The benefits to a family business of having a board of directors are indisputable. A well-chosen board provides you with honest, objective opinions, uncolored by the kinds of relational issues that can muddy the waters of governance in an all-family enterprise. Having a board strengthens accountability, self-discipline, and strategic thinking because your board can ask the challenging questions that family members might not be willing to advance.
A high-functioning board grows your enterprise’s value, too. According to research from Lodestone Global1, 96% of companies who implemented boards of directors reported increased revenues, seeing an average revenue growth of 55%.
When might you consider forming a board?
When the person responsible for business operations isn’t the sole owner
When other members of your family share ownership but not owners’ responsibilities
When ownership is spread across a large group of shareholders in increasingly smaller percentages
When the business is transitioning to the second generation and beyond and ownership is seeking greater corporate governance
What can go wrong when you don’t have a board of directors, or the one you have isn’t effective? The kinds of internecine squabbles that can affect any family are amplified when the family ties include the family business; personality conflicts, concerns about nepotism, and abuse of power are less likely when a board has oversight.