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December 12, 2018

Why Re-Shape Private Boards

Robin Coady Smith

Robin Coady Smith
CEO & Co-Founder/Privatus CI30

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The purpose of a board is often poorly understood or exists to reinforce founder decisions. This contributes to lackluster performance of the company; as it does not follow precepts of good governance for matters ranging from participating in leveraging business growth to conflict resolution.

 

Points of Pain

 

A founder re-tooled his company board two years ago from family members to more financial advisers to help him with decisions about growth and strategy for the business. Financial matters, such as company revenue and profit performance were claiming larger shares of board meetings. Now he began to wonder “what should be the purpose of my board?"

 

The Problems Beneath the Pain Points

 
  • A financial board doesn’t address value creation, governance or risk oversight
  • No board strategy or purpose lowers its contribution to the business
  • Business & family interests are seldom considered on a balanced basis
  • Unresolved conflicts & power struggles can devalue the company & diminish revenues
  •  

The Consequences

 

Not following precepts of good governance means task conflicts quickly become interpersonal conflicts. Within a year or two without consensus of purpose or a guiding business strategy, intra-power struggles arise. In a worse case, not having access to value creation and a deep-risk management program contributes to a downward spiral on the value of the business.

 

Results of Unresolved Points of Pain over Time

  • Price-performance is an issue (- 25%) + in past 52 weeks
  • 5-year growth range - (0% -5%)
  • Negative 5-year average
  •  

An Overview of Solution - 30,000 ft Level

 

A diversified board has both strategic and tactical focuses. The business is a longer-term endeavor and it consists of both financial and human capital. and is differentiated by its choices of readily available financial skills AND limited access to deeper finance/ risk management and human capital skills. Human capital skills are needed for governance oversight, successions, transitions, alignments, dispute and conflict resolution.

Comments? You can contact me directly via my AdvisoryCloud profile.

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