Boards are Smaller and Less Independent in a Private vs Public Company
Statistics show that private company Boards have fewer unrelated Directors than public company Boards.
1. Board independence. Private company boards are overwhelmingly composed of related Directors – owners, executives and suppliers like company lawyers and accountants. For the past decade, public company Boards have put significant emphasis on attracting outside Directors who can make decisions independent of any relationship to the Company. Does this help? Sure it does. Lots have private business owners have told me their business performs better when they get outside perspective and someone who holds them accountable for performance.
2. Board size. There is no perfect size, but larger public Boards seem to reflect the greater mix of skills and expertise they attract with the goal of increasing performance. The chart below is fascinating. It is from the Spencer Stuart 2016 Board Index, and shows the public company Director Composition ‘Wishlist’ – the skills, expertise and other traits that public Boards would like to attract.