Family businesses need outsiders on their boards 

    Nearly every family-owned business leader hopes to pass the torch to a family member when the time comes, but fulfilling that hope is often difficult. While exact figures may differ from one source to another, there is common agreement that fewer than 30% of family businesses survive into the third generation of family ownership.

    Ensuring a positive handover to the next generation—in a way that balances family heritage with business evolution—should be central to the purpose of a family company’s board. One of the critical tools to help with this is to have non-family members play a part in the process to help balance and focus leadership efforts, Harvard Business Review reports.  

    To understand more about how family-company boards operate and what they focus on, advisory firm Russell Reynolds Associates recently analyzed 162 listed companies across Europe, half of which were family owned. 

    Russell Reynolds’ analysis showed that a concentration of board power among family owners can pose a challenge to succession planning. More than 60% of board chairs in the study were family members, raising the possibility that agendas and discussions may not be as nonpartisan as they should be. 

    To strengthen decisions about future leadership, the presence of independent board members, who are neither part of the family nor too close to it is important. 

    Independent directors play a pivotal role in professionalizing board operations, can help family members focus on the right themes, and ideally keep family politics out of the boardroom. Read the full story.  

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