Tag Archives: Independent Directors

How Effective Are Your Board Meetings?

Kelly LeCouvie
Kelly LeCouvie

Many of our clients have either transitioned to, or are in the midst of transitioning to a more professional board, made up of both family members, and independent outsiders.  Based on a survey we conducted with business owning families, there is a clear distinction between the rated “effectiveness” of a board with just family members (47%) versus those with either a minority, or majority of independent board members (91% versus 100% respectively).

This is telling, and may foster further interest and/or action in moving forward with an independent board. Yet, that transition by itself will be insufficient to produce an “effective” board. Boards (Advisory or Fiduciary) add value for a number of reasons, and composition is just one reason for the value boards bring to shareholders. Below is a list of other important variables that influence the effectiveness of your board:

  1. A clear, specific agenda that outlines both the content and the purpose of each board topic;
  2. A board packet that:
    1. Includes all the pertinent information board members require (no superfluous, ‘thrown-together’ information, but a collection of succinct, meaningful data);
    2. Focuses the readers’ attention on the two or three critical strategic issues that will be discussed at the board meeting;
    3. A packet that arrives at least one week in advance, so the board members can adequately prepare for the meeting, and organize advance phone calls with questions if necessary.
    4. Some social time to set up a ‘rhythm’ for the actual meeting – typically a dinner the night before the meeting.
    5. A strong Chair – someone who not just moves the group along from one topic to the next, but someone who can listen to, understand, assimilate, and feed back to the group the meaning of what has been discussed, and what implications those discussions have for future action.

It is tough to fit ALL of the components of a successful board into a blog. But this provides a quick summary of items to think about when developing and managing your board for optimal value.


Female Board Members

Amy Schuman
Amy Schuman

Why should it be difficult to find well-qualified females to serve as independent directors for family business boards? Very frequently we are specifically asked by clients to present them with female director candidates. (Why do they make this request? Stay tuned to this blog later this week.) Sadly, in several cases this request proved quite challenging. Why should this still be the case, after all the gains that women have made? In discussion with several FBCG colleagues, the following thoughts arose:

1. Chicken and Egg Problem: Families seeking independent directors usually want candidates who have experience on boards. Women often lack experience on for-profit boards, although they frequently have non-profit board experience. Families can be reluctant to give a woman her first chance to serve as a director, no matter how qualified.

2. Women Commonly Serve in Non-Operating Roles: Director candidates with experience as  CEO’s, Presidents or other operating leaders are most desirable. Many women concentrate their careers in HR, PR, Community Relations, etc. and are seen to bring less value to the board.

3. Women Still Lack Desired Experience: Direct experience with international expansion, successful innovation, strategic redirection, M&A etc. are highly sought after in board members, and women tend to be less likely to have those experiences.

Since women are often behind on the more traditional ‘leader’ front, families may need to be open to a different set of experiences in order to find strong female candidates. There are many well-qualified women with backgrounds in finance, HR, law, banking, consulting or education who could be great board members, even if they don’t fit the standard profile of a proven leader. That said they can be excellent strategic problem solvers.

What have you found as you seek well-qualified women as board members?

Later this week – why many families actively seek to find qualified women for their boards.

(Thanks to my colleagues, Stephanie Brun de Pontet and Jennifer Pendergast, co-authors with John L. Ward, of Building a Successful Family Business Board, for sharing their insights in this regard.) Top of Form


Return on Board Investment

Norb Schwarz

Recently one of the national business news programs asked its audience to call in to vote on whether public company boards are worthwhile or worthless. Commentary suggested that in many cases public company boards were headed by CEOs who were also the Board Chair and questioned whether a board under such leadership could be truly independent with primary loyalty to shareholders. The implied conclusion was that such boards have limited shareholder benefit.

That conversation caused me to reflect on the many family business boards I have had the pleasure of working with. Many of those boards included independent directors, some boards having a majority of independents.  Like some public company boards, some family business boards might be considered a waste of resources and others return many times the investment to the family shareholders. Interestingly, in my limited personal sample, the boards chaired by someone other than the CEO or those with an independent lead director tend to offer the greatest return to the shareholders. These high return boards have much in common. Among their many attributes, these highly productive boards had the following characteristics:

  • They are truly independent in that their qualifications were based on the skills they brought to the table.
  • The boards have a majority of truly independent directors.
  • They were not known personally to any shareholders until they were interviewed for the board positions.
  • They work well together as a group and respect one another’s contribution to the board process.
  • They respect the family and offer challenging support to management.
  • The independent directors meet regularly as a group.
  • The board engages in independent evaluations of its own effectiveness at least bi-annually. 

