Independent Directors Contribute
The examples of independent directors' contributions to a family business' long-term success are numerous. Recently, in a profile of Corporacion Puig in the Family Business Network Newsletter, the Puigs related three incidents.
Prior to Spain's joining the European Economic Community, the company diversified in packaging and did quite well nationally. When the Spanish market opened to European competition, however, Corporacion Puig could not successfully compete in the packaging market. In a meeting with its board of directors, the family was advised to sell off these packaging businesses. While they resisted at first because of their historic identification with the industry, in the end, the family successfully followed the board's advice.
The family was trying to buy a competing company. The executive management team was excited because this would mean that their market share would grow and positioning would be strengthened. The seller, however, kept adding conditions; the management team went along in retrospect, accepting perhaps a little too lightly. Fortunately, the board stepped in, admonishing them not to meet further conditions. Negotiations broke down. After a year, the seller came back, and accepted all the conditions that the family would otherwise not have been able to impose.
The growth rate of the Puig's Paris based company (established there in the 1960s) slowed dramatically. Second generation business leaders were concerned because France was seen as a highly competitive country. They did not know how to reverse the situation. The board suggested, "Send a member from the third generation there." At first the family opposed the idea, but in the end, the board prevailed. And the experience has been excellent--so good in fact, that the same scenario was repeated by sending another member of the third generation to the New York subsidiary.
We thank the Puig family for always so generously sharing their experience.
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