The world’s largest organisation for female corporate directors has announced it is establishing a family business council to explore how family firms can improve corporate governance.
Women Corporate Directors (WCD) said a growing number of its members, especially those from emerging markets, were requesting in-depth information about family business-specific issues.
A survey conducted by the organisation in 2012 revealed family businesses, more than their publicly-owned counterparts, were concerned that certain skills sets were missing from their boards – particularly human resources and talent management.
Co-chair of WCD Henrietta Holsman Fore, who is herself a chief executive of family business Holsman International, says: "There is a genuine desire to implement governance best practice, but also to learn how to balance this against the wishes of the family stakeholders, who may represent multiple generations."
WCD’s family business council will conduct initiatives such as programmes for female directors at family firms; research into specific skills needed for family business board service; and networking opportunities between family businesses and public companies.
Susan Remmer Ryzewic, president, chief executive and director of EHR Investments, says: "Family business governance benefits from ownership aimed at the generations ahead, but complications arise around family dynamics and stakeholder fairness.”
Ryzewic says these include succession, board composition, board preparation and family board member decisions.
When it comes to succession she says it can be hard to get a family member chief executive to relinquish control, because their identity and role in the family can be tied up in that position. She says lingering resentments and rivalries can also emerge during transitions.
Ryzewic also explained that many family business boards suffer from cronyism. “The founder or elder may have included friends and advisors who are loyal to him or her, but who are not necessarily the most effective board members.”
“Family business boards may include family members who are lacking board preparation. Being a family member does not automatically make one an effective board member,” Ryzewic says, adding: “Not being well prepared can lead to “not rocking the ship,” not understanding the role of a board, and potentially interfering with management in inappropriate ways.”
Ryzewic also says historical patterns of behaviour and unresolved issues in the family can flow over into the boardroom. “[Family members] contributions while serving on their own family business board can be undermined and undervalued because of others’ memories and perceptions of their earlier selves,” she says.