In conclusion, let me be quick to point out that the return to shareholders I refer to may not be a financial metric in all cases.

My sincere thanks go out to those independent directors who continue to give their best to our family businesses.


Is your board doing its job?

Norb Schwarz

Ram Charan has some good advice in his book “Boards That Deliver.” In it he lists what the top subjects of focus should be for effective boards.  Not surprising to many of us, the number one priority he identifies is:  “Do you have the right CEO…” 

In public and private companies, boards are too often lax in their responsibility of reviewing, evaluating and developing management at the top. Whether a family member or not, all boards should ask if the company’s leader is the best suited person for the job – bearing in mind the company’s current needs and strategic direction.  If the answer is “no,” the board must look to make a change and shareholders should support the process.

When the business is family owned and managed, the most difficult leadership change decision comes when the CEO who needs replacing is a family member. Truly independent directors are critical to help all stakeholders navigate this challenge.  While these directors must be wise in their judgment of the business’ needs, in order to really be effective in this delicate situation, they are ideally well known to the family and respected by all, as well as experienced with family business and sensitive to the concerns and needs of the family, in addition to those of the business.  This awareness will not lead them to change their mind about what is best for the company – but will enable them to interact with the family, and communicate the needed changes in a manner that all stakeholders feel respected, which will help the family remain united, despite this needed business change at the helm.


The Lead Independent Director

Steve McClure
Steve McClure

The lead independent director role emerged in US public companies after legislation responded to flagrant mismanagement within the former Enron Corporation.  The Sarbanes-Oxley Act requires that independent directors meet apart from those who are not independent.  The lead independent director serves as chair in such meetings.  The role and separate meeting process is particularly valuable for balancing the interests of the shareholders and management when the company CEO is also the Chair of the Board.

Legislation is not a factor, yet we see lead independent directors emerge in private family companies. Independent directors on family business boards balance not just the interests of shareholders and management, but also the interests of different family branches, and the board and family or non-family management.  It’s much more complicated in a family business and often hard to be clear about what is going on between family members.  A lead independent director can help the other independents coordinate with each other, navigate the family politics and assemble to compare their perspectives when needed, separate from the rest of the board.  The lead independent will coordinate and serve as the spokesperson when there is value in communicating a single message from the independents to the family.

In that many family CEOs transition to the role of Chair of the Board as a natural progression toward retirement, there is another opportunity for lead independent directors.   By playing an active and visible role during agenda creation and by facilitating sensitive board discussions, lead independent directors can serve the business and family by maintaining real and perceived fair representation from all factions, and thus promote trust within the family.  Savvy family member Board Chairs promote these benefits when they willingly share some of their traditional duties with a lead independent director.  Savvy lead independent directors assist the family Chair without ever sacrificing their real or perceived independence from the Chair.

The lead independent role tends to informally emerge within family company boards, yet it may also occur by design when particular leadership qualities are sought during independent director recruitment.


Do Good Board Candidates Find Your Business Attractive?

Kelly LeCouvie
Kelly LeCouvie

This is a follow-up to the October issue of the Family Business Advisor, which presents the non-strategic value of directors. We are often so focused on finding “the best” director candidates, that not a lot of thought is given to the circumstances under which they will find our family business attractive. How do we appeal to outstanding directors?

The list can be very lengthy, but there are a number of questions we often get from the candidates we try to recruit – some food for thought:

  • Is there currently a functioning board in place?
  • Are there other independent directors, or would I be the only one?
  • Does the family really want outside advice or are they just attempting to appease a group of shareholders?
  • Have they developed specific expectations for this position?
  • How would you describe the communication within the family (collaborative, conflictive, for example)?
  • Does the business have a strategic plan?
  • How would you describe the leadership style of the current Chair? The current CEO?

Remember that board candidates are interviewing you and your business as well. They want to commit to a board that works well together, knows how to be productive, and presents a culture that is aligned with their own values and business principles. So getting your ducks in a row prior to your search is a good way to send the right message to great candidates!