The Goals and Tasks of Family Governance
Any strategy that seeks to optimise all forms of a family’s wealth that are connected to their enterprise needs to consider how the family is governed. This blog post looks at the goals and tasks that can be assigned to family governance and there is another post on this website that explains a process for creating a family assembly or family council.
The goals and tasks of family governance can be broadly classified as social, educational and formal.
Social
The social capital in a family enterprise is the glue that bonds family members to each other and to their shared interest in the family enterprise. When it is strong, there exists among the family a sense of goodwill, loyalty, trust and mutual respect. However, as a family extends and individuals move apart in order to pursue various lifestyles and careers, this emotional glue can naturally dilute. In light of this reality, good family governance can create the type of collective engagement that maintains glue; for example:
Arranging a regular family gathering.
Providing information to family members about the enterprise that they would not otherwise receive.
Circulating news on family events so that the wider family is kept in touch with what is happening with their relatives.
Curating and maintaining a historical archive in relation to the family enterprise.
Addressing conflicts and rivalries among family members that could affect the family glue and even the enterprise.
Educational
Families that have an enterprise as part of their lives are likely to benefit from being educated about it to some level. This can be arranged as part of family governance with the intention of nurturing interest and awareness of the enterprise, especially among those who one day may inherit future ownership or pursue a career in the family enterprise.
Formal
A family might want to be involved in some governance matters that will affect the family, for example in relation to creating the following policies that will affect family members.
Employment
The way in which family members can become employees, their remuneration and how their careers will be managed.
Confidentiality
A policy to remind or require family not to disclose any information in connection with the enterprise that they receive and which is not otherwise in the public domain.
Media and PR
If a family is concerned about how the behaviour of owners, the enterprise and the wider family can affect the reputation of the others, it will help to have a policy in relation to engagement with the media. This could include a requirement that the wider family need to be informed, preferably in advance about PR issued by the enterprise so that they are aware of what is happening rather than discovering news from the general media.
Family governance is important as part of the overall governance of a family enterprise. The extent of it depends on consensus among the owners the enterprise and the wider family about where and how family should exert influence. That decision will in turn affect how the family need to be organised in order to be present and effective in their governance role. The potential role of a family assembly and a family council are explored in “Family Assembly and Family Council.”