At the Business for Breakfast on March 10, 2011, Richard Simmonds, Simmonds & Associates, LLC, and Mike Henningsen, Jr, Chairman and President, Henningsen Cold Storage answered questions facilitated by Marc Kralj,Ferguson Wellman, about the role of outside board members on a board of a family-owned business. Following is a summary of the key points made by Rich and Mike.
1. The board of directors should have independent, outside members to provide objectivity and act as a sounding board for the President and management team.
2. This independent board should be in place when there is a transition from founder to second generation.
3. The independent board members should provide an expertise needed by the company and be open, direct and honest.
The company should be prepared to pay reasonable compensation to these board members. Mike Henningsen engages a consultant to do a compensation study. As a rule of thumb the daily rate is based on the CEO's compensation per year by 200.
Following are books and articles you may find helpful:
Ward and Pendergrast (2011) Building a Successful Family Business Board, Family Business Consulting Group, Inc., Palgrave Macmillan, New York, NY
Jaffe and Davis (2010), The independent family business board, Family Business Magazine (Winter 2010), pp. 54-56.
LeCouvie and Pendergast (2010), Developing Your Board of Directors for Maximum Impact Webinar, CDE available from Family Business Consulting Group Inc, Marietta, GA.
Tutelman and Hause (2008), The Balance Point: New Ways Business Owsners Can Use Boards, Famille Press, Edina, MN.