FAMILY BOARD OF DIRECTORS
Back to GlossaryDefinition
The most formal form of family governance, a family board of directors will have set terms, compensate its members, and bring diverse expertise to augment the leadership, owner and/or company executive expertise.
Summary
A Family Board of Directors is the highest level of formal governance structure in family businesses, functioning similarly to corporate boards but specifically designed for family enterprises. Unlike informal family meetings, this board operates with professional standards including fixed terms of service, member compensation, and structured decision-making processes. It brings together family members with external experts to provide strategic oversight, ensure accountability, and bridge the gap between family interests and business operations. This structure helps professionalize family business management while maintaining family control and values.
Usage Context
This term is crucial when studying advanced family business governance structures, succession planning, and the professionalization of family enterprises. It's particularly important when examining how families balance emotional/relational dynamics with business performance requirements.
Common Confusions
- Confusing it with a Family Council (which is less formal and more advisory)
- Thinking all members must be family members (external expertise is key)
- Assuming it replaces company management (it provides oversight, not day-to-day management)
- Believing it's only for large family businesses (can benefit smaller ones too)
- Thinking compensation means only monetary payment (can include other benefits)
