Serving on any board of directors is hard, but in a family-owned business, it’s even harder. Unlike their public-company counterparts, which focus mainly on increasing shareholder value, family-business boards must act on behalf of stakeholders with multiple and potentially conflicting agendas – for example, co-owners with equal power and completely opposing financial timelines. And because interpersonal dynamics in family businesses are much more complicated, discussions of critical issues like leadership succession, compensation, and the performance of management often become uncomfortable, messy, and emotionally fraught. It’s not unusual for family directors to shy away from them and, when they do, for the independent directors to follow their lead.
Managing the Trickiest Parts of a Family Business
Succession, compensation, and underperformers.
January 23, 2020
Doug Armand/Getty Images
Summary.
Directors on the board of family businesses face some unique challenges. Family owners often don’t share the same agenda, and interpersonal dynamics are much more complicated, which can make discussions of CEO succession, compensation, and underperforming executives messy and emotionally fraught. Though tackling these issues may be uncomfortable, family boards cannot afford to treat them like taboos. In this article, the authors draw from interviews with directors of family businesses to offer advice on navigating these sticky subjects with grace and sensitivity.