Atricle Written By Sheila Filion, CPA, CA
Partner, Virtus Group
The simple answer is it depends. The purpose of a board of directors is to oversee the activities of the organization, and these activities can vary greatly between organizations. Boards that are too large may take more time to debate and decide on a matter, and those that are too small may be overburdened by the time required to meet the needs of the organization. Organizations often have other considerations in determining the optimal board size such as sufficient representation by stakeholder groups, diversity, outside expertise or anticipated strategic initiatives. In our practice, we have seen boards with few as 2 board members and some with up to 40 people.
Some examples of different board environments:
- Private Company (Owner Managed): Companies which are managed by its owner typically don’t have a board of directors. We have seen a few instances where an owner may create an Advisory Board of Directors of two or three individuals. In this case, the advisory group does not have any power in managing the company, but may provide an outside perspective or specific expertise that the owner does not possess. The owner can use the group as a sounding board for decision making.
- Not for profit organization without employees: Organizations who do not have resources to hire employees tend to have larger board of directors, typically between 12 – 15 people. These are “working boards” and typically there is a board seat for each area of responsibility. This ensures that all activities are covered, the workload is shared and board meetings serve as a communication mechanism to ensure that all areas are working in tandem.
- Not for profit organization with employees: Organizations with one or more employees typically tend to have boards with 8 – 12 people. In these cases, the board members are usually representative of the members (if member owned) or the community at large.
If you have a large board, all is not lost! Most boards use an Executive Committee, consisting of 2 or 3 board members, in order to take care of routine items between board meetings.
If you want to change the number of board members, review the organization’s bylaws to determine the steps that are needed to make the change.
Other articles on Board Governance to read:
- How often should we review our policies?
- How do I find Board Members?
- What does oversight mean?
- What does Risk Management mean?
- What are the top internal control tips for small organizations?
- Donations & Fundraising - what is your policy?
- Why is effective budgeting important?
- Is the CEO doing a good job?
- How much should a not for profit organization hold in net assets?
- Should we meet with our auditor?