Family business governance is defined as a system of rules, structures, and processes which provide the framework for management and operation of a family business.
The primary purposes of family business governance include separating business operations from family dynamics, defining requirements and boundaries regarding ownership and management, utilizing specific mechanisms to prevent or mitigate family conflicts, easing generational transitions through succession planning, and promoting professional growth and development.
Family business governance can be broadly divided into three categories: family governance, ownership governance, and business governance. Some of the key points covered by each category are the following:
- Family governance: definition of family values, training of future generations, formalization of employment policies
- Ownership governance: definition of dividend policies, specification of processes for cross-generational share transfers, management of family members’ stake sales, general asset management
- Business governance: oversight of management, profit tracking, holding executives accountable
If a family business has appropriately applied family business governance, among the benefits it can expect to experience are alignment of business and investment strategies with the family’s main values, clearly defined roles and responsibilities, increased transparency, and most importantly, family wealth and legacy preservation as well as protection of commercial success across generations.
Some of the most important elements of family business governance include the three-circle model, the family constitution, maintenance of equitability and justice among family members, and personnel and their impact on the family business.
If your family business is in need of a boost with regard to its current governance standards, Evoque Advisory is always ready and willing to play our role in making your family business governance the very best it can be.
Please contact us at enquiry@evoqueadvisory.com to request a consultation or address any other relevant matter.
