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This study constructs a family director board governance index (FBGI) and examines its impact on the firm performance. This motivation is prompted by the literature and theoretical gaps. Despite the pervasiveness of family firms around the world and their significant contribution to the economy, past studies have not developed a board governance index to address the Type II agency conflict in family firms. A panel data of 1105 firm-year observations based on 221 family firms from 2016 to 2020 is used in this study. Two-way fixed-effects estimation with cluster-robust standard errors is employed to examine the association between the proposed FBGI and firm performance. System generalized method of moments is adopted to validate the results. The statistical results report a significant negative association between FBGI and firm performance. The findings suggest that Malaysian family firms have the tendency to tailor the board composition, and such composition is detrimental to the firm performance. The proposed index may be useful for the policy-makers and regulators to assess the board composition and governance role of family directors in Malaysian family firms. Furthermore, the index may be of interest to the potential investors of family firms when evaluating the board governance and making investment decisions.