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 include independent directors, some with 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. For example, it would be hard to put a value on improved family harmony as a result of the presence of objective and respected voices in the boardroom – but this can be a huge ‘return’ to family shareholders in a privately held business.
My sincere thanks go out to those independent directors who continue to give their best to our family businesses.