Board size and composition: the main tradeoffs

Abstract

The purpose of this research is to find the factors influencing size and composition of the supervisory boards in a transition economy with application to Ukraine. This paper is based on the research of 50 largest companies in Ukraine. Period of research is 1998-2005. Methodology of research is based on observations (the first stage) and questionnaires (the second stage). The research found that there is strong dependence of the size of supervisory boards in Ukraine on the degree of concentration of corporate ownership and origin of the controlling shareholder. Size of the company has a very conditional influence on the board size. Professional skills diversification as a fact that could contribute to the efficient work of the supervisory board is still very weakly developed in Ukraine. Particularly this concerns such expertise as auditing, finance, executive compensation. Experience of the supervisory board members in Ukraine is quite poor. Only 24 per cent of members of supervisory boards have a five and more year experience as supervisory board members. the supervisory board members had the strong links with the company in the past as executives. Thus, about 74 per cent of members of the supervisory boards in Ukraine worked as executives of the same company at least during a year for the last ten years. This makes the negative impact on the independence of the members of the supervisory boards.