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3 Case Studies: The Value of Independent Directors in Private Enterprises



Sara Hays is an experienced board member and adviser to family businesses. She began her career as a corporate lawyer and ultimately rose to the role of General Counsel at Hyatt while the company was still wholly-owned by the Pritzker family. Over the past twenty years, Sara has been an independent director and critical adviser to public, privately held and family owned businesses.


We recently sat down with Sara for a conversation about the value independent directors can bring to a private enterprise. As Sara shared experiences, stories, and insights from her career, three key takeaways emerged as to how independent/ advisory/ fiduciary boards can help businesses navigate thorny problems and plan for the future:


  1. Assure Legacy & Continuity: Planning for business & leadership continuity while protecting the legacy of the business.

  2. Providing Objective Balance: Multiple generations and competing perspectives can slow decision making and growth.

  3. Preparing for an IPO or other Strategic Transaction: Forming a fiduciary board creates a framework for family run business to parse what’s ‘family’ and what’s ‘business’



Case 1: Planning for Continuity and Protecting the Legacy of the Business

ECI US Holdings, a fully integrated real estate development, construction and management business whose Founder & CEO became ill.


Sara currently serves as an independent director of ECI US Holdings, a fully integrated real estate development, construction and management business that recently celebrated its 50th anniversary.


When the Founder & CEO of ECI became ill, the need for continuity planning suddenly became urgent. Reaching out to local business leaders with whom he had personal and professional relationships, he formed an advisory board with the goal of ensuring the continuity of ECI and mentoring his kids to become leaders of the company once he is gone. When the Founder tragically passed away, his second-in-command stepped into the CEO role, and the advisory board stepped up to provide business and leadership continuity to the point that the second generation was sufficiently mature and competent to play leadership roles in the business.


As family members moved into senior management positions, the board next evolved from an advisory board to a fiduciary board, adding truly independent directors without any family or business connection, with the goal of creating an evergreen enterprise that would continue to benefit future family generations and to help protect family relationships in the face of difficult business decisions.


Case 2: Balancing competing ‘giants’ / ‘influencers’ in a business.

Draper & Kramer, a Chicago based financial and real estate business with 3rd and 4th generation family active in the business today.


Since its founding in 1893, Draper & Kramer family members held the CEO and Chairman positions as well as majority of the Board seats. After more than 100 years, company leadership transitioned to a non-family CEO and a board that is majority independent with family representation.


The process began when a family business consulting firm assisted with the recruitment over several years of four independent directors with strong industry and family business experience. With the support of the trusted consultant, the independent directors were able to persuade the family that it was in the best interest of the company to move towards a majority independent board with family representation. In the process, two additional independent directors were added and a transition from 3rd to 4th generation family representation was made. Today, the independents on the board ensure decisions and strategies remain focused on value creation and business continuity, while the family directors provide a critical link with the family and shareholders and their goals and objectives.


One of the challenges for the newly constituted board involved succession planning for the CEO, a seat traditionally held by a family member. The retiring CEO was a family member with 40 years at the Company (twenty as CEO) and there were no family members to succeed him. A succession committee was appointed, chaired by Sara, who had joined the Board as part of these governance transitions, and populated with both independent and family board members. The search included internal and external candidates and, after extensive interviews and psychological testing, the internal candidate won the role. Led by the search committee, the process was inclusive and transparent which helped ensure family support of the leadership transition and early credibility of the new CEO as the next chapter of Draper & Kramer was being written.


Case 3: Preparing for an IPO or other Strategic Transaction

Hyatt Hotels, a family-owned hotel / hospitality business, decided to go public as a means of providing liquidity for family members following a generational change in leadership.


Through the 1990s and into the 2000s, Hyatt Hotels was a family-owned business with active 2ndand 3rd generation family members in leadership positions. Following the death of the family’s patriarch, dynamics among family members changed and those without company involvement sought exit strategies that would facilitate wealth transfer. Liquidity strategies were determined for each of the family-owned businesses, including Hyatt which ultimately went public following an IPO. During the lengthy and systematic process of restructuring the company’s equity and debt structure from one optimal for private ownership to one that would be favorably received in the public markets, the company’s board transitioned to a include independent members in addition to family members facilitating the successful IPO and providing the independent fiduciary governance necessary for a public company.