{"id":1264,"date":"2024-04-17T08:05:48","date_gmt":"2024-04-17T06:05:48","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=1264"},"modified":"2024-06-12T11:05:06","modified_gmt":"2024-06-12T09:05:06","slug":"10-insights-to-reinforce-the-corporate-governance-of-your-family-business","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2024\/10-insights-to-reinforce-the-corporate-governance-of-your-family-business\/","title":{"rendered":"10 insights to reinforce the corporate governance of your family business"},"content":{"rendered":"

Truth be told, implementing and managing a board of directors<\/strong> in a family firm isn\u2019t an easy task for a variety of reasons, including the unique nature of each family and company<\/strong> and its specific context and growth stage.<\/p>\n

Through my years of experience working with family firms, I have gathered several practical insights<\/strong> to help them in this process:<\/p>\n

1 – Thoroughly understand the board\u2019s roles and requirements
\n<\/strong><\/span>The decision to create and develop a board of directors should be based on a solid understanding of its functions and requirements<\/strong>, not simply to follow the latest trends. It entails decision-making founded on accountability, fairness and transparency<\/strong>.<\/p>\n

Family owners delegate the company\u2019s governance to the board, which is accountable to them for its decisions and management.<\/p>\n

2 – Aim for consensus but put matters to a vote<\/span>
\n<\/strong>It\u2019s important not to confuse consensus with across-the-board agreement<\/strong>. Sometimes decisions must be submitted to a vote, and consensus implies graciously accepting the stance of the majority<\/strong> while rejecting blackballing tactics and other negative power ploys.<\/p>\n

3 – Prepare the terrain<\/span>
\n<\/strong>Develop preliminary roll-out stages to gain reliable and rigorous reporting<\/strong> for the control and follow-up stages. Remember that the board of directors isn\u2019t a steering commitment, so don\u2019t try to control everything that can be controlled,<\/strong> only what is relevant.<\/p>\n

4 – Long-term vision\u00a0<\/span>
\n<\/strong>Encourage strategic thinking and dynamic debate to map out the company\u2019s future<\/strong>, with a broad perspective and wide-angled lens. Owner families must clearly transmit the firm\u2019s mission and vision<\/strong> so the board can validate and develop business strategies within this framework.<\/p>\n

5 – Define a set agenda
\n<\/strong><\/span>The board should analyze, debate and decide on the most significant issues<\/strong>, without hidden agendas. It\u2019s critical to establish and communicate a decision-making system among the company\u2019s leadership team, board of directors and shareholders.<\/p>\n

In many family firms, family members hold overlapping roles in the ownership and management realms<\/strong>, which can cause confusion when it comes to making certain decisions and the people who should make them.<\/p>\n

\u00a06 – <\/strong>Facts and data
\n<\/strong><\/span>Decisions should be centered on objective facts and data<\/strong>, not solely on emotions and traditions. Naturally, the owner family\u2019s values should be integrated as corporate values<\/strong> and guide the board\u2019s decisions and actions, as well as the board itself.<\/p>\n

That said, it\u2019s important not to confuse them with criteria, facts and related information that are divorced from reality<\/strong>.<\/p>\n

7 – Meritocracy
\n<\/strong><\/span>Avoid using the board of directors to accommodate family members who seek the spotlight without the requisite abilities and experiences to add value<\/strong>.<\/p>\n

The board of directors oversees the company\u2019s top decision-maker and executive cadre, which is why its leadership by example and professional support<\/strong> are critical.<\/p>\n

8 – No shortcuts
\n<\/span><\/strong>Avoid the temptation of converting the board into a training ground by integrating inexperienced young family members too soon<\/strong> as a means of “showing them the ropes.\u201d<\/p>\n

This can lead to competitive stand-offs<\/strong> with veteran members, undermining their development. Similarly, be wary of the \u201cyou have a voice but not a vote\u201d<\/strong> options, which can also backfire.<\/p>\n

9 – Accept discrepancies<\/span>
\n<\/strong>Incorporate non-family directors based on meritocracy and independence<\/strong>, not merely because of personal ties and greater ease in decision-making processes. A non-family board member should challenge the board<\/strong>, not act as a yes-person.<\/p>\n

10 – Separate business from family
\n<\/strong><\/span>Entrepreneurial families should have a rules-based family council<\/strong> to manage emotional issues and interpersonal relationships among its members to avoid shifting these problems to the company and board.<\/strong><\/p>\n

At the same time, it\u2019s crucial not to turn the family council into a \u201cshadow board of directors.\u201d<\/strong><\/p>\n

\n

In my collaborations with top-tier leaders of family firms,\u00a0 some have asked if their business is too small for a board of directors. My answer is always the same: unless you implement a strong governance system, your company might always remain small.<\/strong><\/p>\n

Companies with robust and efficient governance models are also better able to inspire and engage family shareholders<\/strong>. The board of directors helps and reinforces the company\u2019s leadership team in its decision-making process, promoting its long-term growth and sustainability.<\/p>\n

And above all, I advise patience and resolve<\/strong> to implement this fundamental system as soon as possible.<\/p>\n


\nHomepage image: <\/em>Danielle Cerullo<\/a> \u00b7 <\/em>Unsplash<\/em><\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Truth be told, implementing and managing a board of directors in a family firm isn\u2019t an easy task for a variety of reasons, including the unique nature of each family and company and its specific context and growth stage. Through my years of experience working with family firms, I have gathered several practical insights to […]<\/p>\n","protected":false},"author":818,"featured_media":1267,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[981,95121],"tags":[117496,117523],"class_list":["post-1264","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-leadership","category-ownership","tag-board-of-directors","tag-corporate-governance","megacategoria-mc-family-business"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t