Family board members
At Westwick Melrose & Cromwell, we have observed the compensation of family board members in family office-controlled companies for three decades, and it has become clear that only two solutions effectively work.
Without clear rules for appointment and remuneration, tensions within the family are almost inevitable. This is particularly true when board fees exceed the salaries of family members working within the company.
Solution 1: No Remuneration
Being a family director is viewed as a service rendered to the family. Board rotation is organized, typically every four years, ensuring that everyone who is willing and capable takes their turn. This approach guarantees that different branches of the family are represented.
Solution 2: Board Fees Indexed on Non-Family Independent Board Members' Average Age
Two fundamental rules guide this solution:
Rule No. 1: Clearly Defined Rotation to Avoid Jealousy
The term is fixed, for example, three years.
No immediate second term is allowed.
Siblings, parents, or children cannot be appointed as replacements for the next mandate.
Rule No. 2: Fees Reflecting the Age Group of the Family Board Member
If the age of the family board member exceeds the average age of independent non-executive directors (NEDs), they receive the same fee as the NEDs.
A 15% discount is applied for those ten years younger than the average NED age, and a 30% discount for those ten to twenty years younger, and so on.
This structure acknowledges that a younger family member, such as a 25-year-old cousin nominated for their Generation Z vision, might not have been chosen for a board of this size nor paid full fees under different circumstances.
Why These Rules?
These rules are essential because preserving family unity while onboarding the best talents remains the primary objective.