Private Equity Minority Investments - Universität St.Gallen

Chapter IV: Voicewith competitors or potential competitors, 1448 personal character/culturalfit, 1449 interpersonal skills, 1450 personal commitment to the boardmandate, 1451 nationality and residence, 1452 and family membership 1453 .The PEMI’s board representative(s) should meet particularly high standardswith respect to management experience and/or financial literacy since theseare two primary areas in which PEMIs can add value to family firms. 1454Another eligibility criterion of importance in relation to private equityrepresentatives is the ability to commit certain defined resources (e.g.,networks or special expertise). Conversely, the owner family’s representtativesshould have appropriate professional experience and skills necessaryto adequately exercise the board mandate. Under no circumstances shouldboard membership and even more participation in the executivemanagement be used purely to achieve personal aims or financial gains. 1455It is also important to ensure that the board of directors has adequate agediversity and that it makes timely succession plans. Aside from boardmembers representing shareholder groups, a suitable number of board seatsshould be allocated to independent third-party board members who can helpthe board make objective decisions and act, when necessary, as refereesprevious full-time employees of the company, the company’s lawyers, bankers, andconsultants, persons with significant business dealings with the company, with ties to theauditors, and major shareholders and their respective family members are not consideredinterdependent. On independence, see BÜHLER, Regulierung, § 11, N 1333; WERNLI, BaslerKommentar, CO 707, N 30; MÜLLER/LIPP/PLÜSS, p. 704; ROTH PELLANDA, p. 91 et seq., N171; WATTER/ROTH PELLANDA, Zusammensetzung, p. 65 et seqq.; KRNETA, CO 707, N 108et seqq.1448These criteria prohibit directors from sitting on the board of directors of competitors andfrom engaging in other dealings with competitors that may result in conflicts of interest. SeeROTH PELLANDA, p. 162, N 322.1449Important traits are, inter alia, integrity, assertiveness, communication and teamwork skills,leadership skills, openness to dialogue, the ability to deal with conflicts, and the ability togive and accept criticism. See MÜLLER/LIPP/PLÜSS, p. 19, 69 (referring to controllerpersonality, creative or critical thinker); KRNETA, CO 707, N 113; DIETRICH; Brevier, p. 15.1450In light of the board’s ultimate management responsibility, directors should be able to applystrategic reasoning and have vision, have planning and decision-making capabilities,communication and interpersonal skills and be able to establish contacts and build networks.See TRICKER, p. 267.1451The proposed candidate must be willing and realistically be able to devote adequate time.The company may therefore limit the number of directorships or similar mandates that eachdirector can hold, e.g., to “no more than five”. See KRNETA, CO 707, N 114 et seqq.;DIETRICH; Brevier, p. 15. On the discussion of limiting the number of board mandates, seeBÖCKLI, Aktienrecht, § 13, N 14; BAUEN/VENTURI, § 1, N 8; AMSTUTZ, Macht undOhnmacht, p. 139; MÜLLER/LIPP/PLÜSS, p. 9, 16.1452See WERNLI, Basler Kommentar, CO 707, N 30; PLÜSS, p. 19.1453See WERNLI, Basler Kommentar, CO 707, N 30 (only in family firms).1454See Section II.A.3.2.2.1455See FORSTMOSER, KMU, p. 503, FN 148.231