Issues & trends - solutions

Question:
I am in my early thirties and I have been invited to join our family Business with the view to succeeding my father as General Manager in the next 12 months. I have a business degree and I have worked in a number of management positions over the last five years. My principal concern is that we do not have a Board of Directors but we have substituted a Manager’s meeting which are the Senior Managers hearing what my father has to say abut the performance of the business. Could you explain to me the benefits of having a Board of Directors including some external non-executive directors?

Answer:
A Board of Directors is a governance structure which works most effectively when the Board has defined powers, well regulated meetings with appropriate agendas and which are controlled by an effective chairman. Most importantly a Board of Directors is a forum in which directors set policies for the company, review performance of the company and assist management in formulating the strategic direction for the business.

The Board may also be responsible for appointing the General Manager, Chief Executive and other senior management positions. Further, in relation to succession planning the Board must continue to review performance of the senior management to ensure that there are a number of key people who have the capacity to step into the shoes of the senior managers at any time.

The composition of the Board is important to provide the right balance for the best functioning of the company. If the dynamics of the Board are right, management will feel supported rather than threatened. However, independence of the Board is important. Each individual Board position should be reviewed so that representation of all shareholders is addressed. Skills and experience are important, not simply being able to get along with the chairman. In family companies, the appointment of external, non-executive, non-family directors may help the quality of debate at the boardroom table. Robust debate is important and there should be encouragement to those who express a different view. Consensus will achieve a fair result.

As far as the dynamics of the Board is concerned, external directors need to be educated in the ways of the family etc. Once they are familiar with critical family issues, it is quite often beneficial to have one of them appointed the independent chairman. There is plenty of help available in selecting eligible directors including the Institute of Directors, the various accounting bodies, the Law Society and private organisations including Pro-Ned.