UK IPO Board Structures and Post-Issue Performance

Abstract

The publication of the Cadbury and Hampel Reports in the UK drew attention to the concern with the 'proper' governance of organisations; and in particular the governance of public, quoted companies. This paper uses UK IPOs in 1990-1994 to establish a pattern of corporate board structure and qualifications and then considers the empirical issue of whether variant board structures and qualifications can be associated with the conduct and the performance of quoted companies. Specifically, it questions whether the structure and qualifications of boards and board members, the combination of the roles of chairman and chief executive in one individual and the numbers and independence of non-executive members of boards of directors can be shown to explain variation in corporate performance, growth, or survival. In exploring performance, the paper adopts a multi-dimensional perspective, addressing performance from several stakeholder perspectives, including those of shareholders (equity returns), employees (growth and salaries) and society. It concludes that the Cadbury Code of Practice has been inappropriate as a model for the boards of directors of emergent quoted businesses and that there is little evidence that the structure or qualifications of boards and board members are connected with subsequent performance.