2.4.8 Not too large

"Sir Walter Puckey, writing on board size, says that in his experience

`I have found that its most effective size for first-class participation and decision making is between six and eight excluding the chairman and the secretary, who may or may not be a director. Too many board meetings display verbosity among a few and almost complete silence from the rest.'"3

Martin Lipton and Jay W. Lorsch, who have contributed so constructively to the debate on corporate governance in the US as well as intemationally, argue persuasively for a reduction in the size of American boards. In their "Modest Proposal for Improved Corporate Governance" their recommendation is as follows: "We believe that the size of a board should be limited to a maximum of ten directors (indeed we would favour boards of eight or nine) with a ratio of at least two independent directors to any director who has a connection with the company "4

They reason that boards of this size enable the directors to get to know each other well enough for their discussions to be frank and searching and to allow every director to contribute to them. With this number it should also be possible for board members to reach a true consensus in coming to their decisions. It is worth adding that the "modesty" of Lipton and Lorsch's proposals lies only in their not being backed by statute, not in their refreshingly radical nature.

Other authorities edge the figure up. Sir Walter Puckey quotes Harold Koontz as saying that it is sensible "to limit a board to thirteen members in order to obtain the free discussion and deliberative interplay which board decisions require. At the upper end, Professor Northcote Parkinson's researches have conclusively demonstrated that what he refers to as the `coefficient of inefficiency' is reached when the members of a body number between nineteen and twenty-two; at that point an inner cabinet is established, or establishes itself, to take over the functions of the original board or committee."

"Figures quoted in The Professional Board for the top 150 companies showed that on average they had 11.4 directors on their boards. There was, however, a wide variation within that average, with 15 per cent of companies having eight or less and 15 per cent having fifteen or more. Just over half of the board members of those same companies were outside directors. This confirms that the proportion of outside directors to executive directors has risee compared with ten years ago, when boards were more likely to be made up of one-third outsiders to two-thirds insiders."