ILMA Compoundings August 2016 - 31
FAMILY BUSINESS
Should We Separate the
Chair and CEO Roles in Our
Family Businesses?
Steve McClure, Ph.D.
I
n family businesses, it is common for a single individual
to hold both the CEO and chair of the board positions
generation after generation. This combined role is usually
a result of a board needing a chairperson and finding no
reason to look beyond the well-qualified leader of the
business. The business's performance benefits as operational
and governance functions more easily align to efficiently
support business agility. We see many family firms default to a
combined function as generations and business circumstances
change without questioning the arrangement, unless there is a
significant leadership change such as the appointment of the
first nonfamily CEO.
Further, in situations where shareholders are concerned with
business performance and the two roles are combined, there
will often be a push for nonoperating shareholder participation
on the board. The result may be an ineffective board, especially
if nonoperating shareholders have little business experience or
lack the governance skills the business needs. Many consider
it a waste of a resources if the board primarily becomes a
management oversight function. By splitting the roles, many
have found that the chair can focus on good governance,
including utilizing independent directors and populating the
board with those who most add value to business success, while
providing management oversight.
Yet, when the CEO position is held by a family member, is
a combined CEO/chair function always the right structure?
The answer becomes complicated in later generations, for
bigger families, for those with more complex businesses
and when governance is formalized. The opportunity to
challenge tradition is while you are planning a leadership
change or making significant changes to the board, such
as increasing formality as with the addition of independent
directors. It should also be a key question in your emergency
succession plan.
When to Separate and When to Combine
We have no hard and fast rules for when to separate the roles
of chair and CEO and when to keep them combined. However,
one of the most common reasons to split the roles is to
increase the confidence of shareholders to provide greater
alignment between owners and management. We see this
when trust has fallen below a threshold and also with larger
families who are geographically dispersed or disconnected
from the business. A single family member holding both
positions can understandably appear like a conflict of interest
to nonoperating shareholders. They reason that since a key
purpose of the board is to ensure effective management, it
becomes more difficult to hold a CEO accountable if that
person is also leading the board of directors.
Compoundings August 2016 * 31 * Vol. 66 No. 8
ILMA Compoundings August 2016
Table of Contents for the Digital Edition of ILMA Compoundings August 2016
FROM THE CEO
FROM THE PRESIDENT
BOARD BRIEF
NOTES FROM NLGI
THE HEART OF ILMA
In Memoriam Mike Ryterski (1920–2016)
Radco Industries Promotes Brian Finch
Manufacturing Day is Coming! October 7, 2016
THE EVOLUTION OF GROUP II
VOICES & VIEWS
INTERNATIONAL INSIGHT
FOCUS ON ETHICS
FAMILY BUSINESS
RULES & REGS
POWER PLAY
LEGAL EASE Preparing for Brexit
THE WHITE PAPER
ILMA Compoundings August 2016 - 1
ILMA Compoundings August 2016 - 2
ILMA Compoundings August 2016 - 3
ILMA Compoundings August 2016 - 4
ILMA Compoundings August 2016 - FROM THE CEO
ILMA Compoundings August 2016 - 6
ILMA Compoundings August 2016 - 7
ILMA Compoundings August 2016 - 8
ILMA Compoundings August 2016 - FROM THE PRESIDENT
ILMA Compoundings August 2016 - BOARD BRIEF
ILMA Compoundings August 2016 - 11
ILMA Compoundings August 2016 - NOTES FROM NLGI
ILMA Compoundings August 2016 - THE HEART OF ILMA
ILMA Compoundings August 2016 - 14
ILMA Compoundings August 2016 - In Memoriam Mike Ryterski (1920–2016)
ILMA Compoundings August 2016 - Radco Industries Promotes Brian Finch
ILMA Compoundings August 2016 - 17
ILMA Compoundings August 2016 - Manufacturing Day is Coming! October 7, 2016
ILMA Compoundings August 2016 - 19
ILMA Compoundings August 2016 - 20
ILMA Compoundings August 2016 - THE EVOLUTION OF GROUP II
ILMA Compoundings August 2016 - 22
ILMA Compoundings August 2016 - VOICES & VIEWS
ILMA Compoundings August 2016 - 24
ILMA Compoundings August 2016 - 25
ILMA Compoundings August 2016 - 26
