1. WHY IT IS CALLED “REPORT TO THE BOARD” AND NOT REPORT TO THE TABLE? IMPLICATIONS FOR FAMILY BUSINESS BOARDS. Maryanne Peabody & Larry Stybel

2. 2 OUR MISSION: Wow your friends at Governance Trivia. Understand the core missions of Boards of Directors. How to deal with the most sensitive, critical issue in the life of family dominated companies.

3. QUESTIONS FOR YOU THIS MORNING: What Boards have you been on. Strengths? Weaknesses? 3

4. WHY ‘REPORT TO THE BOARD? 4

5. 1620: THE NEW WORLD IS THE INTERNET OF ITS DAY. 5

6. FRANCE, BRITAIN, SPAIN, AND PORTUGAL 6

7. NETHERLANDS, SWEDEN, DENMARK 7

8. DUTCH WEST INDIA COMPANY, 1621-1792 8

9. PRIVATE INVESTORS FROM HOLLAND AND SWEDEN. South America-Africa Slave Trade. Swedish settles cultivate tobacco in Delaware Valley. Dutch settlers cultivate tobacco in Hudson River Valley. Headquarters on the Island of Manhattan. 9

10. DID THE BUSINESS MODEL WORK OUT FOR INVESTORS? 10

11. DID THE GOVERNANCE MODEL WORK OUT? “Directors” represented the investors. Review/approve strategy. Hire/Fire the CEO. Make sure the money is being spent correctly. 11

12. REPORTING TO THE BOARD. 12

13. 400 Years of Board Work: Review and approve strategy. Hire and fire the CEO. Review the finances to see how the money is being spent. Nose In; Fingers Out. 13

14. FAMILY DOMINATED COMPANIES. Since Boards represent the interests of owners. The owner is usually one dominant family member who also is CEO. The Board is often composed of relatives and socially/economically dependent “outside” Board members. 14

15. When It Comes to Leadership Succession….. What’s YOUR experience in how it is working out? 15

16. pwc 41% of family firms plan to pass ownership to the next generation within the family. 30% of family firms succeed from the first to the second generation. 10% of family firms succeed from the second to the third generation. 16

17. A MODEST SUGGESTION: Succession Board of Advisors (N=3) to report to the Board of Directors. Composed of “true” outsiders. One independent ibanker/broker. One psychologist to assess children and recommend development plans. One tax professional. 17

18. HOW THIS IS WORKING AT OTHER COMPANIES. Compensation Committee Becomes Compensation and Succession Planning Committee. 18

19. DISCUSSION WITH SMALLER GROUPS. How might this work in your family business situations? 19

20. ideas/reactions/concerns 20

21. IDEAS TO ACTION: 21

22. SUMMARY Boards are supposed to represent the interests of the owners. In the psychologically sensitive area of succession, they are structured to not do a good job. Appoint true outsiders (n=3) to a Board of Advisors to advise the Board. 22

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