There are numerous advantages to having an independent chairman. The main advantage is the ability to bring a different perspective into the business. A business owner may become too close to what is going on in his or her company. Furthermore, people who run a family business sometimes do not have a broad enough range of experience, which may make it difficult to grow their business.

Timing is everything

Especially when bringing in an external individual into the business. The right time to bring in an individual into the business is dependent on the circumstances. However, some suggested times include:

  • When the business is of a size where it is required to file financial reports with ASIC;
  • When governance issues become critical;
  • When the business has reached a size which requires external auditors;
  • When business owners are reluctant to take decisions that have a damaging effect on relationships with long-term staff.

It is also possible to have a separate family board to the business board. This may be helpful in situations where the business is facing decisions that are not compatible. For example, this can arise where some family members demand that they receive a dividend, whereas a more commercially beneficial decision would be to invest in a new factory.

Other advantages of having a non-family chair include:

  • Accountability at board level spreads through the business
  • A well-networked and respected outsider can add value to the business
  • Proper governance process and knowledge
  • The ability to remove the family issues out of the agenda and conversation when it is necessary

Michael and Peter Quinn often act as external chairmen for their client’s family businesses as they have diversified experience and are both Fellows of the Australian Institute of Company Directors. If you require any further information in regards to the above, contact The Quinn Group on (02) 9223 9166 or submit an online enquiry.