CORPORATE BOARD SIZE, COMPOSITION AND CORPORATE FAILURES IN RETAILING INDUSTRY[1]

TLDR

Activists have recently proposed reforms to corporate board structure and process to improve governance. This study investigates whether formal board changes can guarantee good governance. The authors compare board size and composition across 21 pairs of failed and non‑failed retail firms. Non‑failed firms had larger boards than failed ones, yet differences in outsider director percentages and CEO office holdings were not significant, suggesting limited evidence that board size alone predicts firm survival.

Abstract

ABSTRACT In recent years some activists have advanced proposals to reform corporate boards, notably their structure and process, to assure desirable corporate governance. the empirical question, however, is whether such formal board changes would guarantee good governance. This paper examines this issue by studying the differences in the board size and board composition of 21 pairs of failed and non‐failed firms. the results suggest that the non‐failed retailing firms, as compared to failed ones, tend to have bigger boards within the size range suggested by the activists. the differences in the percent of outsider directors and multiple offices held by C.E.O.s between the failed and non‐failed firms were not significant. Implications of the results for the evaluation of board reforms are discussed.