1. Alumni Magazine IESE22 april-june 2013 / no. 129
corporate governance
i d e a s
corporate governance • board of
directors • management • stakeholders
I
s the board an asset or a
liability? Shareholders
would like the board to be
an asset. But this requires
that it is established in the
rightway.Theobjectiveofa
company is to create value
in a sustained way. Share-
holdershaveinvestedtheirresources
in the company and expect the value
of these resources to grow, and they
would like to be able to recover the
profits on their investment when
theyneedthem.
To create value a company needs
continuous innovation, growth, cor-
rect investments, international de-
ployment and to be able to benefit
from opportunities that may appear
(acquisitions, diversifications). All
these things should happen within a
solidfinancialframeworkthatgener-
atesandusescashwhilemaintaining
a solid financial structure. In turn,
this means that the company has to
be capable of making good use of all
the options available in capital mar-
ketswithalltheiralternatives(equity,
venturecapital,privateequity,short-
term debt, long-term debt, bonds,
listingonthestockexchange).
Theobjectiveofaboardistomake
sure that all these things happen in
thecompanyinasustained,balanced
strategic way. The board may be un-
der lessday-to-daypressurethanthe
management and can help to apply
the necessary pressure on different
areas at different times with a long-
termperspective.Theboardcanalso
assess the extent to which the man-
agementperformswellandifatsome
pointthereisaneedtodevelop,addor
improvespecificmanagementskills.
shareholders’ varied
perspectives
lThere are different types of
shareholders, however. The mi-
norityshareholdersof listedcompa-
nies,forinstance,wanttotalandim-
mediate liquidity. If they need their
money for another investment, for
example, if they feel at a given mo-
ment that it may be better to invest
in real estate, they want to be able
to convert their shares into cash in-
stantly. Other investors may have
a longer-term perspective and may
prefertoinvestinfundsthatcontain
a basket of shares from listed com-
panies. They trust the evolution of
the basket in the medium term. But
therearealsoshareholdersoffamily-
owned companies who may have a
muchlongertimeperspective,trust-
ing in the accumulated value in the
company that becomes the reposi-
toryofthefamily’swealth.
The bigger the shareholder’s com-
mitment to the company, the greater
thepressureonthecompany’sboard.
The members of the board of family-
ownedcompaniesmayhavetoanswer
detailedquestionsfromthefamilyand
may need to adapt their decisions to
the specific regulations established
by the family with regard to access of
familymemberstothecompany;toits
managementorgovernance;theirsuc-
MAXIMIZEYOUR
BOARDPOTENTIAL
PedroNueno
Professor of
Entrepreneurship,
IESE Business School
For successful governance
the board of directors
should embrace a wide
range of experience, abilities
and outlooks that are
unlikely to be found in a
single board member.

2. Alumni Magazine IESE 23april-june 2013 / no. 129
bers to know everything. What’s im-
portant is the overall content of the
board. As the company evolves, the
board can be enriched as necessary
through board member rotation.
Experience has shown that a certain
renovation of the board is required,
buttocarrythisoutmayentailareg-
ular professional assessment of the
boardanditsmembers.
Fortunately, today we have a lot
of knowledge about how to form a
board, and its operation and assess-
ment.Thecorrectapplicationofthis
knowledge can positively affect the
board’sperformanceand,asaresult,
thatofthecorporation.
cession, and distributing the wealth
created or accumulated versus using
it for business diversification. Com-
pliance with family-specific expecta-
tionsisnoteasyandsomeoutstanding
board members of listed companies
have not performed so ably in well-
knownfamily-ownedcompanies,and
havehadtoleavetheboard.
For successful governance the
board should include people with a
variety of perspectives (industrial,
international, family-owned com-
panies, listed companies, entrepre-
neurial ventures, financial markets,
understanding of the economy). It’s
notnecessaryforalltheboardmem-
in a family
business the
company is the
repository of
the family’s
wealth
moreinformation:
Short Focus Program: “Maximize your Board’s
Potential”, from June 4-7, Barcelona
www.iese.edu/MYBP