It is often an outsider that will ask hard questions about some matters that family members have been taking for granted for years. Alternatively, some family firms adopt a Board of Advisors, which has less policy-making authority, but nonetheless ensures stronger external guidance and feedback. Family businesses generally recruit outside directors among people who have achieved something significant in another industry. Because it often takes time for a new director to become acclimated and knowledgeful, family business often look for someone who can make a long-term commitment. All directors should hold some incentives linked to long-term growth, which are often in the form of profit sharing, stock options, or outright stock ownership.
Many firms also provide their directors with appreciation gifts at year-end.
For example, a local firm with operations in Maine, Vermont and New Hampshire gives each director a case of assorted wines, and enough prepackaged frozen lobster tail and Omaha steaks for a large family meal, along with a monogrammed executive calendar and scheduler. In most cases it is not necessary to purchase director's liability insurance unless the firm is public or has a large proportion of shareholders without board representation. Check with your lawyer and your insurance agent. Many family firms utilize board committees that meet between board meetings to provide greater board scope for such issues as finance and audit, compensation, and strategic planning. One of the board's more stimulating and delicate tasks is the evaluation of the CEO's performance, which should be done annually in conjunction with the firm's analysis of its goal achievement.