Board Size

Discussion

Proposals to allow management to increase or decrease the size of the board at its own discretion are often used by companies as a takeover defense. Since directors are the shareholders' agents, and votes on directors are the most fundamental shareholder right, the corporate governance system should allow shareholders the same rights given to management, to expand the scope of the board, or to contract it, if they wish.

Shareholders should support management proposals to fix the size of the board at a specific number of directors, thus preventing management from increasing board size in the face of a proxy contest without shareholder approval. By increasing the size of the board, management can make it more difficult for dissidents to gain control. Fixing the size of the board also prevents a reduction in the board size as a means to oust independent directors or those who cause friction within an otherwise homogenous board. Finally, fixing the board size prevents management from increasing the number of directors in order to dilute the effects of cumulative voting.