The most effective size of the health system governing board (parent or subsidiary) is an increasingly important governance issue given continued industry evolution. This point is emphasized by a new article in HealthLeaders magazine. Since matters of board size implicate corporate law, tax and fiduciary duty concerns, the general counsel should be consulted on all "right sizing" initiatives.
It is a generally recognized nonprofit governance principle that boards should periodically review the size of the board to assure continuing efficiency. Yet (despite what some voices may say), applicable law does not mandate a particular board size (other than to establish statutory minimums). Neither is there any accepted best practice on the subject. Recent, prominent statements of governance principles confirm that there is no one-size-fits-all standard. From the law’s perspective, the proper size of an individual governing board is best determined by balancing two different, but not necessarily competing, factors.
On the one hand, the board should be large enough to allow for the effective management of board affairs and to incorporate desired diversity in viewpoints and perspectives. On the other hand, the board should be small enough to accommodate effective board discourse and decision making, and to avoid frequent barriers to achieving meeting quorum. For health systems, the particular challenge is how best to address these two factors given increasingly complex board agendas. The extent of regulatory scrutiny of board actions, it may be best to emphasize (or “lead” with) the “effective management” factor. The health system board must be large enough to allow for the appropriate allocation of duties and responsibilities, to meet with sufficient frequency without prompting concerns with director fatigue, and to properly staff board committees without excessive overlap that might strain focus and attention. These are all issues that support director satisfaction with the elements of the duty of care. The temptation to keep boards as small as possible, simply primarily in order to reduce burdens associated with necessary executive/board interaction (a valid, but not exclusive concern), should be resisted.
Structuring a “right sizing” initiative to focus on the number of directors necessary to properly address board responsibilities—as opposed to (legitimate) matters of streamlining—places appropriate attention on the nature and scope of board duties, particularly as they arise in the context of large, operationally sophisticated health systems operating in a highly regulated environment.