Family Owned Business Institute

Research Scholar's Abstracts 2006 - Sabine Klein

The Impact of Organizational Culture onto the Board Size of Family Businesses
Sabine B. Klein
2005

The size of a board of directors can have a strong impact on the quality of corporate governance in a business. Several negative effects can come when a board becomes too large. Negative consequence could be range anywhere from dysfunctional boards, to high costs associated with the large number of members. In general, board size can have positive and negative implications. On one hand, a rising number of members in a board will provide different knowledge to the business. However, taking decisions and gathering compromises can become more complicated as the number of persons involved increases. In the worst case scenario, a board with too many members can paralyze the board functioning.

This project examines the prerequisites that may influence the size of a board in family business, rather than the effect of certain board sizes on performance. The concepts of agency and stewardship theory will also be drawn into the framework, and define business as well as the family on variables to test the relevance of qualitative and quantitative factors with respect to board size. Shared values and goal alignment between the family members and the managers in a business allow implementing a smaller board as less monitoring is required.