The challenges of the family board.

• Author: Nelson, Marilyn Carlson
• Position: Family owned businesses

In quest of a governance model that embraces the best of the public corporate board while retaining the agility, dynamics, and passion so characteristic of the closely held company.

The history of american business is filled with the stories of legendary American families and the companies they built. Some, like the Cargill family, now in the fourth generation of leadership, continue to thrive. Others, like the Bingham family, have become synonymous with the challenges that can befall family owned and operated businesses. For many of these family businesses, success or failure is often directly related to the ability of their boards of directors to recognize and handle the particular challenges that are unique to a family company.

There are few successful or enduring models to help define the roles and responsibilities of those who serve on the boards of large, privately held, family operated companies. Board members, who serve solely at the pleasure of usually one or two owners, are charged with not only maximizing returns on investments but with helping to preserve a corporate and family ethic of personal and financial commitment.

Free from the issues of SEC regulatory compliance faced by publicly held companies, directors of these companies must impose upon themselves rigorous standards of achievement and returns. They must also demonstrate the same level of stewardship of company assets as do their counterparts on boards of public companies. However, unlike their counterparts, these board members must also exhibit a stewardship of a name, of a personal heritage, and of a founder's vision.

This is certainly true of The Carlson Companies, on whose board I sit. Founded in 1938 by my father, Chairman Curt Carlson, the company is one of the largest privately held businesses in America. The Carlson Companies employs more than 118,000 people worldwide and has annual revenues in excess of $12 billion. Carlson Companies is known to most through Radisson Hotels, Country Inns and Suites, TGI Friday's Restaurants, and Carlson Wagonlit Travel.

Generational transition

Membership of The Carlson Companies board is comprised of family members, with the exception of three outside directors. In addition to corporate governance of this rapidly growing company, the board is in the process of supporting the transition to the second generation of leadership - arguably the most pivotal responsibility that the board of such a company can face.

It is generally believed that only 20-30% of private family corporations survive more than one generation. Oftentimes, the issue of succession can bring to the surface a variety of personal agendas that are not in the best interest of the future of the company. If a family board is unprepared, this crisis can quickly become insurmountable. This appears to be a contributing factor to the situation that brought the Bingham family's business to an end.

Barry Bingham, together with his family, built his fortune through ownership of the Courier-Journal and the Louisville Times, as...