boards than their US and Asian counterparts, with 18.7 directors on average, compared to the global average of 13.4.

The optimum size of a board was found to be 11, with quicker decision-making, greater focus on key issues and better management from the chair among the key advantages of a smaller board.

A comparison between share price performance and board composition also found that companies with a greater number of female directors performed better, particularly in the banking sector.

However, the Eversheds research also found that boards whose directors held a number of additional executive or non-executive appointments with other companies had a negative impact on share price.

Better-performing companies were also likely to have a higher number of shareholders with a substantial shareholding. This would typically be in excess of 3 per cent of the issued share capital, the survey found.