The idea of codifying a written family constitution or charter has become popular in the family enterprise world, but it should be noted that every successful family enterprise already has a constitution, whether it be a written document or not. So, what do you really need?
A family enterprise can thrive with an unwritten constitution
As long as the family and other key stakeholders trust each other and feel they are striving to achieve the same goals, there will be a functioning system of governance. This unwritten constitution will often be referred to as ‘how we do things around here.’
However, as an enterprise and the family grow and ownership passes down generations, it is often sensible to put some things in writing, such as a shareholders’ agreement, employment agreements for family members and an estate plan. These documents, however, do not completely replace the established customs and practices of the unwritten constitution. This type of constitution that is partly written and partly unwritten is similar to the constitution of the United Kingdom.
developing a written constitution
Eventually a family might decide that they need to pull together how their enterprise is governed in a codified constitution. This will address all aspects of governance, including the roles of owners, the involvement of wider family and corporate governance in the enterprise.
The term ‘family constitution’ is used most often to refer to a codified constitution. However it is important to remember that if you don’t have a codified constitution, you will have an unwritten or partly written version.
Before going further, it is wise to reflect on how your existing constitution has helped your family enterprise be successful, and how this can be adapted to continue working in the future.
Browse and Borrow
Coming soon…
Infatuated with Formality: and Watching our Constitutional Language