Women add value as independent directors
If your family business is looking to add independent directors to your board, take note: The talent pool includes highly qualified women as well as men.
In 2003, Abarta Inc, a third- and fourth-generation family business in Pittsburgh, began a search for a new board director. Abarta has interests in non-alcoholic beverages, energy, ethnic frozen foods and technology. Its ideal candidate was someone knowledgeable about the bottling industry who had a broad professional background. Lynn Clarke fit the bill. She was the CEO of Metrokitchen.com and had experience working in packaged goods, technology and e-commerce. And, of particular interest to Abarta, she had worked for Pepsi, one of Abarta's competitors, for ten years in marketing and as a general manager. Clarke joined the eight-member board as one of five independent directors. She was Abarta's first woman independent director and remains the only female independent member on the company's board.
Laurie Benson is the first and only woman independent director on the board of Bassett Mechanical, a third-generation family business in Kaukana, Wis., specializing in custom mechanical contracting and metals. Benson is the CEO of LSB Unlimited, a business consulting firm, and previously had co-founded and served as CEO of a technology company. Her entrepreneurial drive, technology expertise and corporate board experience were just what Bassett Mechanical was looking for; she joined the board in 2012.
Over the past three decades, an increasing number of business families have recognized that granting leadership opportunities to qualified women makes good business sense. But in most family companies with women directors, the women who serve on the board are members of the family that controls the company. Women independent directors are still a rarity.
Part of the reason for this is that many family business boards lack any independent directors, male or female. (Independent directors are board members who are not members of the controlling family and do not work for the company or for a firm that does business with the company.) A 2013 PwC (PriceWaterhouseCoopers) survey of family business CEOs and CFOs found that 58% had no independent directors, and only 17% had a majority of outside directors.
Susan Stautberg, CEO, co-founder and co-chair of WomenCorporateDirectors (a global membership organization for female directors), says that board composition is key to board effectiveness and that competitive pressures will push growing family businesses to seek out independent directors. "A diverse board is essential to a company's success," Stautberg says. "Boards can't afford to have directors who all think alike. They need men and women who will bring the best ideas to the table and offer the broad thinking companies need to deal with the challenges they face."
Diversity of viewpoints
Both Clarke and Benson emphasize that they were chosen to serve on family business boards because of their professional skills and accomplishments and not because of their gender. While professional qualifications must always come first in choosing directors, there are cases when gender is a legitimate consideration.
In 2003, Cynthia Watts was contacted by Furst-McNess, a third- and fourth-generation family business based in Freeport, Ill. Furst-McNess, an agricultural nutrition business, was seeking a director with a background in consumer products and Internet services. Watts had been a partner in an Internet incubator company and had served on corporate boards for two decades. For the Furst-McNess board, her gender and age (40) made her an even more desirable candidate. Most consumers who bought Furst-McNess's consumer products were women, and the board wanted a director in the middle of her career who understood and reflected the voices of their customers. Watts was the first woman independent director—and, so far, the only one—on Furst-McNess's board.
Interestingly, not long after Watts joined the board, Furst-McNess decided to minimize its focus on consumer products and Internet service in order to pursue greater opportunities in agricultural nutrition. By that time, Watts had already proved herself to be an asset on the board. "I'm good at setting goals," she says. "As an outside director, it's my job to keep asking questions about the company's goals that family members may not ask. I've pushed for the board to state its goals for the quarter, for the year, etc., and now it's super-proactive in setting goals and monitoring its progress."
Does gender make a difference in the value men and women bring to boards? Anecdotal reports suggest that many women have certain traits or behaviors that make them desirable board directors. Among these traits are a willingness to ask questions and initiate dialogue, a preference for using cooperation and collaboration in reaching decisions, and a comfort in talking about sensitive topics in ways that don't threaten others. These behaviors could be especially welcome on family business boards, where directors have to represent not only the interests of the business, but also the interests of the different stakeholders, while at the same time being attuned to family dynamics.
Clarke is hesitant to state that her actions as a director are different from what a male director might do, but she says gender differences are something for company boards to think about. "I've worked with men throughout my career, and they tend to be competitive," Clarke says. "I don't feel that I have to be competitive. I'm on the board to provide advice, guidance and support, and I say what I believe without feeling that I have to win."
