Family Business Boards and Family Dynamics

Family relationships often carry history and emotions that can blur professional boundaries. In a family business, navigating these personal dynamics may be difficult and can affect business operations. At the same time, family dynamics can provide businesses with a unique strength that helps these companies continue through multiple generations. Because decisions that are made in the boardroom are closely intertwined with family expectations and values, family business boards must ensure that governance practices balance both business and family interests. This Director Essentials, the third report in the Family Business Series, outlines key board governance structures and processes that can help family businesses to balance dynamics and optimize their unique strengths.

Introduction

For a family business to be successful in the long term, the responsibilities of the family should be clearly outlined. A lack of clarity in roles can lead to weak board cohesion and power struggles. Strong governance doesn’t mean excluding family members through an independent board—it means working together to determine what is best for the business and the family. Robust governance should be built upon a foundation of shareowner culture and values. As different generations of family members have differing views on business strategy, the best uses of capital, and risk, boards must work to bridge gaps between legacy and innovation to direct the future of the company.