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Legacy Matters
BlogsPublications | October 29, 2021
4 minute read
Legacy Matters

How Do I Create a Functioning Board of Directors for My Family Business?

Family business experts consistently identify a functioning board of directors as a key ingredient for the long-term success of a family business. To help family business owners create a board or expand an existing board of family members to include outside directors, Warner recently co-sponsored a Family Business Board of Directors Workshop in conjunction with the Family Business Alliance in Grand Rapids. Presenters included experienced family business directors Win Irwin, Tim Schad and Bill Goodspeed and Warner attorneys Matt Johnson, Corinne Sprague and Dan Persinger.

The presenters worked with business owners in groups to help them:

  • Understand how advisory and fiduciary boards work.
  • Consider the purposes for which the business could use a board of directors.
  • Think about board composition (only family members or also independent members).
  • Understand the duties and liabilities of board members.
  • Create a process to recruit and evaluate potential board members.

Where Do I Start When Creating a Board of Directors?

Often the biggest obstacle in creating a board of directors is not knowing where to begin. During the workshop conversations, the participants discussed important early steps in the process, including:

Creating ownership buy-in for a board of directors. It is important that owners are in agreement about the importance of having a well-functioning board and have a shared vision for how the business will use the board. An initial meeting of the ownership group to work through this is vital.

Creating a nominating committee to choose outside board members. If the ownership group is large, geographically spread or contains multiple generations, creating a nominating committee can help streamline and manage the search for and selection of both family and independent board members.

Creating a recruitment document to provide to potential board members. In this document, you can educate a potential board member on your family and business and set expectations for directors. This document should contain information about your business and its ownership, the purposes you expect the board to serve, the skills you are seeking from board members and the specifics about the board position (role, fiduciary duties, insurance coverage, time commitment, compensation and other important information).

What Do I Look For in Board Members?

During the workshop, participants discussed the process of choosing board members, including: 

Determining the skills and experience the business needs from its independent board members. As the ownership group or nominating committee creates the recruitment document, they must determine the skills current family members/management can provide to the board and consider what may be needed from outside board members to keep the business strong and thriving into the future. Questions for the ownership/nominating group to address in this discussion could include:

  • Are you looking to grow the business into another area and will you need an expert in that industry or geography?
  • Are you looking for someone from a different industry who could bring a transfer of knowledge or new ideas?
  • Do you expect a transition of the business to the next generation soon and need someone who has been through this process?

Evaluating a potential board member. Once you create a list of potential board members based on their skills and background, it is important to discuss how those individuals would fit with the business.

  • Would they be a good fit for the board’s determined purpose?
  • What other skills or experience would they bring to the board (industry or professional knowledge, management or CEO experience, business transition experience, academic or global business perspective, etc.)?
  • Would they fulfill the role you are asking of them? Will they raise the sometimes uncomfortable concerns they see, ask the hard questions and challenge family and management leaders?
  • Do they have values that align with the values of the family and the business?
  • Do you see potential conflicts of interest to address?

A Board of Directors Provides Value for Family Businesses. 

During the workshop we discussed how a functioning board with independent directors helps any business and is particularly helpful for a family-owned business. In addition to working through the purposes and process for creating a board, we discussed how the time spent creating and working with your board is a valuable and vital investment into making the transition to future generations.

Whether you are ready to create a board of family members or expand your board to include outside board members, Warner can help. For assistance, reach out to your Warner attorney, or contact Matthew Johnson at or 616.752.2529, Corinne Sprague at or 616.752.2756, or Daniel Persinger at or 616.752.2353.