Family Office – Family Members on the Board
The board of a for-profit enterprise is meant to be a working board. Unlike its not-for-profit equivalent, it does not exist to facilitate fund-raising activities and so does not require representation from an exhaustive group of stakeholders who have the capacity to be potential donors. Because the mission of a family board is to work with and advise the CEO of the company or president of the family office—not represent constituencies—it is better kept small. Most group dynamics research argues that board size should be limited to between five and nine members in order for it to remain a working board. The majority of those members should be independent outsiders, such as peer CEOs, business-school professors, and/or professional service providers who derive no revenues from their relationship with the company except through board service fees. Ideally, the individuals chosen are not friends of the family, as friends tend to turn the board into a rubber-stamp board, devoid of independent and respectful but challenging thinking.
Fourth generation Richard and Tim Smucker run the now 115-year-old J. M. Smucker Co. (SJM): famous for its jams, jellies and peanut butter. Their family, with fifth-generation Mark Smucker and Paul Smucker Wagstaff now in the management
ranks, avoids the squabbles that mark many business dynasties. Tim and Richard Smucker have quintupled sales by buying up iconic, but underdeveloped, brands such as Crisco, Jif, and Pillsbury, along with winners like Folgers and Dunkin’
Donuts coffee, making the Smucker Company a branded food products giant. Their stock, at about $80 a share, was close to an all-time high in 2012 (closing stock price on April 18), and company revenues exceeded $5 billion.
Chief executive Richard Smucker, 64, says their business formula is: Strategy + Implementation + Culture = Success, with the added responsibility of needing to manage the family dynamic because of their being a family enterprise. “At Smucker’s
being a family member helps get the first job but performance measurement then is the same for all employees. Family members must remember that their actions are scrutinized more closely than those of others, by fellow employees. A good family business is like a good marriage, at times you have to ‘work on it,’ he says. (It is worth noting that Tim and Richard Smucker served as co-CEOs for several years. This was a rather unusual structure that has, since the summer of
2011, been replaced by the more traditional single chairman and CEO posts.)
The J. M. Smucker Co. has an independent board, which, Richard Smucker says, shows that you’re willing to listen. But he adds that their board members understand the unique company culture, much of which is family-infused with values such as quality, personal and business ethics and independence, and support their unique culture. A couple of the independent directors have also been involved in the ir own family businesses but serve on the company’s board with an independent perspective. Smucker’s has been a public company since 1959 and the family has never treated family shareholders differently than any other shareholders, producing shareholder returns that have exceeded the industry’s and total
market returns by anywhere from 30 to 50% over the long term.
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