Family board members 'need external and internal credibility?

Appointments of family members to boards are often more successful if they happen following a transparent nomination process and are based on a person’s ability, according to one leading family business commentator.

Professor Joachim Schwass from Swiss-based business school IMD said a family member’s success on a company board is dependent on their internal and external credibility, adding that all family board appointments should be assessed based on these factors.

The individual needs to be viewed as competent externally, with the ability to defend the interests of the business as a whole, Schwass said, while fellow family members also need to see the future board member as reliable, trusting the individual to “ably and fairly represent the shareholders’ interests”.

“A transparent and professional nomination process is crucial,” he advised.

The role family members play on company boards has been heavily scrutinised recently, because of the current issues at News Corporation.

Commentators have suggested the Murdoch family have been too dominant at the media conglomerate, which has recently come under fire for alleged phone hacking by its UK division, News International.

Rupert Murdoch, News Corp’s current chairman and chief executive officer, and sons Lachlan and James already sit on its board and plans were in place for daughter Elisabeth to join.

However, Viet Dinh, chairman of the nominating and corporate governance committee of News Corporation’s board of directors, announced last week that these plans have been delayed.

Elisabeth and the company’s independent directors believe her nomination would be “inappropriate”, he said.