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"
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.
An increasingly important responsibility of the general counsel is to advise the corporation, and its officers and directors, on the application and extent of insurance/advancement and indemnification protections.
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