March 2015

In This Issue

15 rules for directors on how to work with private company owners, new print edition of Private Company Director magazine (downloadable) and the Private Company Governance Summit 2015

eNews Date: 
Wed, Mar 04, 2015

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Featured Articles

New Issue: Private Company Director Magazine

Trust and Culture

Building confidence in the strategic value of independent directors.

By Eve Tahmincioglu


What Private Boards Can Learn From Public Boards

An interview with Dennis Chookazian, retired chairman and CEO of CNA Insurance Companies.

By Roger Nanney


The Board’s Role in Growth & Succession

A trustworthy board can impact a company’s future.

By April Hall


McDonald’s Veteran Relishes Private Boards

Andrew McKenna, chairman emeritus, offers governance tips for private companies.

By Barbara Spector


Making the Right Director Match

5 questions to ask.

By Jim McHugh and Dale E. Jones


Best Private Company Boards: 2017 Awards

High standards bolster bottom line.

By April Hall


Governance Success Recipe

Independent voices, innovative compensation and an eye on the future.

By Allison Jacobs


SPECIAL SECTION: Private Company Director
2017 Directors to Watch

Stalwarts of private company governance.

By Scott Chase


Taking the Heat Off the CEO

The board’s role in compensations, succession and talent oversight.

By Barbara Spector


Convincing the Family

An independent board can be a business boon.

By April Hall

Click here for the full article.

You’ve Become One of Them

Fifteen rules for directors on how to work with owners

“You’ve become one of them.” That’s what a fellow Director (“MoneyGuy”) said to me after one of XYZ Company’s regular board meetings. MoneyGuy was from XYZ’s lead investor group and the majority shareholder. The ’them’ MoneyGuy was speaking about was XYZ’s management team. From his tone, I knew MoneyGuy wasn’t giving me a compliment; I was being admonished because I ‘sided with management’ about a particular matter that was pivotal to the future of the company.

What had I done wrong? To find the answer, you’ll need to read the following fifteen “rules” on how to work with owners.

These rules apply to different ownership structures of private companies. In general, the shareholders in private companies are either families, private equity/venture capital groups, management/founders, or a combination of these. The rules are indifferent to the stage of the company (early stage, mature, in decline, whatever). Hopefully you will see why these distinctions don’t alter how I work with owners. 

Here are my fifteen rules:

  1. Remember your role as a fiduciary. MoneyGuy knew I had a fiduciary responsibility to the corporation, not just to him and his private equity firm. They put me on the Board to be ‘an outside, independent voice.’ Somehow that slipped his mind! This brings me to Rule #2…

  2. Don’t be a rubber stamp. You can get rubber stamps at Staples. MoneyGuy or any other majority shareholder should realize that you are not on the Board just to be another automatic vote for them. Another Director friend told me: “There is a fine line to walk as an independent director when those sitting around the table own the company and you are effectively their invited guest.” If management knows you are truly independent and not there to throw them under the bus, this will help build trust with all.

  3. Understand the owner’s expectations and their personal and financial goals. One owner told me: “I believe the most important consideration for an outside Director is to ensure the shareholders’ goals and desires are fully understood. Private company owners are likely to have a complex mix of primary and secondary goals that often change based on circumstances impacting their lives. Multiple shareholders might present further complications which need to be blended into the stew.”

  4. Understand the owners’ personalities. This is different than #3. The particular personality style of the individual majority shareholder exerts a significant influence on the board and management.

  5. Get to know the management team. Is the CEO and senior team strong-willed, weak or balanced? How well does the CEO work with the company’s owners? Being aware of the strengths and weaknesses of the C-Suite will help you be a better coach to the owners.

  6. Understand the culture of the company. Why? Because you and your other directors do have a role in shaping it and maintaining it by your actions.

  7. Be consequential. Joe White used this term in his book Boards That Excel. One CEO/owner told me: “I want Directors that challenge me and bring perspective and skills I lack. I also want them to be well-grounded. The one thing my board has lacked is someone who is very knowledgeable about the specifics of my industry, but I think that has been outweighed by Directors with broad experience who see the big picture.”

  8. Understand the business model and the industry. I had recently joined the Board of a company and we were discussing changes to the distribution channels. One Director said: “That’s not how we go to market now, is it?” He had been on the Board for over ten years and did not know one of the basic aspects of the business model!

  9. Be a colleague, not an adversary. You are on the Board to give your opinion and offer advice, suggestions and ideas, not to advance your own career or agenda. I disagreed with MoneyGuy, but I wasn’t being disagreeable. No grandstanding, no pontificating allowed.

  10. Don’t be timid about personally coaching or mentoring the owners. Even though they own the company, they may need advice on areas they are unfamiliar with. See #7.

