The pressure of "corporate governance" is rising on family members running their family business. When a board seat opens, the reflex now is to reach for an independent director, someone who ticks the boxes of listed-company governance, with a CV shaped more by the technostructure than by the industry itself.
A well-established European winemaking family approached us to challenge their approach to replacing a director. Two candidates made the final round. The first came from the wine industry, someone who had seen a vineyard, grown a similar business, and lived the operational realities. The second came from the corporate governance circuit. Against our recommendation, and under pressure from their chair (herself from the corporate world), the family chose the second. They reversed the decision eight months later, and replaced the chair at the same time. The board had been running like that of a listed company, and the family realised it was the wrong fit.
A family-controlled business does not need an extra layer of corporate governance around the boardroom. It needs people who add tangible value, who can genuinely support and challenge the management team, and who understand the asset from the inside. Independence is a useful quality. It is not a substitute for competence, and it should not override it.
In the mandates Westwick helps design, the recruitment brief for board seats starts with the operational and strategic value a candidate can bring, and treats independence as a check, not the headline. Families that reverse this order end up with directors who are formally unimpeachable and operationally absent. Which is the worst of both worlds.
Frequently asked questions
Should a family business board prioritise independent or competent directors?
Competence first. Independence is a useful quality and a reasonable check, but in a family-controlled business it is not a substitute for knowing the asset from the inside. A director who understands the industry can support and challenge management in a way a governance-circuit CV cannot. Families that reverse the order end up with directors who are formally unimpeachable and operationally absent.
Does a family-controlled business need listed-company governance?
No. Corporate governance exists to protect outside shareholders from the people running a company. A family-controlled business has its shareholders in the room. Its board needs people who add tangible value to the business and can hold management to account. An extra layer of process designed for a listed company does neither.
This article is part of our series on family governance. The reference piece for the series: Governing Families, Not Corporations — the Westwick white paper.