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Should Ex-CEOs Serve On Their Boards?

Very commonly the newly retired CEO of a business stays on as a member of the board of directors. More and more, though, we’re noticing – in both non-family public companies and in family controlled companies – that ex-CEOs are choosing not to continue as directors or are not being asked. What’s the “family business perspective” on this matter?

 

Owner Manager
I like having the ex-CEO on the board. Over the years we've become comfortable, trusting and confident in the person's judgment. I worry that the ex-CEO's presence can overly influence the board's views on changes we might want to introduce.
Who could know the company better? And, in case there are problems, the ex-CEO will be able to spot them soonest and, thereby, help us protect our investment. I even worry that the management team will be less bold and will always look over their solders if they feel the ex-CEO is in a position to judge them.

 

There are, of course, at least two valid and valuable points of view. The decision depends on several considerations. If family ownership is remote from what’s happening in the business then having the trusted ex-CEO close by is a very good insurance policy. On the other hand, there may be a trade-off in risk-taking and fresh ideas by management. That concern depends on the personality of the ex-CEO and the make-up of the board. The stronger the other independent directors, the less a concern this may be.

Sometimes management may genuinely want the ex-CEO nearby. But that can be addressed by a consulting contract just as well as through board membership. Or management may feel like the honor is due the previous CEO, who they like a lot. If ownership is not highly unified, the ex-CEO can be drawn into issues in destructive ways and risk tarnishing a reputation built over many years.

It’s a most tricky issue. What’s most important is to consider all the particular issues before making the offer too casually. The boardroom is a precious, critical resource for a family business.

 

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