External oversight keeps family businesses on their toes

More and more family businesses are opting for formal external supervision by a supervisory board. This fits the trend of a more open structure of family businesses.


Corporate freedom versus external supervision

It is often precisely this opening up of the family business that traditional family businesses struggle with. The director shareholder cherishes his freedom and entrepreneurship. He does not always feel like being accountable to a supervisory board. This is despite the fact that he already has the ultimate ability to send the supervisory board home. After all, the supervisory board members are appointed by the shareholders of the family business. In family businesses, the shareholder, or one of the shareholders, is often also the board of directors. See here the dilemma of the supervisory board. The supervisory board member supervises whoever appoints him.


Commissioner’s responsibility

Nevertheless, this appointment structure of the supervisory director by the shareholder should not be an obstacle to good external supervision. After all, the supervisory director also has (legal) responsibilities. A supervisory director can be held liable for proven damage as a result of improper performance of duties, read supervision by the supervisory director. Here it is important how the supervision is carried out, the frequency of meetings, the transfer of information and the questions asked. As a supervisory director, you must not only be the sounding board and sparring partner of the management but also dare to ask critical questions.


A board has advantages but can also be difficult

For the family business, the appointment of a supervisory board has great advantages. An external supervisor keeps the management on their toes. At periodic meetings, the board takes stock of the situation, both literally and figuratively. It forces the DGA to reflect on the policy, examine the strategic position and report to the board. Due to the distance from the company, the supervisory directors have a more independent view. Often a supervisory director can draw on greater experience. He also puts things in a broader perspective so that he can compare situations. A supervisory director must be able to ask questions, even if they are difficult for the management. If the auditor asks the right critical questions, in the long run this could just keep the company from making mistakes or, on the contrary, allow it to take new strategic directions. For family shareholders who are not on the board, the board can also be a good way to keep a finger on the pulse. Where necessary, the board can steer the management without directly straining family relations.


Board composition at the family business

It is therefore recommended that the supervisory board be properly composed. This does not mean choosing the familiar path and preferring a loyal supervisor from the family or circle of acquaintances. A supervisory director with a complementary profile and the necessary solidity to counter the entrepreneur/shareholder of the family business is preferable.  But one with an affinity for the family business and its family values.

Are you also looking for a suitable commissioner for the family business? Clifton finance has an extensive network of expert supervisors who have affinity with the family business or persons who themselves work in the family business or manage their own family business.

Would you like to discuss with us, without obligation, the composition of your supervisory board or the drafting of proper governance for the family business enterprise?

Please call Clifton Finance: Gonneke van der Lee +31 6 52466518 or Maarten Vijverberg +31 6 55853074.

By |2022-11-02T11:06:37+01:00November 6th, 2018|Blog|Comments Off on External oversight keeps family businesses on their toes

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