Media Releases

Survey Provides Rare Insight into the Governance of Private Family Businesses

October 18, 2017

Toron­to, ON – Fam­i­ly busi­ness­es, arguably the most impor­tant con­trib­u­tors to Canada’s econ­o­my, rec­og­nize the need for strong gov­er­nance, but approach board over­sight in a vari­ety of ways depend­ing on their size and stage of matu­ri­ty. A sur­vey con­duct­ed by the Insti­tute of Cor­po­rate Direc­tors (ICD) and the Clark­son Cen­tre for Board Effec­tive­ness (CCBE) at the Uni­ver­si­ty of Toronto’s Rot­man School of Man­age­ment shows that, while fam­i­ly busi­ness­es in the ear­ly stages of growth tend to rely less on for­mal gov­er­nance struc­tures, sec­ond- and third-gen­er­a­tion com­pa­nies tend to move toward for­mal gov­er­nance such as fidu­cia­ry boards.

“This study is a strong start to bet­ter under­stand­ing fam­i­ly busi­ness­es and their unique gov­er­nance strengths and chal­lenges,” says Rob Brouw­er, Chair of the ICD Ontario Chap­ter. “We hope to sup­port fam­i­ly enter­prise by iden­ti­fy­ing the gov­er­nance approach­es that yield the best results for each stage of the company’s evo­lu­tion.”

The sur­vey shows:

• Fam­i­ly busi­ness­es usu­al­ly adopt an advi­so­ry board in the first 30 years (first gen­er­a­tion), with 32% opt­ing for a for­mal fidu­cia­ry board.
• More than half of sec­ond-gen­er­a­tion com­pa­nies have for­mal fidu­cia­ry boards.
• By the third gen­er­a­tion, no com­pa­ny relies sole­ly on an advi­so­ry board, and 64% have a fidu­cia­ry board.
• 34% of advi­so­ry board mem­bers are women, com­pared to just 24% for fidu­cia­ry boards.
• Fidu­cia­ry boards hold short­er meet­ings and are more like­ly to reach con­struc­tive con­sen­sus than advi­so­ry boards.

Read the study online.

“Canada’s fam­i­ly busi­ness­es cre­ate much of the wealth and employ­ment in our coun­try,” said ICD Pres­i­dent and CEO, Rahul K. Bhard­waj. “This study shows that their tran­si­tions from small to medi­um to large enter­pris­es is sup­port­ed by cor­re­spond­ing­ly more for­mal board gov­er­nance struc­tures.”

The sur­vey also shows that gov­er­nance con­cerns shift over time with growth and per­for­mance being the top focus for most fam­i­ly busi­ness­es today, but that suc­ces­sion is becom­ing a top con­cern for many. Suc­ces­sion for first-gen­er­a­tion com­pa­nies gen­er­al­ly means devel­op­ing the next gen­er­a­tion of fam­i­ly mem­bers, while for third-gen­er­a­tion com­pa­nies suc­ces­sion usu­al­ly refers to find­ing the next CEO.

“Fam­i­ly busi­ness gov­er­nance is an impor­tant, yet over­looked, area that war­rants more study,” says CCBE’s Man­ag­er Matt Full­brook. “Our sur­vey opens the door into this sector’s ‘board­room,’ and helps us under­stand the moti­va­tions behind deci­sion-mak­ing approach­es in each gen­er­a­tion.”

The Insti­tute of Cor­po­rate Direc­tors (ICD) is a not-for-prof­it, mem­ber-based asso­ci­a­tion rep­re­sent­ing Cana­di­an direc­tors and boards across the for-prof­it, not-for-prof­it, and Crown sec­tors. The ICD has more than 12,000 mem­bers and 11 Chap­ters across Cana­da and fos­ters the shar­ing of knowl­edge and wis­dom through edu­ca­tion, pro­fes­sion­al devel­op­ment pro­grams and ser­vices, and thought lead­er­ship to achieve the high­est stan­dard of direc­tor­ship. ICD mem­bers across all sec­tors of the econ­o­my over­see well in excess of $1 tril­lion in mar­ket cap­i­tal­iza­tion and insti­tu­tions that impact the lives of vir­tu­al­ly every Cana­di­an.

The Clark­son Cen­tre for Board Effec­tive­ness (CCBE) at the Rot­man School of Man­age­ment, Uni­ver­si­ty of Toron­to, is Canada’s lead­ing inde­pen­dent cor­po­rate gov­er­nance research body. CCBE’s mis­sion is to cre­ate prac­ti­cal tools and insights to improve the effec­tive­ness of boards of direc­tors in all sec­tors. CCBE’s research focus­es on effec­tive dis­clo­sure, adop­tion of for­mal gov­er­nance process­es, pay for per­for­mance analy­sis and more.

The Rot­man School of Man­age­ment is locat­ed in the heart of Canada’s com­mer­cial and cul­tur­al cap­i­tal and is part of the Uni­ver­si­ty of Toron­to, one of the world’s top 20 research uni­ver­si­ties. The Rot­man School fos­ters a new way to think that enables our grad­u­ates to tack­le today’s glob­al busi­ness and soci­etal chal­lenges.  For more infor­ma­tion, vis­it www.rotman.utoronto.ca.

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For more infor­ma­tion:

Ken McGuf­fin
Man­ag­er, Media Rela­tions
Rot­man School of Man­age­ment
Uni­ver­si­ty of Toron­to
Tel: 416–946-3818
E‑mail: mcguffin@rotman.utoronto.ca