Private company boards are increasing in their popularity and use. Many forward-thinking private companies use boards as a way to increase their knowledge bandwidth and add to their talent pool in making decisions about the company’s strategy.
Boards in family-owned companies often serve another purpose. They provide a buffer for the G1 family member in addressing performance and pay issues with other family members. Since structure is critical in family companies to keep the peace and avoid the traps of nepotism, a board can provide that vital piece of structure that prevents the confusion that sometimes happens between a family member’s role as an employee owner and family member.
Compensation is one example. A best practice of private boards is to form a committee that establishes and reviews the compensation of family members. This approach has several benefits. The committee has no family bias and can evaluate the compensation requirements independently. Plus, using independent parties to review family compensation will avoid the conflicts that can arise when family members have to discuss pay.
Have you established a board for your family-owned business? What has been your experience? Share in the comments.
An alternative to an official board of directors is an advisory board. Check out this article to learn more.