The role of the Independent Director in a family company

It will come as no surprise when I say that it is not easy for the family to have an objective discussion about itself. As an interested outsider, the Independent Director can help that discussion take place. He can encourage the family to address the key issues that family business’s face, such as:

  • What do the family want out of the business? Is the wish to pass the business on to the children or to sell out at some point?
  • If it is to be passed on, is there a succession plan? Who is to succeed; are they capable and interested; how is the choice to be made if there is more than one?
  • When should non family, professional managers be introduced and how can that be done without rocking the boat?
  • Is there a plan in place for the business, if the key family members were unexpectedly incapacitated or even died?
  • How are disagreements between family members, that affect the business, to be handled?

In all these fundamental matters the ID can bring much desired objectivity, along with persuasive skills, and a clear commitment to the well being of the company and its stakeholders. Family companies have the same challenges as any other when it comes to being successful and growing. However, they have an additional set of strengths and weaknesses that others do not, called “The Family”!

The ID can help build upon the strengths and avoid the weaknesses that exist in the family business environment. Particularly he can help mitigate the potential dangers of:

  • arguments over succession – whose children, who is best qualified?
  • sibling rivalry
  • conflict within different parts of the family as to how the business should be run
  • disagreements about bringing in professional managers
  • bringing in al the family regardless of ability or interest
  • a failure to be clear about what the family wants/expects from the business
  • a failure to consider and plan for death and the impact of that on the company
  • the older generation not letting go.

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