How to Make the Most of Your Board of Independent Directors
“It’s not that I don’t trust my cousin,” one younger-generation owner told us. “But how can I give my approval if I don’t know what’s going on?” For months the eight owners of a fourth-generation family business had been stuck. They knew they had critical decisions to make but had not been able to make them. It wasn’t because they couldn’t agree on anything, but rather the unintentional result of how they had set up the roles that different owners had in decision-making.
For many years, only three of the owners – the insiders – had been on the company’s board of directors, which also included four other top-notch independent directors. The other owners – the outsiders – relied on the insiders to convey important information to them from the board room, and to take their questions to the board room. But that system was not working well. Communication between the board room and the outsiders had begun to feel like a game of telephone. The three insiders were middlemen. They tried their best to relay the right information back and forth, but it was never enough or not the right stuff. Both sides felt unsatisfied.
Because they communicated with the board through only the three insider board members, the outsiders felt cut off from important decisions affecting the direction and health of their business. “I would like to have a much more open and direct dialogue with our board,” one of the outsiders told us. The insider owners did their best to represent the interests of all the owners in the board room, but they were uncertain of the support they had to make tough choices. While there were good intentions all around, collectively, the owners found themselves struggling to make decisions as a group.
The insider-outsider wall
This is a common problem. Large owner groups often default to letting a few family owners who are on the board be the sole conduit of insight about key business decisions. But that can unintentionally make the others feel like outsiders, taken for granted with a wall between them and important decisions. Particularly when critical decisions loom, they want to hear from their independent directors, whom they are trusting to oversee their most important asset. This wall can impede their developing the “psychological ownership” necessary for healthy multigenerational family businesses.
We picked up on this stalemate when we met with the full owner group. So, we asked them a simple question: As owners together, what would you like to ask your independent directors?
Once the owners talked through this question, they realized that asking their independent directors a few simple, but powerful, questions could help break down that wall and increase mutual trust. They created a new and constructive process to engage the full owner group on the most important issues they faced, a process that ensures they fully benefit from the experience of their top-notch independent directors. Here’s how they made all of the owners feel ready to offer their input on significant owner decisions without needing to become a shadow board scrutinizing every decision.
Seven questions for independent directors
First the non-board owners had to ask themselves what they wanted to learn from the independent directors. So, Tom, a fourth-generation owner who was pursuing a career in water management, led a three-person workgroup to develop the list of questions they most wanted to discuss. Tom knew that they had well-qualified independent directors, but he had never talked with them beyond a meet-and-greet cocktail party in polite conversation.
Working together, it didn’t take long for Tom and his workgroup to brainstorm a list of questions they wanted to discuss. The questions were tough and direct. They wanted to break through the “trust us” messages they were accustomed to receiving. From the owner reports they received, they knew the business was at a crossroads and wanted unfiltered dialogue about their company’s prospects and its governance.
The non-board owners wanted much more insight about what that crossroads was and how it should be factored into their own long-term owner strategy. To do this, they thought through the big questions that were relevant to each of the key “rooms” in their current governance structure – the owner room, the board room, and the management room. Here are the questions they came up with. They might help inspire the relevant questions you could ask your own independent directors.
1. Can you describe your understanding of our owner goals?
From his work on their owner strategy, Tom knew that their owner goals were a complex trade-off of growth, liquidity, and control dimensions. A key board responsibility is to know what the owners want from and for their business. This question both tested that knowledge and opened the dialogue about these goals. Clearly, if you don’t have owner goals, you have some homework to do prior to asking this question.
2. Is our business strategy set to deliver our owner goals?
Boards translate the owners’ goals to the CEO and management team and approve or disapprove business strategies partly on whether the strategy can deliver on those goals. This question tests the quality of that translation and opens a conversation regarding how and why the board is confident in the strategy and what gaps exist.
3. Are you confident that our CEO can achieve our goals?
A central decision right of boards is the hiring and firing of the CEO. Directly asking board members about their confidence in your CEO can seem too bold, too personal, but it’s fair game. This question is on the mind of every board member, as it is one of the most important decisions they make as a board.
