Strategy, corporate performance, and corporate growth or restructuring were the most commonly cited governance priorities overall for respondents of the 2015–2016 NACD private company governance survey. But a closer look at the results by the type of business reveals distinct differences in director concerns.

This year, NACD for the first time published its survey report in three separate volumes organized around major ownership structures—family, investor, and employee-owned—to provide more customized analyses that address challenges specific to each company type.

Survey findings are drawn from some 712 responses to a questionnaire e-mailed to NACD members serving on private company boards representing each of the three ownership structures. The questionnaire was in the field between March and May 2015.

Family Business Boards

NACD’s survey results indicate that the boards of family businesses are likely to view long-term strategy and value creation as their top priorities. When considering executive performance horizons, a large portion of respondents from family business boards (49%) define “long-term” as more than three years. Twenty-four percent of respondents identified leadership development as one of the three most time-consuming tasks for their board, alongside strategic planning and corporate performance.

The results also indicate that despite their attention to long-term strategy and leadership development, 24 percent of family business boards do not have a formally written CEO succession plan. The lack of such a plan can complicate the effective transfer of leadership, whether between generations of family executives or from the family to outside management.

For guidance on effective practices for family business boards, see NACD’s handbook The Family Business Board, Volume 2: Governance for Agility and Growth.

Investor-Owned Company Boards

Boards of investor-owned companies or those that are supported by venture capital or private equity firms may comprise a mix of founders, management, and investors, depending on the company’s stage of development.

Venture capitalists and private equity firms, by the very nature of their work, are especially focused on results: they want the valuation of the company to increase, oftentimes at a quick clip. Not surprisingly, investor-owned company boards rigorously scrutinize the performance of the company and its executives. The majority of directors at investor-owned companies (61%), closely monitor profits, while 37 percent monitor sales to gauge the company’s performance and determine executive pay.

A significant 33 percent of respondents use cash flows, which offer insight into where and how the company generates income and how its cash is being deployed. The focus is not solely on financial metrics; 44 percent of investor-owned companies also use customer satisfaction as a gauge of the company’s strength.

Employee-Owned Company Boards

Executive talent management ranks as a high priority for the boards of employee-owned companies, which are owned at least partially by their employees, either directly or indirectly through a trust. The vehicles for employee ownership can take several forms, including employee stock ownership, stock options, and profit-sharing plans.

While profits and sales remain important metrics, a large number of respondents from employee-owned companies use metrics related to employee morale (52%) and employee turnover (32%). The prevalence of these metrics was particularly notable among employee-owned companies.

For further coverage of the private company surveys, please see the forthcoming September/October 2016 edition of NACD Directorship magazine.

To download NACD’s surveys of private companies or view guidance and tools for private companies, please visit the Resource Center for Private Company Governance at www.NACDonline.org/privatecocenter.

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