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Why Independent Board of Directors?

Bernie Kliska

Once a crisis hits a family business, there is usually a quick scramble to put the pieces back together.  Perhaps the family CEO is ill and unable to work.  Maybe the company faces a cash-flow problem or unusually high turnover.  Who can the owners turn to for objective help?  In tough times and good times independent board members can be invaluable.

It is not the task of an independent board to run the company.  They are not an operational arm.  They will not decide which products the business should manufacture or sell and they won’t tell you how many shifts to run. 

Instead, the independent board members typically deal with broader issues that affect the company’s success and growth, such as successor selections, strategic planning, liquidity and crisis management.  In addition, an independent board can be extremely helpful in overseeing the executive management.

Note that independent directors serve more effectively if the owning family has done the hard work of articulation their own goals and values.  It would be beneficial if the family would communicate to the independent directors what their function would be before they are asked to join the board.

Independent directors of different backgrounds and views are a precious resource to the business owning family.  Bringing that strength and difference of perspective into the boardroom requires excellent listening, mutual respect and thick skin.

Developing an independent board is a significant step in the life of a family business – while it takes some effort to get established, done well, the value to the business is immeasurable.

We’d love to hear about your experiences in setting up or serving on boards for family owned businesses – please join the discussion…