Category Archives: Business Governance

Management’s Role in Productive Board Meetings

Kelly LeCouvie
Kelly LeCouvie

We often hear from management that board meetings are “a waste of time” where directors “don’t really understand our business” and “don’t contribute much to enhancing our strategy.”

That is unfortunate.

Yet in many cases, the primary source of the problem is not poor director choices, as much as poor management preparation for board meetings.

Directors generally are sincere in their wishes to add value and make a difference for management and for the business. They also typically bring deep experience across multiple businesses and industries. So how is it that they attend board meetings without bringing significant value? There are a number of things that directors expect (or at least hope for) from management in order to help ensure that they can contribute real value.

Below is a list of considerations for management as it prepares for board meetings:

  • Is enough time allotted for the board meeting? (Most effective board meetings are at least a full day in length.)
  • Does the agenda indicate enough specificity in terms of what directors should give thought to before the meeting?
  • Do you allot sufficient time for strategic discussions (versus financial review, operational problems, or regulatory issues)?
  • Have the directors received the completed board packet information at least one full week (and preferably 10 days) in advance of the board meeting?
  • Is there a cover page to each section of the board packet which summarizes the key issue(s) and the key questions that management would like directors to be prepared to discuss?
  • Is management prepared to discuss the issues without running through slides that the directors have already read in the packet?

Directors aren’t perfect and sometimes, poor director choices are made. On the other hand, it is probable that management can step up its game in terms of equipping directors to contribute more meaningfully in board meetings!

Banking on a Strong Corporate Governance Process

Otis Baskin
Otis Baskin

Why are banks so fond of boards with independent directors?  What is the big deal?

Actually, banks are interested for the same reason as minority and non-executive owners in a successful multi-generational family business.  Independent directors with real fiduciary responsibility have an obligation to work in the interests of all owners; not just those running the business, not one branch of the family, but everyone whose capital is at risk – including banks.

In business school, it is called Agency Theory:  the potential that managers of a business will make decisions that are better for themselves than for owners who don’t manage the business.  Things like executive compensation and perquisites are often a concern for owners who don’t share in them.  How can all owners be sure they aren’t paying too much to run their business?  Would dividends and other distributions be greater if management didn’t spend so much on their “pet projects?”

These are the same issues that banks worry about. The Warwick Business School study I cited previously concludes that when businesses don’t have a strong corporate governance process with independent directors, banks react by imposing their own controls through more restrictive lending terms.  Family owners who are not convinced their capital is being managed properly may attempt to impose their own controls by second guessing management and raising doubts with other shareholders.  Sometimes their behavior becomes a strain on the cash position of the business if dissident owners want to be bought out.

At the very least, dissenting voices can disrupt family harmony.

Can Independent Board Members Add Real Value to My Business?

Otis Baskin
Otis Baskin

“What real value can independent board members add to my business?”

This is a question often asked by our clients when we discuss corporate governance.  It is a fair question when the owners of a successful family business are contemplating the creation of a fiduciary board of directors – why should they include non-family, non-owning, non-management, members with full voting rights?  Of course, the right independent directors bring valuable, relevant business experience to your business.  But, it can be argued that consultants and/or advisory board members bring that value without having to give them a vote.  In other words, can we get their advice without being bound to use it in our decision-making process?

Good advice is always valuable but independent directors on a board designed to represent the interests of all the owners of a business have been shown to add much more tangible value.  A study of 1,300 U.S. firms recently released by the Warwick Business School in England shows that banks loan on more favorable terms to businesses with independent directors on their boards.  This study, done over a period of 13 years, shows repeatedly that as the number of independent directors on boards in these companies increased, the terms of their loan agreements with banks improved in the company’s favor.

The issue comes down to this:  When there is an effective system of corporate governance in place, indicated by the presence of independent directors, banks have greater confidence in a firm’s internal controls and don’t feel they need to impose as much external control through their loan covenants.

How’s this for real value?  A better relationship with your bank can yield a lower cost of capital in your business.

The family council dream team

Steve McClure
Steve McClure

In my family, we don’t wait for the basketball madness to start in March.

Last weekend, we watched the NBA all-star game and three-point shooting contest. Next week, my youngest son starts his high school basketball post-season playoffs. And next month during his spring break, we are taking a trip scheduled around a particular NBA game. Needless to say, at home we are talking a lot about players, teams and teamwork.

I don’t talk to my family much about Family Council teamwork, but I think about it a lot and see it firsthand every week.  Like a basketball team, the best Family Councils are teams with the right skills and attitudes.  Larger families with many choices have the luxury of selecting their best talent.  Business families who include spouses as candidates for the Family Council expand their talent pool.

When assembling the Family Council dream team, pick at least one who can be the Chair to galvanize and manage the team. He or she communicates well, facilitates, never bosses -yet can be directive when needed – and is great with follow up so that individuals are accountable. This team manager is the kind of person who can make a good idea seem like everyone’s and can tell the truth about what’s going on without an uncomfortable confrontation.

