Board of directors
A board of directors is the group of people, elected by a company's shareholders, that oversees management, approves major decisions and appoints, supports and if needed replaces the chief executive.
Every corporation has a board of directors, but in many family businesses it exists mostly on paper. The founder and a few relatives are the directors, and decisions are made elsewhere. As the business grows, or as succession approaches, many families turn the board into a working body.
A board typically:
- Sets direction: approves strategy and major investments.
- Oversees performance: reviews results, risk and financial controls.
- Appoints and evaluates the CEO, including planning for succession.
- Represents shareholders, and owes duties to the company under company law. These are often called fiduciary duties, and their exact scope depends on the jurisdiction and the company’s structure, so families should take advice from their lawyer.
The board is led by the chair. Many family businesses add one or more independent directors to bring outside experience and objectivity.
Board, advisory board or family council?
A board of directors has legal authority and legal duties. An advisory board gives advice but cannot bind the company. A family council represents the family as owners and has no role in running the company. Mixing these up, for example by bringing family disputes into board meetings, is a common source of trouble. Independent board before succession looks at why many families strengthen their board before the handover.
Why it matters for the successor
For many successors, the board is the room where authority is tested most directly. Directors often have long relationships with the founder and will notice whether the successor leads with a clear position, answers hard questions directly and owns the numbers. How to present to the board as a family successor covers the practical side.