The demise of Enron in the US in late December 2001 and the global financial crisis that began with the collapse of another American corporate giant, Lehman Brothers, in September 2008, have fueled the debate on the need for more effective corporate governance mechanisms to promote good practice and ensure effective boards of directors. This led to the publication of the new UK Corporate Governance Code (the Code), which focused on the internal mechanisms of corporate governance to ensure effective management of companies' resources. Recommendations of the Code include having a sufficient number of non-executive directors, implementing effective remuneration policies that can be aligned to companies' performance, transparency and accountability, and promoting an effective relationship between the board of directors and the shareholders. Studies have suggested many mechanisms, both internal and external, to reduce the cost of the conflict between the principal and the agent. This paper seeks to examine the association between board composition, in particular board size and board independence, and firm performance.
|IUP Journal of Corporate Governance
|Published - 1 Aug 2020