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Independent board directors: How to improve their contribution to the family business

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  • Gallo, Miguel A.

    (IESE Business School)

Abstract

This study is based on information obtained from two questionnaires, one sent to the presidents and CEOs of a sample of family businesses and the other sent to independent members of the Boards of Directors of the same businesses. The main points of agreement and the main differences of opinion between these two groups are identified and grouped under the following headings: 1) governance practices; 2) reasons for retaining or seeking the resignation of independent board directors; 3) reasons why independent board directors do not give the best of themselves, and 4) most appreciated and most missed qualities in independent board directors. The most important findings are: a) The main reasons for including independent board directors are to improve the structure of corporate governance and to resolve succession problems; b) The main reasons for seeking the resignation of independent board directors are lack of the necessary personal qualities, lack of the right relationship with the other directors, and calls for their resignation from significant shareholders, and c) According to independent board directors, the main reasons why they fail to give the best of themselves are that the owners are not genuinely committed to having a professional and effective Board of Directors, and the fact that important decisions are made by the family without taking the independent directors' opinions into account. The authors put forward six propositions to help get the most out of independent board directors and offer some recommendations on how to improve the structure of family business governance.

Suggested Citation

  • Gallo, Miguel A., 2005. "Independent board directors: How to improve their contribution to the family business," IESE Research Papers D/589, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0589
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    References listed on IDEAS

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    1. Fred Neubauer & Alden G. Lank, 1998. "The Family Business," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-14465-5, October.
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