Are Family Business Boards Sufficiently Diverse In Their Composition?

Within the confines of family businesses, the composition of the board plays a pivotal role in shaping the trajectory of success. In recent years, the focus has switched to board composition and diversity for all businesses and it is a topic of conversation that is on the agenda for family business boards too.

We asked our Global Family Business Think Tank Panel if they thought that family business boards are sufficiently diverse in their composition.

The results:

Are Family Business Boards Sufficiently Diverse In Their Composition?

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• Yes - 13%
• No - 74%
• Don't Know - 13%

Our panel have highlighted that board composition and diversity are on the family business agenda but that family business boards are not yet as diverse as they could be.

Whilst things are changing, there is plenty of room for more change in order for more family firms to benefit from having different perspectives and insights on their boards, helping set their path for further resilient and sustainable growth.

THE THOUGHTS OF OUR ‘THINK TANK’ REPRESENTATIVES:

 “There is not enough gender diversity or generational diversity on boards. Increasingly, having the voice of the next generation on the board will be important.”

Andrew Keyt CEO, Generation6 Family Enterprise Advisors

“I believe more and more families are recognising the need to create a diverse board. Some are in the process of doing so, quite a few are actively working on it, and many have yet to begin. Another complexity for family businesses is not only inviting diversity but also leveraging new perspectives to create new possibilities in the family, the business and the community.”

Sunil Soni Family Business Advisor, IFBN Consultants

“There is a need to understand that diversity could be across and outside family ties, professional competencies and jurisdictions.”

Mercy Edukugho-Aminah Director, Fiduciary Services Ltd

"Boardroom diversity is a common blind-spot for families because even when they do bring in external people, they often default to the family lawyer and/or the family accountant rather than somebody genuinely independent. Having outside input on the board is essential to raise all voices, mitigate the ‘kitchen table’ dynamics in the room and to help avoid ‘group think’ as well.”

David Werdiger Managing Director, Nathanson Pearson Pty Ltd

“While progress has been made, I believe there is still room for improvement in terms of diversity within family business boards. Historically, family business boards have been more homogeneous, often consisting of family members or individuals closely connected to the family. However, there is a growing recognition of the benefits of diversity in the boardroom, including diverse perspectives, experiences and expertise. Efforts to promote diversity in family business boards, such as actively seeking non-family board members is on the rise. This trend is encouraging as it can lead to more robust decision-making and governance processes, ultimately contributing to the long-term success of family businesses.”

Tsitsi Mutendi Co-Founder Nhaka Legacy and African Family Firms 

“It is getting better but boards would benefit from more diversity. Many boards are composed of senior family management, which results in minimal diversity of thought from the regular meetings of the senior management team. Boards are more valuable when there is a mixture of senior leadership coupled with independent external participants.” George A Isaac Founder & Managing Partner, GAI Capital Ltd

“Family businesses are more prone to nepotism and family hiring based on privilege rather than merit, and there is a lack of diversity and inclusion for other non-family members to grow and thrive.”

Fabiola Quin CEO & Founder, Family Thrive Consultancy

“More diversity is required to increase performance, as much academic research confirms. This is particularly urgent in countries like Italy.”

Salvatore Sciascia Professor, Cattaneo University

“I believe that the size of the family business has a bearing on the awareness of the benefit of diverse opinions in the boardroom. Recognition of that belief has a long way to go. In addition, leadership development in certain industry verticals as well as through family generational engagement programmes will need to bear fruit to provide qualified candidates, in order to provide a larger pool of qualified diverse candidates.”

Charlie Leichtweis Founder & Managing Director, Experts in How LLC

"We are beginning to see more headhunters and recruiters with a better understanding of family businesses and recognising the importance of candidates understanding and having experience of working in a family business. Far too often, family businesses make the mistake of recruiting a board member who has been very successful in the ‘corporate world’ but fails to understand family businesses and the socio-economic wealth that usually comes with them.”

“Family business’ are helping move the benchmark for diversity in family business boardrooms. As advisers, I think we have a role to help family businesses recognise the importance of experience, understanding and clarity around the role of a board member and the need for different skill sets in the boardroom to ensure that there is diversity with different perspectives heard too.”

Kirsty Ross Family Business Director, Turcan Connell

“Families tend to have an inherent bias when composing boards.”

Kim Schneider-Malek Founder and President, Family Enterprise Alliance

“While family businesses are ahead of their non-family counterparts in terms of diverse boards, more progress can be made.”

Joseph Astrachan Generation6 Family Enterprise Advisors

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These results were part of the 2024 Global Family Business Think Tank Report that was published in Spring 2024. Check out the full findings in the report here