Researches mainly by Mallin (2010) lead to the conclusion that having an independent and autonomous is profitable but certain interest of the BoD should be present to ensure their interest in the firm’s progress. In similar regard, there are various characteristics regarding the structure and composition of the board that significantly tends to influence its productivity and efficiency, and some would be discussed within this response.
Researches also by Clarke(2007) reveal that the size of the board tends to have a significant impact on the efficacy of the board itself, as this implies bigger challenges for each of the directors, intimating them to be more actively involved in the meetings and activities of the business, subsequently, being involved in better value addition for their job responsibility. A smaller board also implies that the junior executives get better opportunities to have to interact with the board and contribute their understanding of the strategies, tactics, and ideas.
Another critical factor that influences, as mentioned by Clarke (2004), the effects is the weightage of the executive and nonexecutive directors in the BoD. Researches reveal that having an appropriate mix of both gives an optimal outcome rather than one outweighing the other. This plan of action tends to keep a check and balance kind of a situation when it comes to the independence of the board and their accountability towards their required job description.
Finally, a very critical variable is the decision of having the same or different CEO and Chairman – each approach having its distinct advantages and otherwise. There are legal obligations in certain countries against this rule but on a general note, there is almost no harm in taking this approach i.e. of having the same person being CEO and the Chairman. . There are certain key elements that Chew (2005) suggests for the composition of an effective board. Firstly, the leadership should be objective and independent, accountable to the owners (shareholders) of the business. .