Through the Eyes of the Beholder

Abstract

This study posed several questions about the determinants of family business CEOs' perceptions of the board of directors. Specifically, the authors investigated whether the following factors played a role in determining the positive perception of their contribution by the family firm's CEO: the compensation structure of the board of directors of a family firm; the number of outside directors; the size of equity held by the board; and the directors' formal efforts for the benefit of the firm. It was found that the number of outside directors and their formal efforts for the firm played a significant role in determining the CEOs' perceptions of their contribution, whereas their compensation and size of equity had no effect on how they were perceived. This suggests that family business owners value the independent perspective that outside board members bring to a board. In addition, the results suggest that family business owners value (and are sensitive to) the effort board members put into the discharge of their duties. The evidence that independence in the board is highly valued provides reason for optimism about the continued survival, growth and adaptability of family businesses. Other research and practical implications of this study are also described.