UK: NUMBERS ACROSS THE BOARD.

UK: NUMBERS ACROSS THE BOARD. - The size of the decision-making body is on the agenda.

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Last Updated: 31 Aug 2010

The size of the decision-making body is on the agenda.

How big is your board? So big that directors need nameplates, and voices that carry the length of a banqueting table? Or so small that they second-guess each other and desperately need to hear another opinion?

The proper size for a decision-making body is a question that has preoccupied almost everyone who has served on one - or tried to assemble one.

Of recent years there has been a clear tendency towards smaller boards.

The clearing banks - which were traditionally home to some of the biggest - demonstrate the trend. Barclay's board is now less than half its size of a decade ago, down from 33 members in 1986 to 15. Over the same period numbers at NatWest have fallen from 32 to 17. The pattern is evident in other sectors too: J Sainsbury now has 15 directors compared to 20 five years ago.

There are still, nevertheless, a lot of well populated British boardrooms.

Marks & Spencer has 22 directors, RTZ has 20. Common sense indicates that size has much to do with this: that a big company is likely to want a big board. However a study of nearly 800 companies by 3i found that major groups with a turnover of £1 billion-plus had, on average, only 11 directors each - six of them non-executive. At the next level down, companies with revenues in the £500 million-£1 billion bracket averaged eight directors, including four non-executives.

Financial publishers Hemmington Scott calculate that, across the board - as it were - British public companies (not including banks and investment trusts) have a mere seven directors, on average. Some plcs, such as steelmaker ASW and property group Burford, make do with as few as five. Nationally, it's clear, there are enormous disparities.

'A board that's too big can become too formal and procedural, and inhibit the debate of gritty points of strategy,' says Patrick Dunne, head of 3i's independent directors' programme. 'If it's too small you can miss the broad perspective - and the board is prone to become dominated by one person.' Jonathan Charkham, member of the original Cadbury Committee and non-executive director of Great Universal Stores, is a minimalist.

'The smaller the board the better it functions,' he says. 'Conversely the bigger the board the more inclination there will be for business to be handled in committee.'

Charkham points to Japan where certain boards have over 60 members. 'Their role is purely ceremonial - the real work is done elsewhere,' he observes.

'In companies with very large boards you have to make a distinction between the notional and effective decision-making body,' adds Dominic Houlder, a former strategy director at Blue Circle who is studying boardrooms in connection with the strategic leadership research programme at London Business School.

So does anyone have a number to propose? The late C Northcote Parkinson (after investigating the workings of cabinets) came down unhesitatingly on ASW's side. 'Five members are easy to collect and, when collected, can act with competence, secrecy and speed.' Clive Thompson, chief executive of Rentokil (and a non-executive at Sainsbury, Caradon and BAT), considers 'anything above 10 or 12' too big. 'A board should not be so large that people have difficulty in expressing their views,' he says. In fact Rentokil's own board (like that of Bunzl and Christian Salvesen) has just two executives and four non-execs. The reason, Thompson explains, is entirely practical.

'We have more line managers than most companies. It was a case of having all five regional managing directors on the board or none at all.'

But even if it's accepted that small is beautiful in the boardroom, reducing numbers might not be easy. 'With the requirement of Cadbury for three non-executive directors, you can't expect boards to be that small any more,' says Charkham. Moreover a big company will be 'pushed to get through the committee work - particularly that of the audit committee which can be very time-consuming - with less than four non-executives.' However 3i's Dunne believes that staff-work can do much to relieve the hard-pressed directors. 'Increasingly, the board will have a lot more in-depth information and pre-work at its disposal, so can afford to be smaller.'

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