In addition to Benson, an independent director, Bassett Mechanical has a female family member on its board—Kim Bassett-Heitzmann, the company's CEO. Does having two women on the board change the dynamics? "This is a high-performance board that has a great, challenging dynamic," says Benson. "That's not just because of gender diversity, but also because of our different thinking styles. [The board dynamic] raises our collective intelligence, provides a fertile ground for thinking creatively and frees us to explore possibilities."
Cynthia Watts says that the skills women acquire in balancing work and family responsibilities can carry over to their performance on family business boards. As a young professional woman raising children and dealing with aging parents, Watts recalls, she was forced to be more flexible than men in making career choices. "I had to turn down opportunities to work in large companies, but by working in several small companies I had a huge exposure to how different businesses were run," Watts says. "Moving between work and family responsibilities increased my capabilities in strategic planning and execution, and that translated into my being more effective and efficient in my career and as an independent director."
Seeking the right skills
Bush Brothers & Company, the leading U.S. producer of canned bean products, invited its first woman independent director to join its board 12 years ago. Later, the company, which is based in Knoxville, Tenn., added a second female independent director, and on Jan. 29, 2015, it added a third. As chairman and former CEO of Bush Brothers, Jim Ethier, a third-generation member of the Bush family, has had a dozen years to observe whether the women directors have influenced the dynamics and effectiveness of his board.
"Our board is very collaborative, and the women support its collaborative nature," says Ethier, "but men and women directors are not really different. Our interest is in finding directors with the skill sets we need. When we brought on our first woman independent director, we were not specifically looking for a woman. We wanted to up our game in auditing, and she had the skill set we were looking for."
When Bush Brothers was transitioning its leadership from the second to the third generation in 1991, it hired a family business consultant to work with the board. The family was unanimous in its desire to see the company continue to grow over the generations, and the consultant recommended adding independent directors to help it realize its goals. Today, the nine-member board has a majority of six independent directors: three women and three men.
The commitment to having a majority of independent directors in itself increases the chances that a woman will be asked to join Bush Brothers' board. Moreover, Bush Brothers is a food company whose primary consumers are female, and thus women directors reflect its customer base.
Ethier says he is not a flag waver for putting women on boards; his first concern is finding the right person. "I always start out by saying that these are the talents and skill sets we need," he says. "If I can find a woman or a minority who has those qualifications, that's a plus, but I don't set out to find them. It just so happens that the skill sets we need are highly correlated with the female gender."
Stautberg says that when family businesses reach a critical point in growth and complexity, they recognize that their boards need a greater variety of expertise, backgrounds and perspectives than can be found among family members alone. With the call for increased diversity on boards, more family businesses may be open to considering women independent directors, and many professional women are eager for the opportunity to serve on family business boards. So how can they find one another?
Too often, Watts says, women rely on the connections of friends and business associates. She herself was introduced to Furst-McNess by a college friend who was a member of the family that owns the company. A better approach to seeking a director's position is to tell everyone you know that you're interested. Many times the connection comes through someone who told someone else—or, as happened to Laurie Benson, it comes years later and out of the blue. A man Benson had met at a national technology conference in 2000 had been impressed by what a good listener she was. Twelve years later, when he heard Bassett Mechanical was looking for a director with expertise in technology, he remembered Benson and recommended her.
Boards of large companies often look for independent directors who have had experience running companies. Lynn Clarke agrees that women who are asked to serve on those boards generally have held positions as CEOs or CFOs and have had profit-and-loss responsibilities. Many male independent directors are current or former CEOs, she notes.
Jim Ethier says that Bush Brothers casts a wider net. "We don't limit our search to CEOs," he says. "Many strong candidates don't have that experience, and those who do often prefer to serve on public boards that have higher profiles."
Networking organizations that advise women about board service and help them make contacts can be found in most metropolitan areas. Laurie Benson is a founding member of a new organization, the Private Directors Association in Chicago, which will bring together individuals seeking board positions with businesses that are looking for directors.
National organizations like WomenCorporateDirectors and Women in the Boardroom advise women on preparing for board service, connecting with corporate boards and advocating for best practices in corporate governance. Conferences and networking events for owners and executives of family businesses or private companies also provide forums where professional women can meet and mingle with board chairmen and CEOs of family companies.
Greater representation of women independent directors on family business boards is good for women and good for family businesses, Stautberg asserts. "Because women newer to boards are less likely to have entrenched ideas about how things are done on a board," she says, "they aren't limited to preconceived notions about what kind of impact boards can and can't have."
Deanne Stone is a business writer based in Berkeley, Calif.
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