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Family Office – Strategy and Structure of Family Governance

A study in contrast illuminates the significant contribution of good governance to families of wealth and family enterprises. On the eve of the 2007 shareholder vote for the US$ 60 per share offer for Dow Jones, publishers of the Wall Street Journal, Crawford Hill, one of the young Bancroft family members, sent an email to family members from Spain, where he
was residing. In it he stated:
“With all due respect, it is time for a reality check. What is missing from this discussion about Dow Jones and the Bancrofts is a sense of historical perspective […] Neither grandmother, the “family matriarch” and to whom many of us owe “the
legacy” nor my mom ever spoke of the legacy of Dow Jones, much less the possibility of working there or what it meant to be a steward of the business […] There was no effort at educating the next generation whatsoever […] we talked about
everything under the sun […] but never Dow Jones […] We never had, by the way, conversations that the Sulzbergers (New York Times Company), the Grahams (Washington Post Company), and yes, the Murdochs (News Corp.), had every day! There has absolutely never existed any kind of family-wide/cross branch culture of teaching what it means to be an active, engaged owner and more crucially, a family director.”
He concluded his email with his recommendation that the Bancroft family accept what he considered a generous US$ 60 per share offer by the Murdoch family of News Corp.
In sharp contrast, Don Graham, Chairman of the Washington Post Company, and fourth member of the family to lead the company, followed in the footsteps of his mother and former Chairwoman, Katherine Graham. Mr. Graham is committed to continued family control of its enterprises and invests in governance best practices such as a family council, a board with significant independent outsider influence, top-notch professional nonfamily management (including a nonfamily CEO), estate planning to preserve wealth and agility, much communication and education within the family and two classes of stock that give the family control while allowing it to raise capital in
public equity markets. Having gone public in 1971, the Graham family retains control of the company that publishes the newspaper, operates cable TV and broadcasting companies and owns Kaplan Testing and Kaplan Higher Education. And to further consolidate its patient family capital advantage, the Graham family got long-term investor Warren Buffett’s Berkshire Hathaway to purchase 20% of its Class B publicly-traded shares. Notwithstanding the digital media-induced turbulence in the newspaper industry, the Washington Post Company continues to be profitable
and highly regarded; it has received 47 Pulitzers in its history, including six in 2008, the most by any single newspaper in one year.
Globally, leading families are pointing the way on approaches and best practices when it comes to governing the all-important family-enterprise or familywealth relationship. While the strategy has to be tailored to each particular family, boards with independent advisors, family councils, family offices, family constitutions, estate and ownership control planning and committees of the family (e.g., investment, strategic planning, and philanthropy committees) are all part of the structure.
The latest research points to the particularly significant role that boards of directors play in providing for effective family governance. Since our intent is to provide actionable ways to lead family governance efforts, we begin the practical information section of this White Paper with the subject of boards and the value of independent advisors serving on them.

For further information please contact us directly or meet us in April in New York.


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