Governance Success Recipe: Independent voices, innovative compensation & an eye on the future
Creating the best private company board comes down to making room for independent voices, innovative compensation ideas and a clear view to the future, says Cheryl Mayberry McKissack, CEO of Nia Enterprises, who sits on public and private boards.
“The first thing you have to ask yourself is do you believe in governance,” stresses McKissack, director for the Donnelley Foundation and Founders First Capital Partners, LLC.
“I think everyone wants to improve the business and be successful,” she notes, adding that good governance can get you there. “It’s hard sometimes to pull back and put in energy to set up a governance process,” she explains, so you have to think of it as a process.
When it comes to setting up a governance structure, identifying a company’s biggest priorities should be the first step. Then, she says, you should look for board members with the skillsets that can help fulfill those priorities.
And get to know prospective directors well before you bring them on, she advises. That means meeting with them two or three times at least, and also bringing in family members, if applicable, to meet with them. This provides comfort to the director and to the company owners, she adds.
Trusting independent board members can be hardest in a family business. Finding the balance between family and board voices is difficult, but critical if a family business wants to succeed, says McKissack.
There is no “secret sauce” when it comes to finding that balance, she notes, “but what I have found works well are the [boards] that give the non-family members an equal voice.” Directors, she adds, want to feel as though they really have “a seat and a voice at the table.”
That’s one of the top things McKissack looks for when she’s considering taking on board positions with family owned companies.
“There are some nuances,” she maintains, but she wants to know the family will listen to her and respect her experience, in order to move the company forward.
She recommends appointing non-family members as chairs for certain committees and giving them leadership positions.
How can you, as a family-owned and private business, stay true to your roots while welcoming in experience from the outside?
Whether you are going to give non-family members and family members a 50/50 voice, or have one outweigh the other, she notes, “there needs to be a mutual respect.”
Certainly not all private boards have the kind of money to pay as much as a public board. If private boards are looking to include non-family members with experience on a public board, they may want to think beyond just pay.
For example, one of the private companies McKissack served on provided her, as well as the other members of the company, a certain amount of money to donate to charities of her choice. While this was in lieu of pay, it provided her an opportunity to give back and help drive the company’s mission, she stresses.
Another incentive could be as simple as showing interest in what the independent director is passionate about. Offering to sponsor a table at an event they hold, or taking the time to really get to know them can prove very effective, she advises.
Looking at the future
Often, private companies don’t take the time to look towards the future as much as public companies. Taking some time to hone in on what your company wants and where you want to be can really identify the strengths that make it clear where you will go, McKissack says.
Take a few days every year, she continues, “and go on a retreat, get outside the office and find a place where board members can get together and talk about where the company is going.”
One of the things private company management and directors should discuss is how to oversee risk, specifically related to cybersecurity. Cyber breaches are a key issue and it’s not a matter of if but when, she stresses. “You will be hacked at some point.”
Companies need to have a process and guidelines, she points out, and there are key questions that need to be answered: How will you keep the business functioning? How will you communicate with customers? Taking the time to consider the future will give companies a leg up when something unforeseen happens, she points out.