The goal of family governance is to establish a sustainable family structure in relation to the family business. A family governance system can help a family navigate the challenges of family, business, financial and legacy continuity. A structure that is inclusive enough to serve the current generation and flexible enough for the needs of future generations can position your family to thrive, now and in the future.
The main purpose of family governance is to define how a family-owned company is to be run once more generations get involved and/or more family members become active within the family business.
Family governance can serve your family as a system, a process and a tool. As a system, it can manage family members’ competing and interrelated interests, defining roles and boundaries and supporting the family’s collective vision. As a process, it can help a family make decisions based on a shared sense of values, mission and vision. As a tool, it can help a family recognize and manage specific family, wealth and enterprise dynamics.
Every family contains smaller groups that have both overlapping and competing interests. Effective family governance systems serve, manage and balance those interests
The main components of family governance
- A Family Constitution, in which the basic principles of the business and the family’s policies and views are laid down.
- A Family Council – a council that represents all the family members vis-à-vis the company.
- Regular Family Assemblies, annually including information about the business, education of the younger generations, strategy of the company, potential changes of ownership, etc.
Effective governance empowers leaders of wealthy families and/or families in business to make the most of the unique strength of a family enterprise: the synergy between a strong, unified owning family and a well-run family enterprise or family office.