How are individual directors and the board evaluated in a family business?
The owners of any company want the best representation they can get and so have an interest in the ongoing evaluation—and replacement, if necessary—of their current directors. While they retain the ultimate sanction of refusing to re-elect a director, they count on the board to conduct regular evaluations of itself and of its members—usually through its nominating or governance committee. The evaluation process is invisible to the outside in most cases, but not so in family businesses. Whether the family is represented by an individual owner-manager or a family council, it should be looking over the board’s shoulder at the evaluation of current directors and of prospective candidates. At its best, this is a collaborative effort where the family has a chance to react to the board’s work as it progresses. For more information on evaluation, see the Report of the NACD Blue Ribbon Commission on Board Evaluation.
