Lesson 8 response

2 overall. Many board members are usually selected for the skills they will bring to the table and how those skills address current strategic priorities and objectives. With the focus to increase board composition, relating to diversity, women directors and independent directors, there has not been much talk about board size. The new focus for good corporate governance is placing stronger emphasis on the quality of board directors over the quantity of board directors. The new practice is raising questions whether smaller groups of directors are more effective than larger groups.
A group of researchers from GMI Rating performed a study for The Wall Street Journal which supported that small boards are more effective than larger brands. The study revealed that companies with at least $10 million in annual value revenue that had smaller boards produced better returns over a three year period. Small boards held an 8.5 percentage point lead on returns over large companies. The study states that large boards underperformance to small boards by 10.85 percent. These numbers show that many technical companies have small boards.
Here are some reasons why smaller boards can produce better results:
Overall returns have shown stronger results
Directors know each other better, and such relationships are more conducive to cohesiveness and a sense of common purpose
There is less chance of a dominant member swaying the group and problems with groupthink
Directors have greater ownership and accountability
Directors are more committed, candid and engaged
Board directors arrive better prepared and ready to dig deeply into important issue
respond with 150 words (stephanie)
I think when it comes to the board of directors, it can depend on the type of business entity and is entirety. To me I think no more than 12 can be considered reasonable. It would be initiated of course from a mix groups of individuals whom who have valid input, such as the shareholder, business leader and others amongst the corporate board. Which from this perspective, “the ideal board member has to have strong general management skills and experience plus one or two areas of expertise not shared by the other board members. Where diverse experience would assure that the board will miss fewer nuances that could allow a small issue to become a large problem “(Blair,2005). Although, with all things considered getting any amount of people to agree on anything would ultimately still be a primary factor, even if there were a decision to elect to have more members on the board. I would presume if there were a smaller number of individuals on the board, it would provide a greater turn out with a final decision which is usually time sensitive to a business. Besides, the more directors would mean more cost for the organization. Also, noting the reason for their existence of being, “an instrument to reduce agency costs because their body is established to guarantee that the management acts are in the interest of shareholders rather than in its own interest” (Molano,2021).