Statistics show that private company Boards are smaller and composed of fewer unrelated Directors than public company Boards.
This matters. The rationale that leads public company Boards of Directors to be larger and more independent also applies to private company governance.
Private Company Boards are Less Independent
Private company boards are overwhelmingly composed of related Directors – owners, family, executives and professionals associated with company including 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. 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.
Private Company Boards are Smaller
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 interesting. 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.
Public Company Board Director Wishlist