Good governance is critical for effective generational transition and sustainability of family-owned businesses, FOBs, and goes beyond boards of directors and advisory boards.
There is the need to adopt a family governance framework to address the ad hoc, disorganised and informal approach to governance observed in many FOBs
The framework refers to joint decision-making among family members, structures and processes that families use to guide their relationships within the business, and shared values among families. Its components include family constitution, family meeting, family council, family assembly and family office; and it addresses issues such as employment of family members, succession planning, employment of in-laws, share distribution among siblings, and selling of ownership interests.
Left unresolved, these issues can lead to the demise of FOBs.
A family business constitution is a written document that sets out family vision, mission, core values and policies which regulate family members’ relationship with the business. Also referred to as ‘family creed’, ‘family protocol’ and ‘statement of family principles’, the family constitution gives a clear outline of a set of principles by which family members are committed. While it is not usually legally binding, it is not unheard of to have the intervention of the courts to resolve issues and differences.
Article & Photo from: The Gleaner