What is a board's role in family business?

June 2014
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What is a board's role in family business?

At a glance

More and more family businesses are interested in corporate governance today. Many want to understand the value a board brings, and how to evolve their board to provide that value. This publication is the first in a series about family business corporate governance.

The board of a family business generally falls into one of these categories from the Family Business Corporate Governance Model:

  • Compliance board – created to meet the minimum board requirements for the state of incorporation. In the early stages of a founder-led company this type of board may be the best fit for the company.
  • Insider board – often includes family members and members of senior management. It may be created by the founder or by a next generation owner. The founder/owner(s) may retain decision-making authority.
  • Inner circle board – where the founder/owner(s) add directors that he or she knows well and have guided or influenced the company. These directors may bring skills and experience to the board that is otherwise missing and may be able to challenge the founder/owner(s) in a positive way.
  • Quasi-independent board – introduces outside/independent directors that have no employment of other tie to the company. These directors often introduce objectivity and accountability to the board, and policies and processes will likely become more formalized.

This first module of the Series helps you understand why you might want to evolve or change your governance model and what you could expect from a board if you do so.