Fresh blood in the organization: the case of Puig

Puig, the Spanish multinational perfume and fashion company, has recently announced to group its businesses under the new brand Puig Brands S.A. This move will facilitate a future IPO. This appears to be the final part of a parallel process in which Marc Puig has been strengthening its board with the addition of a variety of independent directors. There are currently nine independent directors on a board with fourteen members. This reinforcement of corporate governance aims to incorporate new skills and experience to the company through the extensive background in multiple industries such as consumer goods, luxury, consulting, banking and experience in international expansion of the new recruits.

It is difficult to advise on the weight of independent directors on the boards of family businesses; it depends on the size of the company, the sector in which it operates, its level of international exposure, the family's objectives, culture and values. Family businesses can be small, medium or large, want to go public or be privately held, seek international expansion, or even, for some, need political or geopolitical expertise depending on the sector of activity. The variety is manifold, but the important thing is to define beforehand what experience and skills each board needs.

In the case of Puig, advisers who were family members were the majority for much of the company's history. Specifically, in 2015 the board was composed of ten members, three of which were independent. This has been changing in recent years. In general, having a mix of independent directors and family members on the board helps the organization benefit from those different perspectives coming from both the internal world of the company and the external world. The family member brings the historical knowledge of the company, the market, the purpose, the long-term vision, the values and the culture. They are the ones who ensure consistency between the company's decisions and the family's interests, as well as the continuity of purpose and culture. On the other hand, the contribution of the independent member is varied. They have a broad business vision due to their experience in other boards, other companies and sectors. This diversity offers fresh points of view and best practices. Their skills and knowledge in the areas of marketing, technology, finance or compliance can be of great help. This new and fresh look is what Puig is looking for with the latest additions.

The truth is that today's talent market offers great opportunities for business families to complement their skills. When faced with specific challenges or opportunities, having these skills is critical to making good decisions. The external advisor incorporates an objective and unbiased view of the company's performance, strategy and governance because he or she is less influenced by family dynamics. Not having a financial interest in the business and not being subject to the emotional impact of family relationships allows him/her to be much more aseptic in giving his/her opinion. In addition, this new member has the responsibility and obligation, in the exercise of his role, to always put the interests of the company and its shareholders first; a loyalty that will ensure, in listed family companies, that the interest represented is not only that of the family. Finally, the external advisor will enable and facilitate the company to create new connections that will help it access investors, new markets, new clients and foster new alliances.

The optimal balance between external and internal members will depend on the specific situation in which the company finds itself, although, in general, it is advisable to opt for a majority of external members to ensure good governance practices, with a minority of family members who can ensure that the values, culture and interests of the family are maintained.

In Spain, family businesses represent the largest share of GDP, employment and sources of growth. Thus, having independent directors or advisors who provide an objective perspective based on knowledge and experience, connecting the company with the environment and ensuring good governance, has many benefits for everyone. Better decisions will generate greater growth in the long run, and this will benefit the owners, the workers and the economy as a whole. In the case of Puig, I wish them that the diversity of experience and knowledge on their board will truly support their expansion plan. There is nothing better to face the organizational challenges inherent to growth acceleration than to do so with people who have experienced them throughout their careers.