Family governance is a structure for group decision-making among family members founded on common values, a shared goal, and a shared future vision. It is intended to assist families in transferring ownership and management to subsequent generations while also serving as a valuable example of intergenerational cooperation and decision-making. Families and businesses are often the two constituents performed by family governance models. Establishing a family business governance framework has advantages such as spotting and developing family members with the potential for leadership roles within the company, creating a sense of direction, values to live by or work by, and well-understood policies that specify how members of the organization should behave or what they should do under specific conditions. For the family to continue making wise decisions, effective governance also entails forming a board of directors to offer official structures and procedures.
BENeFITS OF GOVERNANCE IN FB:
Family governance models can support family companies in identifying and managing their wealth, defining responsibilities, establishing personal boundaries, and managing conflicting and intertwined interests among members. Family governance decreases the likelihood that the family business would fail and, by design, turns it into a multigenerational legacy. It assists in preventing the escalation of minor family conflicts into significant family disputes and insurmountable corporate problems. Family relationships are synchronized through governance structures, roles, and responsibilities are specified with distinct limits, and wealth is handled by the founder's vision and the family value systems.
Good family and corporate governance give a family the best chance to leave a lasting legacy for future generations. To best support, the business, families must choose the appropriate governing body for the size and stage of their enterprise and assist board members in understanding their responsibilities. A board of directors typically addresses strategic issues including risk management and succession planning. Owners, clients, and management all have interests in mind when it was created. Using a board for your family business, whether it is an LLC or partnership, is not legally needed but may be essential for maintaining and expanding the company.
Tensions in family company systems are not eliminated by effective governance. But it can ease tensions while enhancing productivity and harmony in these businesses. Every company that strengthens its governance benefits in the long run. Good governance produces a sense of direction, values to live by or work by, and well-defined policies that instruct organization members on how to behave or what to do in certain situations. Policies include things like those governing hiring, promotions, debt, and even firing. While shareholder meetings/councils allow shareholders to vote on significant choices impacting their assets, family assembly/council meetings allow families to debate key issues relating to their enterprises.
Strengthen your family business with a family governance plan (no date) BNY Mellon Wealth Management. Available at: https://www.bnymellonwealth.com/insights/strengthen-your-family-business-with-a-family-governance-plan.html (Accessed: March 19, 2023).
Brown Brothers Harriman (2018) Family business governance: What to know before getting started, Brown Brothers Harriman. Available at: https://www.bbh.com/us/en/insights/private-banking-insights/family-business-governance-what-to-know-before-getting-started.html (Accessed: March 19, 2023).
(no date) Bizjournals.com. Available at: https://www.bizjournals.com/charlotte/news/2021/06/08/family-business-governance-what-to-know.html (Accessed: March 19, 2023).
Strengthen your family business with a family governance plan (no date) BNY Mellon Wealth Management. Available at: https://www.bnymellonwealth.com/insights/strengthen-your-family-business-with-a-family-governance-plan.html (Accessed: March 19, 2023).