BauZentral: Compensation and Governance in the Family Firm
In 2017, the chief executive officer (CEO) and chief financial officer (CFO) of Swiss-based BauZentral, a privately owned family business, faced a restructuring challenge. BauZentral produced and sold electrical systems, plumbing systems, and smart security and energy solutions. In 2014, when the current CEO took over from his father, the company needed to address the growth associated with its successful international acquisition strategy. However, the firm's historical structure maintained tight family control, which needed to change to address the realities of the international expansion. The CEO and CFO recognized that the firm had too many different regions with different market conditions, products, and competitive environments to be effectively run from the head office. The CEO and CFO planned to use the family constitution and the firm's financial targets as criteria to devise a governance system to align the interests of management with the interests of the family owners. Their aim was to restructure the organization to achieve the firm's goal of becoming a global supplier while also respecting the family's values. What type of new governance and compensation structure should they design for the firm?