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Home arrow Economics arrow Boards of directors of state-owned enterprises : an overview of national practices.

Size limits

Determining the right size of the board is an important issue with respect to promoting board efficiency. It is not possible, nor is it appropriate, to recommend a one size fits all approach when looking at board size in the public sector. However, size does matter as is supported by the SOE Guidelines. Large boards can result in unwieldy processes and lack clear direction (as is the case for SOEs in some jurisdictions), whereas boards which are too small may not fully reflect the needs of the company. In other jurisdictions, such as Portugal and Hungary cost savings are a key motivator in reducing the size of boards; whereas, in Switzerland, board size is identified in one of its Corporate Governance Principles requiring slender structures for governing bodies.

As a general rule, board size should be developed taking into consideration factors such as an entity's size, complexity, risk of operations and the needs of the board. Furthermore, over time the optimal board size may vary in line with changes in its functions or the needs of the board. Nevertheless, there does appear to be consensus in the approach of jurisdictions to the optimum board

SOE Guidelines, Annotations to the Guideline VI on board size

To encourage board responsibility and in order for boards to function effectively, they should follow best practices adhered to in the private sector and be limited in size. Experience indicates that smaller boards allow for real strategic discussion and are less prone to become rubberstamping entities.

size: a large number of OECD economies identify the optimum board size as somewhere between five and eight members (see Table 6.2).

Table 6.2. Maximum board size

Maximum size

Minimum

Austria

20

-

Belgium

-

12

Brazil

6

-

Canada

12 (maximum)

9

Chile

7

3

Denmark

-

3

Finland

10

3

France

18

9

Germany1

n.a.

n.a.

Greece

7

-

Hungary1

7

3

Israel

12

-

Italy

5

3

Korea

15 (informal)

-

Latvia

3

-

Lithuania

15

3

Mexico1

n.a.

n.a.

New Zealand

9

2

Norway

-

3

Poland

-

3

Portugal1

-

-

Slovenia

-

3

Sweden

9

3

Switzerland

10

5

Turkey

-

6

United Kingdom1

-

-

1. Depending on the company.

Source: Country submissions to OECD questionnaire.

 
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