A Board of Directors is a group of individuals who are either elected or appointed to oversee the operations of a business and make important decisions on behalf of business. They have an important role to play in terms of approving the strategic business plans in line with the long term business direction of the business. Take decision for appointment or removal as well as fixing the terms of employment for all key managerial employees of the organisation. Ensuring proper governing mechanism for business management including the compliance and reporting of key matters. Work in the interest of minority shareholders and their rights as well as family shareholders in case of a family business. It is critical to have a competent board members which is a mix of family and non-family members to provide the best possible unbiased guidance for your family business.

The role of the Board of Directors is to understand what the business is trying to achieve 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 external board members, but a successful and future looking family businesses seek appointment of experts from different fields who will keep neutral view and ask dispassionate questions on critical business decisions for their family businesses. Such board is an invaluable resource for the family business. The board should be given real time information and the freedom to ask questions which will help in the overall growth of the family business, build its credibility and create a professional working environment.

The board members should also take up the responsibility of grooming the next generation successors as well as mentoring and reviewing the performance of family members holding critical positions in the family business. A competent Family Board of Directors help the family owners establish boundaries and to create a defined line separating the family dynamic from business operations.

Ideal candidates for the Board of Directors

When a family business grows large enough to have a competent Board of Directors, it should have a mix of both the family as well as non-family members. As far as possible the board members should not occupy high level operational positions in managing the day today business operations – as it creates conflict of interest and closes the opportunity to have a divergent viewpoints. A good board should also include external members who can give their independent view on the business operations and also help the organisation build better governance at Board level as well as at operational level.

An advisory board, made up of outsiders can also be an invaluable tool to start with. It helps the owners collaborate with external parties to examine and validate their ideas for the future as well as managing the current business effectively. The advisory board can contribute with their ideas, suggestions and give their independent view on the business. They can work as a mirror for the owners to validate their ideas and point of views. Advisory Boards can add real value, especially when dealing with intergenerational succession where the generations have a different point of views!”

Role of Board of Directors

The primary role and responsibilities of the Board of Directors are:

  • Setting and approving the Company’s Business Strategy
  • Approving the Company’s Financial Statements
  • Analysing the Performance of the Company’s Key Managers
  • Give their independent opinion to the management
  • To appoint or terminate as well as to decide on the compensation of top managers
  • Help the organisation in building better governance
  • Determining the process 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. With competent board members in place, the family can rely on them for guidance on business direction, appointment of critical positions, managing conflicts better and setting professional decision-making processes. This can alleviate the stress that is often placed on the individuals tasked with overseeing a family-owned business. The ultimate task of the Board of Directors is to protect the owner group’s interest through sound business management practices that will help the business achieve sustainable growth. The board can help the family in taking unbiased business decisions based on data as well as on the business acumen.

Should the Family Members be on the Board?

Indeed, to take care and protect of the family’s investment interest in the family business, some family members should occupy the board positions. Not all active family members working in the business should occupy the directorial positions. Many times family members with no active business role in the day-to-day operations of the business can provide invaluable insight into the family dynamic. At the same time it is equally important to induct non-family members on the board. Ensuring a proper mix of family and non-family members provides best possible unbiased guidance to the company.

Does Your Family Business Need Help?

With extensive hands on experience of assisting family businesses, 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 orientation programs, one to one as well as common meetings, workshops, public talks, mentoring, coaching, Family retreats and private family business consulting services, we help family business owners chart their way through family business issues of all shapes and sizes.