Family Office – Family Council (1/3)
Family councils, in conjunction with family business boards, constitute the best forum for achieving and maintaining an optimal balance of ownership, family, and management, one that fosters a positive family/ enterprise interaction. The family council is a governance body that focuses on family matters. It is to the family what the board of directors is to the enterprise. Family councils primarily promote communication, provide a safe harbor for the resolution of family conflicts, and support the education of next-generation family members in family dynamics, and financial and ownership issues. The list below defines important family council tasks:
- Serve as a vehicle for transparency and for good, timely communication
- Provide an opportunity to update family members not active in the business about the state of the business such as financial results, management, strategy, and the competitive dynamics of the industry
- Educate family members about the difference between ownership, management, and family membership
- Engage family members in responsible ownership
- Inform and educate family members on the estate plan and on the management of inherited wealth
- Allow for policy making, e.g., family employment policy, ownership transfers, and other similar matters
- Present a time for problem-solving and conflict resolution
- Provide a forum for celebration and introspection
- Create a safe harbor for planning the family’s future involvement in the business
A great deal of anecdotal evidence suggests that restrictive trusts, ostensibly crafted to maintain business continuity and family unity, usually fail to prevent nextgeneration members from doing with the company as they see fit. While these instruments often do protect and preserve the asset-based legacy for a time, family estrangement and asset sales will result unless a way is found to rediscover the intangible, value-based legacy of the founder and earlier generations.
Rediscovering the values and the legacy takes time and conversation. It takes family history projects, and candid discussions regarding the strategies and growth opportunities sought by the different generations. It takes making history come alive again. For example, at one start-up of a family council, a second-generation sibling kicked off the initial meeting not with the usual discussion of goals and expectations for the meeting but rather by reading a fictional letter from her deceased father. Her father supposedly wrote this letter after finding out that his widowed spouse, five second-generation heirs and their spouses, 18 grandchildren, and seven of the grandchildren’s spouses would be meeting together.
Its purpose was to convey to all family members in attendance a sense of history, a sense of priorities, the founder’s commitment to a few essential principles, and his tremendous appreciation for the job done by his three successors in the management of the business.
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