Good Governance Depends on Family Trust
The Herschend family board is majority independent.
When you own stock in Apple, the employee at the Genius Bar doesn’t care that you’re a shareholder.
“But if a shareholder walks into one of our properties, there’s a good chance they’re a family member, and the employees know who they are,” says Andrew Wexler, the non-family CEO of Herschend Enterprises. “They’re going to maybe get nervous or anxious, because they want to make sure everything is as perfect as can be for that family member.
If a family shareholder doesn’t like the way something looks at a Herschend property, Wexler says, “the employees will run around and fix it.
“It’s just a different dynamic.”
Comparing public and private company management, Wexler says the relationship between management and shareholders has to be different.
“It has its challenges and its rewards, but the big thing it comes down to is intimacy,” Wexler says. “The shareholders know the business really well. As non-family member, I don’t have the same experience. So it’s about creating an intimate relationship and getting comfortable.”
|This interview was part of the 2020 Private Company Governance Summit held online in September. Registration is still available to watch replays of the sessions. Register now...|
Herschend, which owns and operates theme parks, water parks, aquariums and other entertainment properties across the U.S., has a majority-independent board comprising six independent members, two shareholders/family members and himself. The governance committee is made up of two shareholders and two independents.
This independent-heavy fiduciary board is not new thing for Herschend; co-founders Pete and Jack Herschend agreed to an independent board of directors half a century ago.
“Think about the humility required to do that when you’re a young company, and say, ‘We don’t have all the answers, we want to bring in people who’ve experienced things that we’ve never experienced,’” Wexler says. “They brought in smart businesspeople who knew the challenges [Herschend] would face.
“It’s the same thing today. We rely on the board to bring a lens and a perspective that we may not have.”
Herschend has placed a priority on a gender-diverse board. Three of the six independent board members are women. Wexler admits the company needs to do a better job with other kinds of diversity on the board. However, when it comes to the family’s commitment to make the company better, there is no doubt they are in for the long haul.
“The family could sell the business and go invest somewhere else, but Chris [Herschend, chairman of the board] has said that the best way to impact people’s lives is to be their employer,” Wexler says. “That’s lived out in the values of the company.”
Those values were put to the test when COVID-19 hit in March. State governments and public health officials told Americans to stay home. Herschend’s business model centers on bringing large groups of people together to have fun.
Wexler talks openly about Herschend having to furlough nearly all of its staff, but says the blow was cushioned by the company’s “Share It Forward” program.
A 501(c)(3) was established as an employee-assistance fund. Employees and management made tax-deductible donations, which the company matched, to be used if an employee had an emergency.
A 95% furlough is such an emergency.
“COVID created significant hurdles for a lot of our employees, so with Share it Forward we were able to get money into the hands of our employees, tax-free, as well as not generate a lot of payroll taxes that would’ve gone to the government,” Wexler says. “It became a great tool in our toolbox to help take care of our employees, and deal with our huge financial crisis in the company as well.
“People got assistance that really needed it, and that was very important to us.”