Family Governance

Why Family Business Governance?

A well governed business family can freely work to achieve higher performance of the business for generations.

Family managed businesses should establish family governance that promotes coordination and mutual understanding amongst all family members and non-family managers (employees involved in key business decisions).

General Guideline:

·         Best practice for families in business together means that the governance of the family requires as much attention as the business, and while family governance is different from corporate governance, its standards must be equally high in professionalism and accountability.

·         The choice of family governance processes will depend on the size of the business, the number of family members, and the degree of involvement of family members in the business.

·         A family constitution or protocol should outline the vision and objectives of the family for the business.

·         It should define the roles of family governance bodies, and their relationship with the board of directors. It should also state key family policies, e.g. relating to family members’ employment, transfer of shares, and CEO succession.

·         Family governance bodies – such as a family assembly and a family council – provide family members with a forum in which to discuss the affairs of the family and the family business, and assist the development of a coordinated family approach.

 

Family meeting objectives should be to

·         Understand  about the business through presentations by family and non-family managers,

·         Discuss (not decide) the direction of the company

1.    what the company does

2.    financial statements

3.    Changes in the family and Business (share change, new tax laws etc.)

4.    New initiatives.

Treating the family in a more formal, organizational way can feel a bit strange at first. It may take a year or two for the family to grow into this more structured way of interacting. But the value of this process is proven and now many business families are using this as a platform. Discussing issues that can be sensitive and raise complicated feelings are taken in more structured and positive manner as they have recognized the benefits of this approach.