The chair is joined by some great teammates, all of whom:

  • Get things done by keeping conference call appointments and taking responsibility for Family Council tasks/projects without over-committing.
  • Can be flexible and adaptable about the family’s changing needs, yet be rigidly firm on values.
  • Understand the differences between the roles of shareholder, board, management and family and can respect the boundaries.
  • Have the spunk to decide what is right, rather than siding with an individual or family group (especially their own).
  • Are capable of working with differences among individuals, branches and generations.
  • Can inform, listen, respect and build trusting relationships across family branches.
  • Have the diplomacy to keep their mouth shut about sensitive matters but love to blab with the best of them on everything else the Family Council is doing.
  • Can respect, support and help the Chair accomplish the difficult, underpaid, cat-herding job – instead of pushing the buttons of their courageous brother, cousin, aunt, uncle, niece, nephew, father, mother or sister who agreed to do it.

Anything missing?  What talents do you value on a Family Council?

Past, present and future focus in meetings

Chris Eckrich
Chris Eckrich

Spending our lives in business or family meetings is a huge commitment of time and energy.  In order to make those meetings most effective, we do best when we pay particular attention to the degree of past, present and future focus in meeting time.

In board meetings, often a pattern of focus on past performance develops into an expectation of what board meetings should be. At some point, the board begins getting frustrated that too much time is being spent on last quarter and not enough attention is being given to issues facing the company in the present, or future. This tension can bubble up and cause the board to question its meeting practices. Usually this results in movement towards a stronger and more robust board meeting process, with greater focus on responding to today and planning for tomorrow

Shareholder groups often experience this same pattern: the shareholder meeting consists mainly of a review of what has happened in the past. This may continue for a few years, but at some point as the shareholders begin to get anxious about the future. They begin to ask where they are going as a group, and how the entity or the assets they own will help them achieve their goals. Just as in boards, a process of meeting renewal frequently results in a shift of focus to primarily present concerns and future direction.

While it is easy drop into routines and use templates that can be repeated from meeting to meeting, engagement will typically be higher when the board, shareholder group, or even a family group (for those of you hold family meetings) ask the question: “What is our ideal balance of focusing on past performance and history, present situations and pressing conditions, and future direction and strategic intent?”

Collected resources: Family councils

Editor’s note: A frequent question we hear from business families regarding family governance is: “Where do we start?” The following is a selection of articles and other resources that can be helpful in thinking about the role family governance might play in your family. 

As family business advisors, we have been recommending to our clients that they form family councils for decades. In fact, councils are often considered the sine qua non for all families who own businesses together, particularly if the business has been around for more than a generation. But who really needs a family council, and what exactly is one?Read more…

Responsibilities of Family Councils by John L. Ward, Ph.D.
This comprehensive list outlines the obligations a well-defined council provides to the family firm. Read more…

A Renegotiation of Relationships by Chris Eckrich, Ph.D. and Steve McClure, Ph.D.
The “Hills” family asks: Are we ready to commit to changing our rules of engagement with one another? Read more…


Family Council HandbookBook: The Family Council Handbook
by Chris Eckrich, Ph.D. and Steve McClure, Ph.D.
An invaluable owner’s manual for family councils that includes beneficial models, strategies and real-life examples. Learn more…

Webinar: Providing Structure for Family Business Continuity
During this on-demand webinar, panelists Chris Eckrich, Ph.D., Steve McClure, Ph.D. and Amy Schuman explain how to use the family council to strengthen the family and the business. Learn more…


Other Complimentary Resources

These articles originally appeared in The Family Business Advisor, a monthly email newsletter published by The Family Business Consulting Group. To sign up for your free subscription, please complete this form. We also have a vast selection of online articles available at your fingertips!

When best practices (and Mini Coopers) backfire

Drew Mendoza
Drew Mendoza

A little knowledge can be dangerous – no matter how well intentioned.

The family member Chair was a regular face at the local university’s family business center events. She had heard a presentation about how having independent outside directors could be a powerful addition to the company’s competitive arsenal and be an equally powerful tool in managing shareholder relations. The presentation, delivered by an expert in the field with more than 20 years of experience, lasted three hours.

Bubbling with enthusiasm and new found energy, she entered the next board meeting a month later. Over the course of 10 minutes, she informed her cousin shareholders that what was most needed was the addition of three independent directors. She came to the meeting prepared with a slate of directors. The director slate presented would have been impressive to just about any other company in their space. Fantastic academic and career pedigrees, international experience, strengths in finance. In fact, the slate of directors were the equivalent of Indy 500 cars. By comparison, her cousins were Mini Coopers. (I mean no disparagement toward the Mini. I’m sure they’re fine little cars well made for in-city travel.)

Guess what happened next?

A fire storm erupted in the board room. The directors were taken off-guard, felt insulted and threatened. It took the chairwoman over a year to regain the board’s trust and educate the directors about the rationale of the changes she had proposed.

