Family Office Governance – What is Family Governance?
Family governance is a system of joint decision-making, most often by a board of directors and a family council, which helps the owner family govern its relationship with its wealth and enterprises. It is often assisted in this mission by a family constitution capturing the family’s vision and important family values, a family employment policy setting the requirements for the employment of family members in the firm or family office, an ownership structure that allows for corporate control, and capable nonfamily managers that set a standard for the professional management of the family enterprise. The desired outcome is rational economic and family welfare decisions that are not overwhelmed by traditional family dynamics.
In many wealthy families, the family council delegates much of its day-to-day work to a family office. For some, often as a result of an initial public offering or a wealth creating event, the family office becomes the family enterprise itself, or at least a significant part of it.
In the following we refer to family businesses and family offices interchangeably (family’s enterprise and a family’s wealth). While we recognize the very different nature of these entities for purposes of their management, we argue that for the purpose of governing the all-important owning family-enterprise relationship, the challenges and opportunities are quite similar.
We want to represent a unique opportunity for an intimate look at the reallife experiences of families wrestling with achieving the right balance: one that will promote family unity and a continuing spirit of enterprise. Their stories, as told in richly narrated detail, may serve as guideposts for creating a tailored step-by-step approach to developing a family strategy, improving communication, and fostering family unity and family trust: the raw materials of patient family capital. And because these are the real stories of families who value their privacy, their names and the names of their enterprises have been changed.
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