The board must steer the family business and steer the business in the right direction. If you want to have a business that is resilient and has a positive impact on all stakeholders (employees, customers, vendors, society, etc.), you need to make sure your board of directors is intact and functioning optimally. there is. This article provides a few questions to consider when developing a Board Best He practice, including who should be on the board, whether independent directors are required, and how often the board meets. . As we strengthen our family business in these turbulent times, it is important to reflect on the purpose and practices of our boards. Ultimately, the ultimate fate of a business (sale, merger, dissolution, etc.) is determined by its owners. not management.
Running a family business is like sailing a ship. In fact, the term governing itself comes from the Greek “to guide or steer”. Families who own a family business should consider where the family business is headed. It depends on who is leading the business and what direction it is going. This is even more compelling as we face the challenges of a pandemic, rising inflation and geopolitical instability. If you want to have a business that is resilient and has a positive impact on all stakeholders (employees, customers, vendors, society, etc.), you need to make sure your board of directors is intact and functioning optimally. there is. The board of directors determines the direction of the company as a group, much like a captain steers a ship.
Here are some questions to consider and suggestions to help develop board best practices as you strengthen your family business in these turbulent times.
Do you have a board?
Unfortunately, when asked if their family business has a board of directors, many business owners say no. The response is intended to show that the board does not legally exist, or that there is a board but it does not function as such. Either way, “no” is not the best answer. In fact, most companies have a board of directors created at the start of their operating documents. If you review the Articles of Incorporation or Articles of Incorporation, you may be surprised to find a board of directors. It’s worth taking the time to find out if that’s the case, and if so, check who is listed as a board member. If so, you should ask why. Oftentimes, family-owned businesses cede control to founders or other ruling family members who may or may not actually be on the board. This creates unnecessary gaps in corporate governance and creates strategic complexity at some point in the future, if not today.
What is the purpose of the board?
Boards of directors take many forms, but depending on where a business is established or operated, all boards serve the purpose of providing oversight, guidance, and representation of the interests of their owners. increase. By definition, the board should operate at a strategic level and not get involved in day-to-day management. A clear line between the big picture issues that the board must consider and the practical and tactical work of management is essential. If it’s a family business, the board must also ensure that business operations are aligned with the owning family’s values and goals. That’s because the ultimate fate of a business (sale, merger, dissolution, etc.) is ultimately determined by its owners. not management.
Who Should Be on the Board of Directors of a Family Business?
Many family business boards consist only of family members. This may give the family peace of mind that their interests are being represented, especially if the family groups or branches are different, but it is rarely recommended. In fact, it could hurt their bottom line — the opposite of what they’re trying to achieve. This is especially true when it is a name. Board members must collectively possess knowledge, skills and experience ranging from finance and law to industry trends and operational challenges. Issues such as audit, compliance and compensation cannot be ignored due to the family dynamics that drive the election of board members. At the same time, the board of directors of a family business must also have one or more members of her family (family or non-family members) who understand and advocate for her owner’s values and goals.
How should a family business board operate?
Some family owners have boards that meet daily or once a week. In these cases the distinction between management and governance is ignored. In the same way that the captain of a ship can’t reconsider direction every minute (better to set the direction and go in that direction without too many adjustments), the board has to focus on key strategic priorities. You need adequate space and time to do so. Too frequent board meetings inadvertently take up valuable management time and risk micromanaging issues that are not the board’s responsibility. Quarterly meetings are often the norm, but more frequent meetings may be recommended during startup phases or times of crisis (such as a pandemic). The board chair should lead the meeting with a combination of structured time for key presentations and decisions while ensuring that all views are heard. How the best board chairs use the time between meetings to stay informed about the agenda, raise difficult questions or issues, and potentially throw the entire board off course, not just the meeting. I understand how to identify topical topics where there is.
What is the role of an independent director?
The term “independent director” may have a specific regulatory definition depending on the company, but is often used in the context of family businesses to refer to non-family directors. Selection and participation of independent directors is still a “work in progress” for most family businesses. Some family businesses choose a close friend or best friend. This gives you peace of mind that the directors are trustworthy, but in many cases this is no better than appointing family members who do not have the proper board qualifications. In fact, before you start considering candidates, it’s a good idea to develop a board member’s job description that focuses on the board’s purpose and needs. Furthermore, when outside directors participate in board meetings, it is essential to build a system that respects their voices and opinions. The fate of the business and its stakeholders rests in the hands of the board. Independent directors should not be elected for optics rather than substantive purposes.
Why is this important?
Most of the companies in the world are family owned. They play an important role in the local and global economy, the size of which is surpassed only by government agencies. The board of directors steers the business and is where the board determines the direction of the business. Moreover, the nature of business and the duration of business are changing rapidly. In the future, businesses will need to be more agile and more open to fundamental change that is existential in nature. The board must be willing and able to consider when and how to change industries or arrange for the sale of a business. After all, a resilient business may not even be the highest goal. Family businesses are increasingly faced with challenges that require more than administrative expertise. Instead, it calls for governance structures and processes that come from a higher mission: resilient families, economies and societies.
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