Types of Boards
Boards in different jurisdictions must comply with various legal regulations. Beyond the important issue of compliance, “boards” can be flexed to suit the needs of a particular family enterprise and may feature where there is in fact no legal requirement, such as in a partnership. So the answer to the question, “what type of board does a family enterprise need or want?” cannot be answered just by reference to background legal requirements.
Another perspective emerges from answering the question “what function(s) is the “board” expected to perform?”
- Day to day executive decision-making
- Strategic planning
- Supervising the family enterprise
- Advising in relation to any of the above.
The board as the forum where power is exercised over day-to-day matters is more familiar than the ideas of a Strategic, Supervisory or Advisory board, which require further explanation.
Strategic Board
A strategic board can help a family enterprise create value by focussing on the overall “big picture”. This can include devising strategies for each part of the enterprise that will achieve the family’s Shared Purpose, then critically evaluating business plans and executive performance in terms of delivering these strategic goals and also ensuring resources are allocated to overall best effect.Supervisory board
A supervisory board comes into its own when all the owners are not on the board, which can arise in a family enterprise with non-working owners or where the enterprise is involved in a number of different activities. A supervisory board can oversee and monitor the performance of executive or management boards in each part of the enterprise and help to foster good relationships between the owners and management.Advisory boards
An advisory board can be a valuable source of on-going independent advice to any part of the governance structure created by an enterprising family. The advisory board can fill in gaps in the knowledge or networks of those in the business or provide experienced insights to the family/ownership dynamics that influence every family enterprise. They can be useful during a transition to help the seniors download their experience to pass on to the next generation who in turn might welcome the help of an Advisory Board to embed new governance structures and practices.Each of these types of board is immensely flexible, and, of course, a mixture of different functions can be constituted in the same “board”. The members of these “boards” need not be “directors” in the proper legal sense, which means they do not have tenure, and they can avoid becoming ensnared by legal, compliance and regulatory issues. These boards can be more easily changed and disbanded to suit the changing needs in a family enterprise.
