In a recent on-line seminar Jennifer Pendergast discussed the advantages for a Family Business in having an active independent Board of Directors. A senior associate of The Family Business Consulting Group, Inc.®, Jennifer Pendergast specializes in strategic planning, family and business governance, family office structure, and facilitation.
Jennifer went into great detail defining the contribution a Board can make to both the Family and the Business. She began by reviewing research that showed the vast majority of family businesses still do not have independent Directors on their boards, and many never use the board they have in any sort of oversight or governance capacity. Not having a Board may be considered as somewhat shortsighted.Jennifer stated, “First, it is likely that over time not all owners will be involved in the management of the business, creating some possible tension between “inside” and “outside” owners that independent board directors could help alleviate. Second, while the overlap of management and ownership may reduce the need for oversight, the additional overlap of family relationships in a business context increases the emotional complexity of certain key decisions (from compensation to succession planning) that would be beneficially impacted by the presence of trusted independent board members.”
Three Key Take Away Points made by Jennifer:
1.Developing a BOD is process that will evolve over time and will meet the needs of the family and the business. It is critical that family members and the Ownership agree on the Governance structure. Dialogue and discussion are important to determine what “high” level input can be helpful and will be accepted.
2.Define the Roles and Responsibilities and Expectations of BOD. Both Family and outside professionals.
3.Be diligent in the search for Board members. Interview to make sure they meet the criteria you need. And that the individuals you are considering really care about you, really care about your family, and really care about your family business.
This seminar can be viewed in the archives of The Network of Family Businesses at www.netfamilybusiness.com