ILMA Compoundings August 2016 - INTERNATIONAL INSIGHT
ILMA Compoundings August 2016 - 28
ILMA Compoundings August 2016 - FOCUS ON ETHICS
ILMA Compoundings August 2016 - 30
ILMA Compoundings August 2016 - FAMILY BUSINESS
ILMA Compoundings August 2016 - 32
ILMA Compoundings August 2016 - 33
ILMA Compoundings August 2016 - RULES & REGS
ILMA Compoundings August 2016 - 35
ILMA Compoundings August 2016 - POWER PLAY
ILMA Compoundings August 2016 - 37
ILMA Compoundings August 2016 - LEGAL EASE Preparing for Brexit
ILMA Compoundings August 2016 - 39
ILMA Compoundings August 2016 - THE WHITE PAPER
ILMA Compoundings August 2016 - 41
ILMA Compoundings August 2016 - 42
ILMA Compoundings August 2016 - 43
ILMA Compoundings August 2016 - 44
https://www.nxtbook.com/ygsreprints/ILMA/G127535ILMA_vol71_no7
https://www.nxtbook.com/ygsreprints/ILMA/G126213ILMA_vol71_no6
https://www.nxtbook.com/ygsreprints/ILMA/G125546_ILMA_vol71_no5
https://www.nxtbook.com/ygsreprints/ILMA/G124996_ILMA_vol71_no4
https://www.nxtbook.com/ygsreprints/ILMA/G123886_ILMA_vol71_no3
https://www.nxtbook.com/ygsreprints/ILMA/G123315_ILMA_vol71_no2
https://www.nxtbook.com/ygsreprints/ILMA/G122980_ILMA_vol71_no1
https://www.nxtbook.com/ygsreprints/ILMA/G121540_ILMA_vol70_no11
https://www.nxtbook.com/ygsreprints/ILMA/G120882_ILMA_vol70_no10
https://www.nxtbook.com/ygsreprints/ILMA/G120035_ILMA_vol70_no9
https://www.nxtbook.com/ygsreprints/ILMA/G121XXX_ILMA_vol70_no8
https://www.nxtbook.com/ygsreprints/ILMA/G120XXX_ILMA_vol70_no7
https://www.nxtbook.com/ygsreprints/ILMA/G119XXX_ILMA_vol70_no6
https://www.nxtbook.com/ygsreprints/ILMA/G118112_ILMA_vol70_no5
https://www.nxtbook.com/ygsreprints/ILMA/G117382_ILMA_vol70_no4
https://www.nxtbook.com/ygsreprints/ILMA/G116888_ILMA_vol70_no3
https://www.nxtbook.com/ygsreprints/ILMA/G115555_ILMA_vol70_no2
https://www.nxtbook.com/ygsreprints/ILMA/G114774_ILMA_vol70_no1
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no12
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no11
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no10
https://www.nxtbook.com/ygsreprints/ILMA/g109884_ILMA_vol69_no9
https://www.nxtbook.com/ygsreprints/ILMA/g109284_ILMA_vol69_no8
https://www.nxtbook.com/ygsreprints/ILMA/g108494_ILMA_vol69_no7
https://www.nxtbook.com/ygsreprints/ILMA/g107507_ILMA_vol69_no6
https://www.nxtbook.com/ygsreprints/ILMA/g106483_ILMA_vol69_no5
https://www.nxtbook.com/ygsreprints/ILMA/g105803_ILMA_vol69_no4
https://www.nxtbook.com/ygsreprints/ILMA/g104743_ILMA_vol69_no3
https://www.nxtbook.com/ygsreprints/ILMA/g103647_ILMA_vol69_no2
https://www.nxtbook.com/ygsreprints/ILMA/g102869_ILMA_vol69_no1
https://www.nxtbook.com/ygsreprints/ILMA/g101930_ILMA_vol68_no12
https://www.nxtbook.com/ygsreprints/ILMA/g100836_ILMA_vol68_no11
https://www.nxtbook.com/ygsreprints/ILMA/g99200_ILMA_vol68_no10
https://www.nxtbook.com/ygsreprints/ILMA/g98468_ILMA_vol68_no9
https://www.nxtbook.com/ygsreprints/ILMA/g97711_ILMA_vol68_no8
https://www.nxtbook.com/ygsreprints/ILMA/G96767ILMA_vol68_no7
https://www.nxtbook.com/ygsreprints/ILMA/G95397ILMA_vol65_no6
https://www.nxtbook.com/ygsreprints/ILMA/G94323ILMA_vol68_no5
https://www.nxtbook.com/ygsreprints/ILMA/G93127_ILMA_vol69_no4
https://www.nxtbook.com/ygsreprints/ILMA/G91785_ILMA_vol68_no3
https://www.nxtbook.com/ygsreprints/ILMA/G90956_ILMA_vol68_no2
https://www.nxtbook.com/ygsreprints/ILMA/G89146_ILMA_vol68_no1
https://www.nxtbook.com/ygsreprints/ILMA/G87981_ILMA_vol67_no12
https://www.nxtbook.com/ygsreprints/ILMA/G85409_ILMA_vol67_no11
https://www.nxtbook.com/ygsreprints/ILMA/G83595_ILMA_vol67_no10
https://www.nxtbook.com/ygsreprints/ILMA/G81672_ILMA_vol67_no9
https://www.nxtbook.com/ygsreprints/ILMA/G80238_ILMA_vol7_no8
https://www.nxtbook.com/ygsreprints/ILMA/G79388_ILMA_vol7_no7
https://www.nxtbook.com/ygsreprints/ILMA/G78361_ILMA_vol7_no6
https://www.nxtbook.com/ygsreprints/ILMA/G77448_ILMA_vol7_no5
https://www.nxtbook.com/ygsreprints/ILMA/G75899_ILMA_vol67_no4
https://www.nxtbook.com/ygsreprints/ILMA/G75036_ILMA_vol67_no3
https://www.nxtbook.com/ygsreprints/ILMA/G72720_ILMA_vol67_no2
https://www.nxtbook.com/ygsreprints/ILMA/G72220_ILMA_vol67_no1
https://www.nxtbook.com/ygsreprints/ILMA/G70970_ILMA_vol66_no12
https://www.nxtbook.com/ygsreprints/ILMA/G69813_ILMA_vol66_no11
https://www.nxtbook.com/ygsreprints/ILMA/G67522_ILMA_vol66_no10
https://www.nxtbook.com/ygsreprints/ILMA/G66343_ILMA_vol66_no9
https://www.nxtbook.com/ygsreprints/ILMA/G64859_ILMA_vol66_no8
https://www.nxtbookmedia.com