Is Your Board Odd Enough?

The popular rule that nonprofit boards should have an odd number of members is strongly supported by empirical research. 

Scholars Xin Deng, Huasheng Gao and Wei-Lin Liu from the Nanyang Technological University recently examined 12,075 board decisions from 1999 to 2009.  Consistent with theory, they found that boards with an odd number of members made higher-quality decisions. The organizations with odd-numbered boards also did better on a variety of performance metrics. The performance effects diminish with board size. The larger the board, the less important it is to have an odd number of members. 

Why would this be the case? When voting, board members have two preferences which may compete. First of all, board members have incentives to ensure high-quality board decisions. This incentive motivates them to vote based on their own judgment and the information available to them. This is a performance preference, meaning that they want to perform effectively. Board members also have a conformity preference, meaning that they have an incentive to conform, to vote for the decision they think will be favored by a majority of the other board members.  

Conformity preferences are stronger in an even-numbered board because a board member knows that the other board members’ votes will not be balanced out. For example, if you are a member of a ten-member board, there are nine other votes in addition to your own. Those nine votes cannot be split evenly, so any individual board member is likely to vote based on the way he or she thinks the majority of those nine members will vote so as to be on the “winning” side.  

The organizations in the Nanyang study are S&P 1500 companies. However, this does not negate the value of the findings for nonprofit boards. What the researchers are describing is fundamental ingrained patterns of group behavior.  One might even argue that the conformity preference is higher for members of nonprofit boards. Jessica Jameson, an NC State professor in the Department of Communication, has been studying nonprofit boards since 2006. She has found that nonprofit board members tend to avoid dissent or disagreement.  She explains:

“Reasons for this are that newer board members often assume others on the board and the executive director know more than they do about the issue, program, or organization. They rarely receive training in how to read a budget or financial statement and are afraid to ask a ‘stupid’ question. Finally, board members are often recruited by friends or colleagues. Some join for social reasons. In these situations board members may be uncomfortable rocking the boat by offering a dissenting opinion or viewpoint.”

What to do with this information? Look at your nonprofit’s bylaws and see what the document says about board size. Typically, the bylaws provide a range for number of board members. If your bylaws allow, ensure that your nonprofit has an odd number of board members after elections and appointments of new board members. If bylaws call for an even number of board members, consider having a board discussion on whether the bylaws should be amended.         

X Deng, H. Gao, and W Liu. (2012). Voting Efficiency and the Even-Odd Effects of Corporate Board: Theory and Evidence, SSRN Social Science Research Network.        

Leave a Response

Your email address will not be published. All fields are required.