The Family Firm's First Outside Director
Ogun Packaging Industries Limited was founded in 1989 and is 72% owned by the Adeyemi family; a private equity firm holds 28% and one board seat with veto rights over budgets and related-party deals. Revenue is N9 billion. The founder, now 78, remains chairman and still signs off purchases above N1 million, although his eldest son is CEO and his daughter is CFO. A son-in-law runs procurement; two cousins are on the six-member board. The founder's health is declining and the family is split over whether the daughter should succeed as CEO. The company's bank covenant requires a board-approved succession plan by 31 December, and a multinational customer has asked for evidence of an independent board and an ESG supplier code. The PE director has threatened to block the annual budget unless two independent directors and an audit committee are appointed.
1. Advise the family and the board on a governance structure that protects both family and minority interests.
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Two-tier structure: Separate family governance from company governance. A family council and a written family constitution should handle family employment, share transfers, dividends and dispute resolution. The board should govern the company.
Board: Expand beyond six family-heavy members. Appoint two genuinely independent non-executive directors, one as audit committee chair and one as a senior independent director. Constitute an audit committee with financial expertise and a related-party committee. The son-in-law in procurement should either leave procurement or leave the board; a family member can be a manager, but the role must be merit-based and supervised.
Minority protection: The PE investor's veto rights should be documented in a shareholders' agreement and the articles. Reserved matters should include related-party transactions, new share issues, borrowing above a threshold, CEO appointment and budget approval. The family should not treat the company as a private purse.
Succession: The board should adopt objective CEO criteria and a transition timetable, not decide by birth order. The founder can become chairman emeritus with a defined advisory role. This structure gives the bank and customer confidence without surrendering family control.
2. How should the board manage the succession dispute and the founder's continued interference?
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Process: The board should establish a succession committee of independent directors and family representatives, chaired by an independent director. It should agree criteria before candidates are considered: experience, performance, strategy, values and ability to work with the board. Both the son and daughter should be assessed against the same criteria.
Founder's role: The founder's interference is a real governance risk. The board should acknowledge his legacy, define a transition period and remove his operational signing authority at a stated date. He can retain a consultative role, but he should not overrule the CEO in procurement. The CEO needs a clear delegation limit and board backing.
Dispute: If the family cannot agree, use a professional mediator and, ultimately, the shareholders' agreement. The PE director should not choose the CEO, but should ensure the process is fair. The board should minute the decision and communicate it to staff.
Bank and customer: A credible, board-approved plan with dates is more persuasive than a promise. The plan should include independent directors, an audit committee and a family constitution.
3. What should be disclosed to the bank, customer and PE investor, and what should remain confidential?
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To the bank: Disclose the succession plan, the governance roadmap and the timetable for independent directors and the audit committee. The covenant requires board approval, so provide the board minute and the plan. Do not misrepresent the founder's health or the family agreement.
To the customer: Provide the supplier code, the ESG policy and evidence of board oversight. The customer is asking for assurance, not family details. A short governance statement and a named contact will usually suffice.
To the PE investor: Share the reserved-matter schedule, the succession criteria and the audit committee terms of reference. The investor is entitled to information as a shareholder and board member, subject to confidentiality.
Confidentiality: The founder's medical details should remain private. The family dispute should not be disclosed beyond what is necessary to explain the transition. But the fact of a succession process, the timeline and the governance changes are disclosable to the bank and investor. The company secretary should keep a disclosure log and ensure the board speaks with one voice.