Best Practices

When ownership of a family company passes from a sibling partnership to a cousin collaboration, important decisions must be made concerning design and leadership of the board.

  Imagine a typical family-owned business, started by a husband and wife who, through hard work and sharp wits, built the enterprise and proudly passed it on to their children. The siblings then grew the business through its second generation. Governance? No problem. The owners all worked for the family business, so they were the decision-makers who charted its course.

Global companies—public, private and family-owned—compete with everyone everywhere for everything. Good directors can help companies acquire a competitive advantage in the global marketplace. If a company does only what worked in the past, its directors will wake up one day and find that they have been left behind.

A small to medium-size business that has an advisory board is rare in today’s world. However, assembling a board of advisors may be one of the most important steps a CEO can take to assure the success of the company, giving the business a significant advantage over competitors that rely solely on internal talent.

Private boards can borrow from the public sphere, and use committees to provide specific focus on key issues for the board as a whole.

Bob Holland, Director, Carver Bancorp, Inc.:  â€œIf you can identify resources that can help the company, whether it’s resources or leadership transition or whatever, wherever you would reach outside for expertise, there’s an opportunity for a committee.”


Director and author Joe White: A board that excels is one that does the right things and does things right.

B. Joseph White, Director, Gordon Food Service: “Be insistent about strong results. It is vital that directors know what the results are that they are working to.”


Former SEC Chairman Roderick Hills counsels private company owners and directors on term limits, board evaluation and the ‘independent quality’ of the board.

Rod Hills: The role of the board “is the discipline it brings to the Chief Executive Officer to rethink what he or she has done.”


  As former Security and Exchange Commission Chairman and a director of many private and public boards, Roderick Hills has certainly seen the good, the bad and the ugly of corporate governance.

Family-owned companies can benefit greatly from the input and guidance of an independent board.

Anne Eiting Klamar, M.D., President and CEO, Midmark Corporation: “In a privately held situation, you not only have the opportunity to hire your bosses, you can also fire your bosses.”


An alternative to the fiduciary board, advisory boards can provide expertise and advice to the private company’s owners and management.

  The advisory board—as distinguished from a fiduciary or statutory board—can be a very useful form of governance for the private or family-owned company, and can often be the first step toward the creation of a fiduciary board. Without giving up any control, private and family business owners can use an advisory board to help compete more effectively, create stronger strategies, mentor family members and executives and more.

A private board can’t do its job without a thoughtful approach to maximizing the effectiveness of board meetings.

  Any successful meeting begins with prepared participants and a clear agenda, includes action items and a roadmap for decision-making, assigns deliverables and sets deadlines for response, and is characterized by early dissemination of key documentation and information.

Most family businesses of any meaningful size already have a board of directors. If the company is organized as a corporation, a board is required. Yet most of these boards are made up exclusively of family members. If the CEO is non-family, he or she may also serve as a director. Is this the best we can do?