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The trickle-down effect

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How do corporate boards create shareholder value?

In June, law firm Wierzbowski Eversheds and the Polish Institute of Directors, a foundation that promotes excellence in corporate governance, co-hosted a presentation of the Eversheds Board Report: The Effective Board—a global study by the international law firm which uses a statistical analysis to trace the connections between a number of factors related to board composition, such as the number of board members, age, tenure and compensation, and the performance of the company’s shares.

The report was based on an analysis of over 500 public companies worldwide that are top performers in terms of their share price. While the statistical part of the report illustrates the dominant trends in board composition between 2007, when the research for the first edition was done, and 2011–2012, when the second edition was compiled, the report includes a strong qualitative component, which was put together based on interviews with 85 board members who shared their views on the challenges that board members of top public companies face today.

The reason a law firm would undertake such a complex, multifaceted study was explained by Krzysztof Wierzbowski, managing partner of Wierzbowski Eversheds in Warsaw, who said, “Intuitively, we always thought there is a correlation between the composition of the board of directors and the company’s market performance, so the firm decided to go beyond the intuitive approach and did an intensive study.”

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Source: American Investor, Summer 2013