As someone who is neither a WMF or a chapter board member it seems clear to me that there is some tension between the chapters and the Foundation. Increasing the mutual overlap of boards is a tried and tested way of reducing such tension, it doesn't always work, (in wiki speak it isn't magic pixie dust) and we are in this situation despite having two WMF members nominated by the chapters. But it is an option and it is a governance model that lots of organisations find works for them.
With our large ratio of chapters to Foundation, a top down model isn't viable today and would get less viable in the future. As Ray has pointed out, with 21 chapters the European patch alone would be a full time job. I'd add that with chapters being created for major cities and with hundreds of countries and major cities not yet having chapters, a system of the board appointing representatives to the boards of chapters would not scale. At best you'd have a system which broke down as the number of chapters grew, at worst you'd have a UN Security Council style problem where the governance fossilises the structure from one moment in time. Another practical issue of scale is the cost, unpaid board members can't be expected to take on an average of four chapters each and still be effective members of the board. Either you'd wind up with the Foundation shifting to a paid full time board, or appointing Foundation employees to the boards of chapters and burying the Foundation agenda with their reports. Mixing paid and volunteer staff can be problematic, especially if you want to combine a paid board member who is not expected to do work as a board member with unpaid members who are.
But nominations to boards don't have to be top down, they can also be bottom up. Clearly it would be a good idea to improve mutual understanding between the Foundation and the chapters. We could increase the overlap between the chapters and the Foundation by having more Chapter nominated seats on the Foundation.
The current board structure is 1 Founder, 2 chapter nominations, 3 community elected and 4 others, giving a total of 10. 10 is close to the upper limit for an efficient committee, so you probably wouldn't want to increase the number. But you could replace some of the "others" with more chapter nominations. I can see a case for a 1, 4, 4 structure with Jimbo plus equal representation from the chapters and the direct election. This would also have the advantages of ending the seats for sale allegations and ensuring that all board members were wikimedians. But a more modest reform and a practical response to the current situation would be to change to a 1, 3, 3, 3 structure. This could be done in 2012 when two of the independent places are up for renewal - http://meta.wikimedia.org/wiki/Template:BoardChart
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