Everyone says a sizeable business needs a board of directors, but does it?


Recently, Family Capital spoke to an owner of a $3 billion-plus business transitioning to the third generation of family control. There was much to admire about his company, not least its proven commitment to all its stakeholders over many years.

But, despite its size,  the business has no board of directors. The family owner told Family Capital in confidence, so we aren’t going to disclose the name of the business, that he wasn’t against the idea of boards, but said the business has flourished for more than 100 years without one and saw no reason to set one up. He added that the third generation might decide to create a board, but currently there are no plans to do so. The family owns 100% of the business.

This would appear to go against the advice of most exponents of good governance, who argue that a board of directors with non-family members is pretty much a requirement of any well run business with revenues of more than $10 million, if not a lot less.

Interestingly, there are number of big family businesses without boards, including the Canadian-based H.Y. Louie Co, a $2 billion-plus retail empire big in the west coast of Canada. Another $2 billion revenue company, the Italian chemical products company Mapei, also doesn’t have a board of directors. Its second generation CEO Giorgio Squinzi doesn’t see the need for one. And he’s also president of Italy’s powerful industrial group Confindustria — so a many people think he knows what he’s doing.

There are many good reasons to have a board – with checks and balances on the owners and senior management at the top of those reasons – but taking an absolutist view on them from a good governance perspective isn’t necessarily the right reason. Clearly, as pointed out, there are many outstanding examples of excellent-run companies without boards of directors, and there will continue to be so in the future.


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