4. If you could, what would you do with our business?
Most independents are seasoned business professionals and often savvy investors. This question can lead to a rich conversation about what the directors see, applying their experience and goals. Tom and his cousins were impressed by the directors’ grasp of the challenges and upsides of their complex business. This conversation raised their confidence in the oversight role the board was performing and their creativity.
5. What are the key risks our business faces?
Getting all the independent board members to weigh in on this broad question of risk was useful. Each brought different experiences with risk and saw quite different types facing this family business, several of which the family owners were not considering.
6. How would you describe the dynamics on our board? How well does it function?
In this case, the fourth generation was worried that a third-generation family member, a former CEO who was still on the board 15 years after her retirement, was too disruptive in board meetings. They were pleased to hear the independent directors say they appreciated the former CEO’s contributions and how she challenged their thinking. This feedback helped take off the table an issue that had caused much conflict in the family owner group.
7. What do you need from our owner group?
Owners and board members should be candid with one another regarding what they need to do their jobs well. In this case, the independent directors asked for more clarity regarding the performance guardrails that the owners were developing for the business. Further, they requested that a direct conversation with the owners be an annual event in their planning cycle.
Preparing for the conversation
To ensure that the independent directors had adequate time to think through these important questions, Tom and his cousins asked for a pre-meeting with the directors. Reading the questions in the pre-meeting, the independent directors shifted in their chairs and nervously laughed, saying, “Yup, that’s another tough one.” They thanked Tom for the pre-discussion and agreed among themselves to both to the nature of the answer they’d give and which of the independent directors would answer it.
Family owners, especially those without a strong business background, are often hesitant to talk turkey with their independent directors. But they knew the session would work only if they saw eye-to-eye with their independents, and were not being talked down to, despite their relative lack of business experience. As a result, before the meeting, Tom and his cousins met and agreed who among them would ask each question, and they rehearsed them.
Candor and confidentiality
Many independent directors have heard stories about disruptive family dynamics and often avoid such important conversations. To ensure that her presence would not dampen the candor of the discussion, the working group agreed that their former family-CEO, also a long-serving director, would not be invited to the conversation. After some discussion, she agreed to this plan. They also agreed that the conversation needed to be treated confidentially and not shared outside the room.
The resulting conversation went well. The non-board owners got an appreciation for the challenges and opportunities of the business, and they also learned that the independent directors had confidence that the board and their management were up to the task. One said, “This is the best discussion about this business that I’ve had in 20 years!” The board member owners, too, got a refreshing look at their business as owners – above the usual thick binders of financial and operational analyses and results.
Both groups benefited from the opportunity to be on the same side, hear one another, and better appreciate their different perspectives. The independent directors got a clearer sense of the needs and desires of their owner group and renewed confidence in their ability to serve them. Tom and his cousins came away from the conversation not only with greater insight about the potential and the challenges of their business, but with renewed confidence in the value of their independent directors—and trust in the family members who were on the board to represent their interests. The exercise was so successful they have added it as a regular part of their annual process.
Try it in your family business
How can you make the most of your independent directors? Family owners, especially those who aren’t on the board, should create opportunities to meet as a group with the independent directors. In direct conversation, they can work through a list of key questions that, as owners, they want to hear their independent directors address.
The questions you should ask your independent board members will vary, of course, and you should adapt yours to your particular situation. In our experience, when given a well-planned opportunity, family owners ask smart, tough questions, and good independent directors respond thoughtfully and candidly. The most revealing questions often do not require the deeper familiarity with the finances or operations that a family board member will have.
Preparing to ask your directors any set of questions will take work. The point of this exercise is to get uncensored answers to tough questions that can indicate the long-term health and direction of your family business. To this end, owners should meet separately from the board to think through and prepare the right set of questions for your independent directors. You’re looking for insights with high leverage that you might not otherwise be getting in routine board meetings.
Remember, you are the owners: The independent directors work for you. Opening a dialogue with them can help owners have clearer insight not only into the business but also into whether these are the right independent directors for you. You can institutionalize this process, planning for and scheduling an annual question-and-answer session between owners and independent board members. This will break down the insider-outsider wall and build trust within the owner room (as owners who are on the board won’t be the sole gatekeepers of board information), and will help foster a genuine sense of psychological ownership for each individual owner. Keep the doors between your rooms open.
Originally published on Inc.com, 4 May 2025.