Despite my extensive experience serving on professional association boards and in public companies, I wasn’t sure what to expect from a discussion of board diversity by six members of a private company board. After all, the composition of private company boards doesn’t face the intense scrutiny that is routine for public companies publishing annual proxy statements, responding to proxy advisory firm recommendations, and reading media and investor reports about the dangers of entrenched boards. So, what did I hear at a Private Directors Association meeting last week? Good common sense that applies to the leadership of any type of organization, including:
- Diversity is important. The panelists, moderator and Q&A facilitator serve on the board of O’Neil Industries Inc., parent company of the 92-year-old O’Neil construction companies. The board members discussed how leadership discussions and decisions have been improved by equal representation of a) four family members/majority owners, b) four members of management who are presidents of subsidiaries geographically dispersed throughout the United States, and c) four independent directors who bring a fresh (i.e., a non-construction) perspective, as well as expertise in family boards, talent management and succession planning. The board has focused on fostering diversity of opinion/point of view, including diversity of experience, gender (three women directors out of 12) and age (ranging from Millennial to age 75). However, the panelists acknowledged that they have not matched the diversity of some public company boards in terms of cultural, racial and heritage/ethnic diversity – in part, because senior management (all engineers) are not as diverse as the company’s 450 employees and America as a whole.
- Succession planning should be a top priority. Every 18 months, the board reviews “the organization of the future,” including succession plans for the CEO and each subsidiary president. Current non-family CEO Brian Ramsay said he was tapped as a CEO successor two years before he was promoted, providing him with time to develop additional strategic planning skills and sit in on board meetings to learn about board dynamics. Similarly, a relatively new family council meets regularly to help prepare the fourth generation of family members to take on broader company leadership roles.
- Put a priority on expertise amid change. Board members serve four-year terms which can be renewed. In recruiting new directors, Chairman Bill O’Neil emphasized the importance of listening skills and determining how a board candidate’s expertise can meet the current needs of the company. For example, two newer independent directors have specialized expertise in family businesses and have advocated a greater emphasis on longer-term strategic planning, while the board does not currently include a lawyer because regional counsels have been able to anticipate and deal with key legal issues.