Regarding your concern relating to our board size, we believe a smaller board is more effective and has minimal governance risk.


Considering governance risk, our audit and compensation committees each have three independent members, so with five directors, four of whom are independent, we could maintain committee size and independence even with a vacancy. As reported in our proxy statements, we have had perfect director attendance at Board and committee meetings each of the past two years. We believe the risk of two concurrent vacancies, and thus the risk to independence, is very small.


Furthermore, we believe small boards tend to be more effective, communicate better, can become more involved in strategy, and can act more quickly.


We note from your Website that TCL relies on statistically proven indicators of board weakness. Dalton et. al. did an exhaustive statistical meta-analysis and found there was no consensus for the idea that larger boards are associated with better performance. To the contrary, there is conclusive statistical evidence that board smallness is associated with increased shareholder value and higher returns on assets (Yermack). We can provide you copies of both papers on request.


Other research shows the advantages of smaller boards. A board with eight or fewer members "engenders greater focus, participation, and genuine interaction and debate," according to Firstenberg & Malkiel.

Yermack concluded that whatever benefits may be associated with board largeness may be overwhelmed by poor communication and decision-making processes.


Studies have also reported that larger boards were less likely to become involved in strategic decision making (e.g., Goodstein et al.; Judge & Zeithaml).


Finally, research suggests smaller boards are more independent. Jensen, for example, found that larger boards are easier for the CEO to control, and Mintzberg suggested that board members' assessments of top management are more easily manipulated when boards are large and diverse.


In short, smaller boards tend to provide what TCL promotes: more effective boards, more involved boards, more independent boards, and increased shareholder value. Please consider this in your assessment of NVE.



Dalton, D. R., Daily, C. M., Johnson, J. L., & Ellstrand, A. E. 1999.

Number of Directors and Financial Performance: a Meta-Analysis. Academy of Management Journal.


Firstenberg, P. B., & Malkiel, B. G. 1994. The twenty-first century

boardroom: Who will be in charge? Sloan Management Review, 36(1): 27-35.


Goodstein, J., Gautam, K., & Boeker, W. 1994. The effects of board size and diversity on strategic change. Strategic Management Journal, 15:



Judge, W. Q., & Zeithaml, C. P. 1992. Institutional and strategic choice perspectives on board involvement in the strategic decision process.

Academy of Management Journal, 35: 766-794.


Mintzberg, H. 1983. Power in and around organizations. Englewood Cliffs,

NJ: Prentice-Hall.


Yermack, D. 1996. Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40: 185-211.