  11. Trust your gut. It’s ok to be a nudge (…and be Columbo-like). For those of you who are too young to know who Columbo was, Google him. Don’t allow the CEO and the team to stiff arm you or ignore your questions. Hopefully you have proved to the owners that your probing is done with good intentions.

  12. Prepare for and attend the meetings. How obvious is this? Don’t be a no show or empty seat.

  13. Participate. Be available to the owners not only at the Board meetings but also between the meetings. Encourage honest two-way communication and feedback.

  14. Embrace and use technology. Just a pet peeve of mine…I’m tired of hearing about people being ‘too old’ to learn today’s communication technologies. The cloud is something more than moisture in the air.

  15. Stay fresh. Owners don’t want ‘stale’, they deserve ‘fresh’.

None of this is complicated and these rules may seem pretty basic and just common sense to you. But if that’s the case, then why have I witnessed so many Directors who don’t follow these, who behave irrationally and/or who are ineffective with ownership?


Jim McHugh is CEO of McHugh & Co. Jim specializes in ‘fixing STUCK companies’. His 9Stucks® business diagnostic tool identifies nine distinct, yet interrelated business challenges that cause a company to underperform. In addition to his work as a senior advisor and consultant, Jim has broad, general management experience in middle market and emerging growth companies as an operating executive, a member of multiple Boards of Directors, and has served in management roles as a CEO and CFO. Currently he is on the Boards of Southworth International Group, Inc. (Falmouth, ME) and Kennebec Technologies, Inc. (Augusta, ME). Jim graduated with an AB in Economics from Bowdoin College and an MBA from The Amos Tuck School of Business Administration at Dartmouth College.

Click here for the full article.

There is still time to reserve your seat at the governance conference for directors, owners, and advisors of family-owned, closely-held and private-equity owned businesses of all sizes.

Speakers include: John J. “Jack” Brennan, Chairman Emeritus, Vanguard Group; Director, General Electric Company Lansing Crane, Chairman Canal Insurance Company Julia H. Klein, Chairwoman and CEO, C.H. Briggs Co. Jeffrey A. Sonnenfeld, Senior Associate Dean for Executive Programs & Lester Crown Professor in the Practice of Management, Yale School of Management; Director, Lennar Corp. Meghan Juday, Director and Family Council Chair, IDEAL Industries Gerry Czarnecki, Director, State Farm Insurance, MAM Software Group, Inc. Darcy Howe, Director, Heatron and Advisory Board Member, The Bama Companies George Isaac III, Director, Findley-Davies, The Isaac Group Edward D. Horowitz, Co-Founder and Board Member, U.S. Space LLC Jim McHugh, Director, Southworth International Group Inc. and Kennebec Technologies Inc. Cynthia Watts, Director, Furst-McNess Company B. Joseph White, President Emeritus, University of Illinois and Director, Gordon Food Service Bernard H. Tenenbaum, Advisory Board Member, Diesco, Woldenberg Group Dennis Cagan, Director, Copper Mobile, Acorn Technologies, Truston, HeartStories, Inc., Tavros Technology Challis Lowe, Director, Seaway Bank & Trust Paul Bartelt, CEO and President, The Vollrath Company Steve McClure, Principal Consultant, The Family Business Consulting Group Nina Henderson, Director, CNO Financial Group, Regus plc, Walter Energy Janet Morrison Clarke, Director, Cox Enterprises, Forbes Media Holdings Seth Goldman, President & CEO, Honest Tea



Click here for more director appointments.

Other Perspectives

The Number One Way to Destroy Your Private Company Wealth

From George Isaac via CNBC: Many privately held businesses unwittingly destroy shareholder wealth every year because of two easily reversed flaws.

First, most boards and CEOs focus only on operating entity results. They give priority to issues such as business strategies and plans, financial budgets, organizational issues and major transactions. They often select corporate ROE (return on equity) as a major metric, which is an appropriate element to consider.

Yet surprisingly, despite their legal and fiduciary responsibilities, few private company boards pay attention to perhaps their most important function: maximizing realized shareholder ROE. Read the entire article here.

Deloitte's Private Company Issues and Opportunities 2015 Report

​From Deloitte:  As the US economy continues to build positive momentum, it’s no surprise that private companies are adjusting their growth strategies to capitalize on a strengthening market for their goods and services. In fact, our most recent survey of mid-market executives last fall showed noticeable upticks across a broad sweep of indicators, from hiring plans to merger activity to global expansion.

The following report captures some of the most pressing issues privately held companies are facing in the current operating environment. However, we wanted to go beyond problem identification to underscore the opportunities companies can seize by addressing these issues in proactive and systematic ways.  Read the entire report here.

Click here for more news.