14 Things You Need to Know About Company Boards

1. Board size positively affects firm performance, but only up to a certain point. Beyond that point, increasing board size does not lead to further improvements in performance. The presence of independent directors on the board has a non-linear effect on firm performance, while directors elected by minority shareholders do not significantly impact performance.
2. This study found that the annual number of board meetings is inversely related to firm value, which means that as the number of board meetings increases, the firm's value decreases.
3. This study suggests a relationship between board structure and qualifications and corporate performance. Specifically, companies with a higher proportion of non-executive directors tend to perform better than those with fewer non-executive directors. Companies with separate chairman and CEO roles also tend to perform better than those with combined roles.
4. ​Board size and education positively and significantly affect company performance. The study sampled 90 firms from the main board of the Nigerian Stock Exchange from 2010 to 2012. There is no significant relationship between board equity, board independence, and board age with company performance. Based on these findings, the study recommends legislation mandating companies listed on the Nigerian Stock Exchange to appoint at least 30 to 35% of women on the board of directors and this could potentially improve company performance in Nigeria. The study suggests that their appointment is window dressing as the percentage is too small for a meaningful positive effect on company performance.
   
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5. One researcher analyzed the impact of a 2011 Belgian policy reform introducing a gender quota for listed companies. The authors compared the evolution of firm performance between companies subjected to the quota law with similar firms that were not subjected to the law. The findings indicate that the quota policy replaced one male director with a female director in the average firm between 2010 and 2017. The increase in diversity negatively affected some firm performance indicators. The authors found statistically significant negative effects for ten of the twenty-three financial indicators analyzed. Therefore, it is crucial for companies to carefully consider the potential benefits and drawbacks of gender diversity when making decisions about board composition.
6. Results from a study of board composition and company performance in Sub-Saharan Africa suggest that having a higher ratio of foreign directors on the board may negatively impact accounting performance. Cultural differences and a lack of understanding of the local market could be the reason. Surprisingly the study did not find a significant association between board size and company performance, suggesting that having a larger board does not necessarily lead to better performance. The study found no significant association between board composition and stock performance, indicating that investors may not view board composition as a key factor in their investment decisions. Overall, these findings provide valuable insights for companies operating in Sub-Saharan Africa and suggest that careful consideration should be given to the composition of their boards to optimize company performance.
7. ​Board size has a negative effect on ROA but has a positive correlation with ROE. This suggests that larger boards may not be as effective in generating returns for the company as smaller boards. On the other hand, board independence was found to positively affect both ROA and ROE, indicating that having independent directors on the board can lead to better financial performance. However, the study found no significant relationship between board activity and company performance.
8. In this study, a significant relationship existed between board diversity and firm performance as measured by return on assets. The study measured board diversity using four variables, including gender diversity, the director's age, educational background, and the outside director while controlling for board and firm size. The population of the study was companies included in Forbes Asia's 50 Best Big Public Companies of 2014-2016.
9. In a study examining the relationship between women on boards and firm financial performance( by combining the results from 140 studies), the authors find that female board representation positively relates to accounting returns and that this relationship is stronger in countries with stronger shareholder protections. The study finds that the relationship between female board representation and market performance is near zero. However, it is positive in countries with greater gender parity and negative in countries with low gender parity. Overall, this study suggests that having more women on boards can positively impact firm financial performance, especially in countries with strong shareholder protections and greater gender parity.
10. One study analyzed 56 studies on corporate governance in the banking industry published between 2007 and 2019. The study results show that larger boards and a high proportion of outside and female directors are positively associated with bank performance.
11. There is a positive and statistically significant relationship between board diversity and firm innovation. This means that as board diversity increases, so does the firm's innovation level. Interestingly, the study also found that cognitive diversity among board members had a greater impact on firm innovation than demographic diversity.
12. The relationship between board composition, board leadership structure, and firm financial performance has been a topic of interest for researchers for many years. However, a careful review of existing research on this topic shows little consistency in the results. Neither board composition nor leadership structure has been consistently linked to a firm financial performance.
13. There is no significant relationship between board independence and firm performance. The study analyzed nearly 500,000 observations. The study also examined specific measures of board independence and found that four out of five indicators were not significant. However, the presence of non-affiliated directors had a negative relationship with performance (-0.12, p<0.001), meaning that having affiliated directors on the board enhances the firm's performance.
14. The impact of CEO duality depends on contextual factors such as industry type and financial performance, highlighting the need for a nuanced understanding of this relationship. This suggests that CEO duality may be beneficial when a firm struggles and needs strong leadership to turn things around.
    

Related: Does your board regularly take an objective look at itself and its relevance to the needs of the company?​