It’s one thing to understand best practices. It is another thing entirely to know how to educate and prepare an ever increasingly disparate shareholder group for change.


Today’s blog is inspired by and written in support of FBCG’s newly announced event, The Chair Forum. We invite family firm chairs to continue the conversation by joining us to share experiences, generate ideas and hone their skills at productive corporate governance. Click here to learn more>>

Understanding the complex role of board chair

Drew Mendoza
Drew Mendoza

I’m a fan of good corporate governance particularly in family enterprises with the complexity or size that warrants having a (well) functioning board of directors. How complex and what the thresholds are for having a board of directors that has bench depth, structure and independence depends on a wide array of factors and are the focus of articles, books and blog postings throughout the family enterprise world. But, for today, I want to plant this seed in your thinking.

I believe the global community of family enterprises is awakening to and realizing the value and importance of good corporate governance and, more importantly, excellent management of those boards by qualified chairpersons.

Being the chairman of a family firm board is not like being the CEO. The CEO focuses on growth, profitability, strategy implementation, and the processes and structures that keep the business moving toward its strategic imperatives. The chairman leads the business’ governance function, not the day-to-day management of the company.

 Yet, most family firm chairs are the men and women who were the company’s previous CEO. Do they know their company’s operations? You bet, thoroughly and deeply. But, do they have the skills necessary to be the chairman? Can they manage the board in ways which reflect shareholder expectations and ensure the CEO is receiving clear direction? Do they know what data the board needs and in what format to do its job? Can the chair develop accountability measures for both the board and management without alienating family managers and family shareholders? Is the chair ready and able to listen to director input and facilitate difficult conversations without resorting to the meeting management style s/he used when they were the CEO? Is the chair able to identify the needs for creating or dissolving board committees?

We believe the role of the chair is very different from the role and responsibilities of the CEO. And, we believe that the chair is not just another director. The chair has special responsibilities that add value to the company and help align shareholder expectations.


Today’s blog is inspired by and written in support of FBCG’s newly announced event, The Chair Forum. We invite family firm chairs to continue the conversation by joining us to share experiences, generate ideas and hone their skills at productive corporate governance. Click here to learn more>>

Back to school

David Ransburg
David Ransburg

I realize that kids have been back in school for a couple of months now, but I recently ran across something inspired by one school in particular, and that something has direct value for family businesses.

The KIPP Foundation was founded in 2000 with the purpose of creating “a respected, influential, and national network of public schools that are successful in helping students from educationally underserved communities develop the knowledge, skills, character and habits needed to succeed in college and the competitive world beyond.” Much has been written about KIPP, and their many successes are remarkable.

KIPP has many chapters, and each chapter is governed by its own board. KIPP’s Colorado board was recently provided guidance to help them understand which issues the board should deal with vs. those that are better left to those who manage the schools day-to-day. While specific issues were not delineated, the KIPP Foundation provided the following list of questions to help board members make their own decisions along these lines:

Governance Issues vs. Management Issues

  • Is the issue strategic?
  • Is it about the future?
  • Is it central to the mission?
  • Is a high‐level policy decision needed to resolve a problem or disagreement?
  • Is a significant change in firm performance, either positive or negative, in evidence?
  • Is the board’s performance dashboard signaling a need for greater attention?
  • Does the CEO want and need the board’s support?
  • Has a new risk factor for the firm become evident?

What other questions would you suggest to help family businesses in particular distinguish between governance issues and management issues?

Why executives seek service on family business boards

Kristi Daeda
Kristi Daeda

As leader of FBCG’s Governance Practice, I often interview executives pursuing board service. Their stories are always interesting – full of career twists and turns, successes and lessons learned.

One thing I always ask is what their goals are for future board service. What kind of company excites them? What’s the contribution that they hope to make? The answers to these questions are telling – both in their perceptions of board service in general and their ideas of what it means to be a director for a family business board.

These successful men and women come from a mix of backgrounds. Most have worked in family firms within their careers, either as a family member or a trusted non-family leader. Many have served on other boards in the past, including public company boards. Regardless of their experience, many of the themes that move them to serve on a family business board are the same:

“I’m excited by a business that has a strong focus on values and vision.”

“I want to serve on a board where I can share my expertise and make an impact.”

“I like a board that can take a long-term strategic view.”

“I want to keep learning.”

“I want to work as a team with others for a common cause.”

They often see a family business board as a better route to these aims than public boards. They expect – and find – that family business boards will allow them to build rewarding working relationships with family ownership, have a long-term effect on the business, and derive more satisfaction from seeing the business impacts of their work than other board settings.

This is good news for all involved. Family business directors get an environment where they’re accepted as strategic contributors and they see the fruits of their labors on the bottom line. The businesses they serve get access to expertise from engaged, passionate contributors dedicated to the larger vision. In a well-functioning governance system, the outcome can be a meaningful and valuable partnership.