How an Independent Board Can Help Your Company
By Barbara Spector
Private and family-owned companies are the backbone of the American economy, and their prosperity drives the country’s fiscal health.
That was the consensus of a panel of veteran directors speaking at a program presented by the National Association of Corporate Directors’ Philadelphia chapter. At the session, moderated by Eve Tahmincioglu, executive editor and digital director of Private Company Director and Directors & Boards, panelists described the many ways independent directors can help private and family firms to grow and thrive.
Julia H. Klein, chairwoman and CEO of C.H. Briggs Co., a family company that’s one of the largest U.S. independently owned distributors of specialty building materials; Ivy Silver, founder of Sparkplug Innovations, a consulting firm, and a founder of Mily-on, an architectural design firm; and Stanley W. Silverman, founder and CEO of advisory firm Silverman Leadership and the former president and CEO of PQ Corporation, served as panelists.
Tahmincioglu opened the session by noting some success factors common to the 2017 winners of Private Company Director’s Private Company Board of the Year awards. These companies’ independent boards hold the CEO accountable, take drama out of decisions, build trust in the boardroom and offer proven experience in key areas like cybersecurity and supply chain management, she says.
Here are some of the key takeaways from the program:
• Independent directors must understand the history of the organization and the dynamics among the owners, and how these affect the decisions that have been made.
• An independent board holds the management team to a higher level of excellence and scrutiny. The board holds management accountable for making important decisions on a timely basis.
• The board composition must be refreshed to match the company’s needs at different points in its life cycle.
• Some directors’ strength lies in the ability to build consensus. Others’ strength lies in asking provocative questions.
• It’s essential for the board to assess the “tone at the top.” Is the CEO bringing the right tone to the organization? As stewards of the company, the board must ensure the CEO is doing the right thing.
• More so in a private company than in a public company, a director’s role includes coaching, teaching and encouraging the CEO.
• Directors must consider the interests of all shareholders, including minority shareholders and those who do not work in the business.
• In startup companies, an independent director plays a key role as a “door opener” but must also oversee strategy and help stave off management burnout. Directors of startups must ensure that policies and procedures are in place to foster sustainability of the company.
• Board refreshment tends to be faster in startup companies, since a different mix of director skills will be needed as a company matures.
• The board’s role in a startup includes coaching and counseling to help the CEO grow into the job as the company grows larger. (Some CEOs are unable to evolve and must be replaced.)
• In a family company, having independent directors at the table can help keep family dynamics out of the boardroom.
• Directors can help resolve conflicts in family businesses by shifting the focus to what is in the long-term interest of the company rather than what benefits family owners in the short term.
• The appropriate place for a director to provide counsel and coaching to the CEO is generally behind the scenes, at a breakfast or lunch, rather than at the board meeting.
• Advisory board service is just as essential as fiduciary board service; it offers an equal opportunity for a board member to help a company succeed.
• There are three spheres of operation in family companies: what’s happening in the business, what’s happening with the shareholders, and what’s happening in the family. Often, independent directors are best able to recognize where these spheres overlap and where they need to be separated.
• Directors must keep “noses in, fingers out.” They must be careful not to undermine the CEO.