Every Family Business Needs an Independent Director

Family Business Governance
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1月 27, 2020
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Family Business Governance
Family-owned businesses can benefit greatly from independent board members to provide an outside opinion free of emotion.

Harvard Business Review

The Harvard Business Review article, "Every Family Business Needs an Independent Director," was written by Russell Reynolds Associates Consultant Beatrice Ballini. Beatrice shares how independent directors and board members can help family businesses make stronger decisions about their future leadership.  

Nearly every family-owned business leader hopes to pass the torch to a family member when the time comes. Yet, fulfilling that hope is surprisingly difficult. While exact figures may differ from one source to another, there is common agreement that fewer than 30 percent of family businesses survive into the third generation of family ownership.  

To strengthen decisions about future leadership, the presence of independent board members, who are neither part of the family nor too close to it, is vital. Multiple family representatives spoke about the importance of independent directors actively listening to the different members (branches) of the family and sharing their opinions. As a result, they could develop a nuanced and balanced point of view in the interest of the company and all of its shareholders.  

Having independent directors with these broader C-suite and boardroom experiences can help family members focus on the right themes, and ideally keep family politics out of the boardroom. Independent board members additionally contribute to the resilience of the company by transferring their experience and knowledge to the younger family board members.  

To create the best chance of a successful leadership transition, we recommend that family businesses take a thoughtful and well-orchestrated approach to the nomination of their independent directors. These directors ideally should not only bring CEO and/or international experience, but also a deep understanding of digital transformations and new technologies. Ultimately, technical skills are just a starting point; their fit with the family would seal the deal. Independent directors should be selected as carefully as executives are, no matter how much time that process takes. It’s the best way to ensure that the family business can remain competitive for the next generation.  

To read the full article, click here.