External Directors

A Perspective From a Non Executive Director

in Family Business

Presented by Bill Winter MAICD

External Directors

Only one third of family business use a formal board of directors or an external advisory board

( 2009 survey KPMG/FBA )

External Directors

A key Challenge for NEDs

How do you help implement key business disciplines and still maintain the family vision, culture and core values that got

to where you are today ?

External Directors

Dealing with boards does not come easily to most family business founders

• The board will inhibit their entrepreneur skills

• They cannot come to terms with the changing business compliance and risk management environment of the 2000’s

• Family board members don’t take kindly to advice from outsiders.

• Family business and family issues should not be shared with non family members

External directors

Who should consider NEDs ?

• Companies going through transition from small to mid-size

• Companies committed to growth

• Companies in an industry or market that is changing

• Companies that are struggling with succession

External Directors

What should you expect from the NED’s

• Joint responsibility for the survival and growth of the business

• Understand the connection between family and business

• Raise issues and ask questions to challenge the thought process

• Provide insight, and a benchmark against other business

• Assist with long term strategic direction

External Directors

• Supplement and not substitute existing management expertise

• Bring new disciplines to the business while respecting the family core values.

• Respects confidentiality

• Understands the liabilities and responsibilities of directors and officers with reference to the Corporations Act 2001

• Stick nose in and keep fingers out – respect the line of delegation

External Directors

The attributes of an effective NED

• Experience from different business sectors, business insight

• Works harmoniously with other board members, the Chairman

• Someone who is not connected socially or personally. Preferably not your normal accountant or lawyer

• Understands family / business dynamics, next generation expectations

• Is willing to put forward an opinion that is different from the norm

External Directors

• Willing to be involved as required outside set meetings

• Is willing to participate in formal board and director reviews

• Prepared to take on continious learning

• Has a high focus for risk management and compliance

External Directors

Take the position that you are custodians for future

generations

Is it about building wealth

in the long term ?

External Directors

Many family business boards do not understand the reality of risk

management and compliance with reference to the

Corporations Act 2001.

External Directors

In one year ( 2007 )

Record number of ASIC prosecutions.

ASIC prosecuted 561 company officers for 1,133 contraventions of the Corporations Act with fines and costs of $1.1 million. Six good behaviour bonds and

320 hours of community service

(Company Directors Magazine)

External Directors

Most Family businesses are not aware:

Even if you are not formally a director but make key decisions and are involved in decisions normally made by a director - you are in fact a shadow director.

Refer; ( Corporate Affairs Commission v. Drysdale ( 1978 )

External Directors

Do you have checks and balances in place ?

External Directors

Bill Winter MAICD Point North Consulting

www.pointnorth.com.au

Email: bill@pointnorth.com.au

Mobile: 0411536424

If you have any questions please email or call me and I will be happy to offer my comments or point you to someone who can assist if it is

outside my area of expertise.