A new concept for the family business sector with a portfolio board that is increasingly being utilised by family business owners when a family owns multiple companies together.
It is sometimes referred to as a holding board, a top board, a portfolio strategy board, or a portfolio management board. When the owners need a high-level, macro view of their full portfolio of companies–and typically have effective boards in place for their operating companies–a portfolio board is often the next step in the evolution of a family company’s governance system.
A good insight from Dr. Pascale Michaud.
The purpose of a portfolio board in a family business system is to oversee the collective operating companies that a family owns. It ensures that there is a designated governance forum that maintains a global view of the family companies, with given authority to monitor and guide those companies from a strategic standpoint. Owners receive great benefits from a portfolio board, as it ensures that the family is not over-exposed in terms of risks, the family is adequately leveraging all of its assets and generating sufficient returns, and that the “total is greater than the sum of its parts.” When no portfolio board exists, one of the businesses (often the ‘legacy business’) tends to get the most attention and remain the top priority in strategic discussions, whether or not it can still create significant economic value in the future.