Family Business Board of Directors

A Board of Directors is a group of individuals who are either elected or appointed to oversee the operations of a business. The role of the Board of Directors is to understand the goals of the business and to make important decisions on behalf of business, always keeping the best interests of the business in mind. A family owned business is not always required to have a Board of Directors, but many family businesses are large enough to warrant a Board of Directors. The benefits of having a Board of Directors are numerous. A Board of Directors allows a family owned business to establish boundaries and to create a defined line separating the family dynamic from business operations.

Who Sits on the Board of Directors?

When a family business is large enough to require a Board of Directors, “No Two Hats” is a good policy. This means that members of the board should not also hold high-level positions within the company because this can create a conflict of interest. In order to avoid complications, the Board of Directors should include individuals other than the company’s majority shareholders, President, Chief Executive Officer, or people who are in any other prominent position in the business.

“An advisory board, made up of outsiders who are not “cronies,“ is a good way to push the governance envelope. The board creates an environment where owners, in conjunction with third parties, can examine possibilities, suggestions and directions that they might not otherwise consider. Advisory Boards can add real value, especially when dealing with succession!”

David Bork
The Little Red Book of Family Business: Page 57

What Exactly Does the Board of Directors Do?

The role of the Board of Directors can vary from one family business to another. In addition to numerous decision-making responsibilities, a family business Board of Directors is usually responsible for:

  • Approving the Company’s Financial Statements
  • Setting the Company’s Business Strategy
  • Analyzing the Performance of the Company’s Managers
  • Determining the Process used for Family Business Succession
  • Manage Decisions Regarding Family Conflicts Related to the Family Business

The Benefits of a Family Business Board of Directors

A Board of Directors reinforces family business governance and structure. When a Board of Directors is in place, the family can rely on the board for guidance, conflict management and decision-making. This can alleviate the stress that is often placed on the individuals tasked with overseeing a family-owned business. The Board of Directors is tasked with resolving various issues and providing guidance, with the ultimate success of the business as a top priority. Family members can rely on the board to make unbiased business decisions that may otherwise be impossible to reach.

Can Family Members Sit on the Board of Directors?

In many cases, family owned businesses want to have family members sitting on their Board of Directors. Indeed, family members who do not play an active role in the day-to-day operations of the business can provide invaluable insight into the family dynamic. However, it’s important that non-family members also be on the board. Insuring a mix of family and non-family members yields an important combination of board members who will be able to provide the best possible unbiased guidance to the company.

Does Your Family Business Need Help?

Family Business Matters has extensive experience assisting family businesses in the development of a Family Business Board of Directors. With many decades of experience, we understand the wide variety of challenges that families face as they work together to build, grow and sustain a thriving family business generation after generation. Through conferences, continuing education programs, family business retreats, speaking engagements and private family business consulting services, Family Business Matters has assisted more than 450 family-owned businesses around the world chart their way through family business issues of all shapes and sizes.

Contact Us

For more information on how Family Business Matters can help your family business survive and thrive, please contact us today at (970) 948-5077.