Good Governance Guides

Good Governance Guide: No 1.3

Category: Structure
Subject: Composition and Size of the Board
Source: Chartered Secretaries Canada

The size of the Board very much depends on the size of the corporation or organization and whether or not it possesses national or international reach. The inevitable risk lies in constituting Boards which are either too small or too large. In the case of the former, there may be insufficient numbers to ensure good governance and appropriate decision making; in the case of the latter, the unwieldy size may lead to an inability to reach consensus or make decisions. The key is balance in respect to factors related to the nature of the underlying business of the entity, the number and type of shareholders or stakeholders and the need to cultivate a synergy between those with highly specialized knowledge and those with more general knowledge and experience.

Generally Board sizes of between 7 and 19 are deemed appropriate for good governance purposes depending on the size and complexity of business operations. There are no fixed rules in this regard and there will always be exceptional circumstances which will see Board sizes rise above and fall below these threshold numbers. Whatever the number, the preference in today’s climate is to have an independent Chair and a target of 50% independent Directors. The independent Directors can play lead roles in various Committees of the Board, including: Audit, Compensation, Human Resources, Governance and Nominating committees. Further, in respect of independence, there should be procedures in place to permit the Directors to meet independent of Management.