Ok, let me see if I have this right. Size does matter and smaller is better? Faleye reports that large boards of directors are less likely to replace existing CEOs and if the CEO replaced, less likely to find a successor from outside the firm. Moreover, when firms announce smaller boards, the firm’s stock return is positive. Thus Faleye concludes: “suggest that a large size hinders the board’s ability to perform its monitoring functions, and lends additional support to the current drive toward smaller boards.” [FinanceProfessor.com Annotation]
Editor’s Note: The number of directors serving on 5 or more Boards of Directors is falling, but Forbes reported that 12 people still are serving on 12 S&P 500 boards. Why a problem? Time and conflicts of interest. Read at:
Olubunmi Faleye
Subject: Corporate Governance
