Reflective Advice
Thoughtful, Experienced Advice Dedicated To Small Businesses

For this article, an independent director (also referred to as an outside director) is a person not having a sufficient enough relationship with the family or management so to influence the individual’s independent, objective judgment in carrying out the responsibilities of a director.

As with any business, a family business exists to grow, succeed and create wealth for the owners. However, in a family business, family involvement can change the dynamics.  Some members become actively involved in day-to-day operations, while others may undertake supervisory roles acting through Board participation. Family ownership is unique in one fascinating sense. The “family” culture of long-term stewardship embraces the development and support of family members over multiple generations. Family influence and agendas can diverge with each member and impart a healthy emotional content to decisions. Most family businesses do not have a clear approach for decision-making and conflict management, especially if a matriarch operates the business. Matters of ownership, governance, management, succession and exit planning can become muddled by family differences and challenging to resolve. If professional managers operate the business, the lines between management and family may become blurred or conflicted because of the shorter-term view of professional managers seeking a liquidity event, contrasted to the family-centric, generational view. 

An efficiently functioning Board is essential for any company to be successful. Broadly, the principal role of the Board of Directors is oversight of strategic direction, financial performance and the selection and retention of the CEO and other senior executives. The Board also has an important role in establishing the governance and compliance programs for operating the business. Independent directors will seek to formalize decision and business processes to strengthen operational performance. Specifically, the independent directors can lead the institution of a well-administered governance program encompassing the framework for separating and resolving family concerns before becoming disruptive.

The appointment of independent directors brings fresh perceptive, deeper business skills, and heightened accountability. More importantly, the appointment inaugurates the setting of a clear boundary between family and business. An active outside director should build trust and possess an understanding and patience with family matters, freely air candid opinions and promote open and honest debate, especially in issues involving family members.   

In conclusion, a family owned and operated business should appoint independent directors to its Board to help ensure sustained generational success. Best practice suggests the appointment of two or more independent directors. A single independent director can become isolated and marginalized and have difficulty affecting family and Board dynamics.  While reaching family consensus to such an appointment can be knotty, the company can experience remarkable benefits.   

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My background: I have diverse experience in engineering, law, and finance. My expertise embraces varied roles, early-stage investing in medical devices, life science, high technology, and professional service firms as a member of a family office and as a Board member of various family-owned and operated businesses and non-profit organizations. I was VP, Business Operations, General Counsel and Secretary and a member of the Operating Committee of Computervision Corp (formerly Prime Computer, Inc.), and VP, Administration, and CFO of a $100 million IBM hardware and software reseller with professional services organization and a corporate venture arm. For the last ten years, I have worked with small business owners as a consultant, as a member of an Advisory Committee, and a Board of Directors. My Practice: Experienced Board Member Helping Owners of Small to Mid-size Businesses Build a Company that is financially strong with consistent earnings and is operationally self-sustaining. I provide thoughtful strategic support based on careful financial, planning, and analysis with the business owner. My experience includes: Business Sales: I have worked with business owners in the generic pharmaceutical, technology, software, professional services, and laboratory services industries to increase value and prepare for and navigate a successful exit. Operations/Financial Management: I seek to bring sound, practical business and financial judgment learned from my experience working with owner-operated companies. I have resolved complex problems under critical time constraints in quickly evolving and tense environments. I believe in acting ethically, openly, and decisively. Independent Directorships: I have been a board member of several startups and family-owned and operated businesses, including a generic pharmaceutical firm, a reference laboratory, and SaaS and other software and high technology companies. I work persistently to support growth and create wealth for the owners. As an independent director, I have been the Chairman of Special Board Committees established to solve critical financing issues. I believe in the setting of a clear boundary between family and business. As an outside director, I build trust, understanding, and open-mindedness with family matters and freely air candid opinions to promote open and honest debate between family members. My recent growth services and transaction advisory engagements include: Family-Owned Businesses: • I provided advisory services to sell an Identity Access and Management (IAM) SaaS offering of a family-owned company to a public, global technology and services company. I coordinated the investment banker's activities, outside counsel, and internal staff to develop the valuation, respond to due diligence and negotiate the transaction. • I sold a SaaS platform providing a web portal for reporting the status of various permits processed by a municipality, including valuation, due diligence, drafting, and negotiating the acquisition agreement. • As a transaction advisor and independent board member, I provided advisory services to the founders of a family-owned and operated laboratory services firm in a sale to a public company. I worked closely with outside audit, tax, and legal counsel. I managed the process, including developing the valuation, dealing with tax and accounting issues, responding to due diligence, and negotiating the sale documents and integration issues. Independent Board Memberships • As an Independent Board member, as Chairman of the Special Committee of Independent Directors, I negotiated a recapitalization of a family-owned generic pharmaceutical business with various outside shareholder groups, including family members, resulting in a satisfactory resolution for everyone. In a separate transaction, I negotiated the purchase of the firm by a family member competing with an outside offer. I was also actively involved in negotiating the transition from family management to a professional management group. Other Transaction Support: Restructuring/Recapitalizations/Public Offering of a Private Equity Owned Company. • Responsible for the workout and going public transaction of this private equity-funded high-technology company. I coordinated the CFO, Controller, Legal, Tax, and Workout advisors' activities to develop, evaluate, and implement restructuring alternatives. We negotiated the transaction with banks, shareholders, and bondholders to restructure bank and bridge financing and coordinated with investment banking, legal, audit, and tax advisors to raise $600 million in an initial public offering comprising $300 million in equity and debt financing. Education: Suffolk University Law School, JD Northeastern University, BSEE Executive Education Programs - Business: Brandeis University Non-Degree Student - Heller School (Course in Corporate Finance) and School of International Economics and Finance (Various courses in Financial Modeling and Acquisitions) Duke FUQUA School of Business (Strategy, Economics, and Operations) Executive Education Programs - Legal: Stanford Law School (ERISA Law), Harvard Law School (Antitrust, Corporate and Tax Law)