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12 Rules for Family Business Failure

[Editor's note: the following excerpt appears in the Private Company Director October 2015 issue.]

Lansing Crane was a keynote speaker at the Private Company Governance Summit 2015 and spoke about governance issues for companies and their boards. Some of his key talking points were using the board as strategic advisors, using the board's advice on personnel decisions, the board's role in culture change and avoiding common mistakes. 

During his speech he also took the time to outline some rules for family business failure. They included:


Onboarding the New Director

Is there a such thing as a “feeling out” process for new directors? There was a time in years past where a new director wouldn’t say much during his first couple of board meetings. In fact, there was an old rule of thumb that said a new director should take about a year to get accustomed to a board, its members and how the company runs.

In today’s business world, private companies do not have the luxury of waiting that long. It is imperative that the new director be brought up to speed on all aspects of the company before the first board meeting. Three directors—Janet Morrison Clarke, Bernard H. Tenenbaum, and Ed Smith—shared their best practices for new director orientation at the Private Company Governance Summit 2015, in a discussion moderated by Ray Judge of Diligent Corporation.

These directors focused on vital issues such as addressing the role of the board chair, lead director, the CEO and key managers in onboarding the new director, what types of documents and training materials are needed and what can reasonably be expected of new directors.


Three Lessons for Private Companies from Public Company Governance

Closely held companies may not be able to afford to accept the mom-and-pop style governance that has long separated public and private concerns. Increasingly, private company executives are embracing the more structured governance processes used by their public counterparts.

There’s a challenge for closely held companies: strengthening governance without compromising the flexibility that many see as their primary advantage in the marketplace. While most public companies have clear rules and strict procedures to ensure everything from regulatory compliance to risk assessment, private companies may be wary of becoming too bureaucratic or beholden to process.

Based on our research with both public and private companies, Deloitte has identified three key areas in which private companies can emulate public company governance in developing their oversight.


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