Transforming the governance framework for capital allocation
GOVERNANCE
Context
A fourth-generation family board member of a $10bn+ diversified conglomerate needed help tackling a long-standing governance challenge. For 15 years, the same six family members had sat on the top-level board – and the group had come to recognise the need for fresh ideas and new inspiration. In particular, they needed this layer of governance to focus much more on long-term capital allocation and less on the scrutiny of individual company operations.
Work
Our partner began by working closely with the six family board members to clarify their aspirations for the future role of the holdings board. This involved grounding the discussion in the realities of the current portfolio.
Through a series of workshops, the group aligned on the ideal composition of the board – the proportion of family to non-family members and the skill sets required to meet the challenges the portfolio presented.
To assist the transition, our partner helped design a structured board evaluation process which supported their decisions as to which family members should remain on the board. For the first time, family board members received formal feedback – and the process unfolded over two years, allowing time for development and adjustment ahead of a final assessment and recommendation to the family.
In parallel, we collaborated with an external search firm to identify prospective Independent Board Members. Together, we defined the desired profiles required in terms of hard skills and interpersonal qualities.
Once appointments were made, we continued to support the transition by acting as board observers; we helped the new board to build the processes, agenda management and board culture that would drive good decision making.
Impact
The outcome was a significant transformation. Four new Independent Board Members were appointed, bringing fresh expertise and perspective. Within two years, the Holding Company/Portfolio Board had adopted a more strategic position, with more focused agendas and more rigorous discussion of portfolio-level issues. These changes improved decision-making, which led to stronger performance and a higher level of trust from the owners.