Donatas Voveris

The board of directors plays a pivotal role in firm governance, endorsing strategic choices, coordinating operations, ensuring regulatory compliance, and furnishing organizational support. This paper aims to examine the characteristics of the boards of directors and the guidelines for board composition in publicly listed firms in the Baltic countries. The analysis consists of two stages. The first is a quantitative investigation of the attributes of boards (board size, CEO duality, gender diversity, foreign directors, board committees, board independence, and directors’ occupational background) targeting 35 firms and 187 directors. The second is a qualitative analysis of guidelines for board composition of Nasdaq Baltic-listed firms in Estonia, Latvia, and Lithuania. The results reveal that the attributes of boards of directors do not raise concerns. Despite their relatively smaller scale in contrast to the United States or Europe, the boards of Nasdaq Baltic companies align effectively with their respective firm sizes. Notably, CEO duality is absent in Estonian and Latvian listed firms, while it is only partially evident in Lithuania. Moreover, directors’ heterogeneous professional backgrounds distinctly contribute to these boards’ overall enhancement. While the existence of board committees is strongly recommended, they are primarily implemented as a tool for controlling.

The relationship between governance measures and company performance is a widely debated topic in economics, finance, and organizational analyses with diverse outcomes in the existing scholarly body of work. This study aims to examine the relationship between the share of independent members on the board and the financial return of state-owned enterprises. Lithuania was chosen as a setting for the research because the country has been successfully implementing ambitious corporate governance reforms in the public sector and thus is recognized by the Organisation for Economic Co-operation and Development for its efforts. Within the examined dataset of 27 Lithuanian state-owned enterprises spanning 2015 to 2021, there was a notable rise in the proportion of independent board members, ascending from 13% in 2015 to 61% in 2021. However, no statistically significant correlation is discerned between the share of independent board members and financial performance indicators, specifically return on assets (r (181) = –0.020, p > 0.05) and return on equity (r (181) = –0.104, p > 0.05). The quantitative results are complemented through the administration of semi-structured interviews with a subset of board members affiliated with these enterprises. The absence of a relationship between independent board members and the financial return is explained via a more significant influence of state decisions than the effect of a board. Therefore, the appointment of independent board members alone cannot be regarded as the sole guarantor of improvement in financial returns.