Why You May Wish to Consider Having Independent Directors on Your Company Board
Whether you are looking to maintain or grow your business in the shorter term or to ensure that it lasts for future generations, you may wish to consider having independent directors on your company’s board.
Founders of the business may initially resist for a range of reasons, including a feeling of a loss of control, a reluctance to share information with outsiders, or an unwillingness to let outsiders to tell them what to do. These are all valid concerns; however, here are some reasons why you may wish to include arm’s length members on your company’s board.
Reason #1
Often, founders of a business may be reluctant to change the status quo or re-examine a long-standing business strategy—in other words, don’t fix what isn’t broken. An independent director can bring a fresh set of eyes, experience and even connections to the business that can shift the business into a higher gear and propel it forward, maintaining and even improving its competitiveness in today’s fast-changing world.
Reason #2
Relationships among company founders may get in the way of making good business decisions. The roles, responsibilities, loyalties and animosities arising from intertwined ownership and business relationships can cause conflict, stagnation and bad business decisions. A well-chosen independent director represents the business and not any particular owner or officer of the company, with the primary goal of benefitting the long-term sustainability and growth of the company. As a result, independent directors can provide a more balanced view of potential competing interests as well as help to avoid “group think.”
Reason #3
Many companies have an established hierarchy that, whether intended or not, can be carried into the boardroom. An independent director can act as an independent voice enabling contrasting perspectives to be discussed and uncomfortable conversations to be objectively resolved. Perhaps most importantly, an independent director can “professionalize” business meetings further, enabling current leaders to assess the leadership qualities of younger members of the team to prepare for business succession.
The Bottom Line
There is no doubt that there may be resistance to the idea of adding independent directors to a company’s board, but it can be one of the best ways to ensure that the business lasts years to come. Rather than being tied to the business’s past, effective independent directors look to the future to achieve long-term growth and continued success. The best time for an independent director to join a company’s board is now.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.