Strategies that seek to optimise all forms of a family’s wealth – financial, intellectual and social – need to include practical advice on how the business of a family can be well governed. Since it is impossible to separate a family from their business, there must always be a forum where the interests and concerns of the family can be discussed. In a small family these discussions will occur spontaneously, whenever needed, and often take place over dinner, at weekends or on holiday. However, as the family and their business both grow, the business of the family requires a bit more thought and formality. This challenge is often met by creating a Family Assembly.

The purpose of a Family Assembly is often a mixture of social, formal and educational. As a family grows and the demographics become more complex, the Assembly can generate social interaction that will help to create and sustain the “glue” that binds the family to each other and their shared investments in the family business. This is important because if the glue that binds the family together is not maintained and instead is allowed to dilute, there eventually will come a point where it is not strong enough to hold the family business together.

Some families hold an annual Family Assembly meeting, timed to coincide with the company’s AGM, which is intended to ensure that all family members are kept in touch with what’s happening in the family business and in the lives of their relatives.

The formal role of a Family Assembly can include creating policies that govern areas where the distinct interests of family members and the business overlap and which can often be the source of conflicts. For example the family may create a policy on employment and remuneration of family members that clarifies in advance:

  • How family members can get a job in the family enterprise?
  • What qualifications and experience will be needed for different roles?
  • How their careers will be developed including appraisals?
  • What they’ll be paid?

Family Policies can also govern many other areas of importance to the family.

Education

This policy may provide funding for the education of family members, including educating them about the structures in the family enterprise that will eventually form part of their lives.

Philanthropy

Where families are involved in philanthropy they may decide to co-ordinate their giving so that it becomes a shared activity among the family, and their giving, through being combined, has greater impact. The policy can determine the scale of giving and how decisions will be made about supporting different types of charitable works.

New Ventures

Families sometimes like to encourage entrepreneurship through creating a fund that can be used to support new ventures started by family members. The policy will determine how to apply for funding, the type of funding available and the return on investment required by the new venture fund. As well as giving family members the means to pursue their own aspirations, this fund can also lead to diversification of the family’s overall enterprise.

Media and PR

Many families are concerned about how their affairs are reported in the media. In order to achieve overall consistency and some element of control a media policy can determine how the family manages publicity surrounding their private and personal lives. It may also specify types of conduct that should be avoided since they could affect the reputation and standing of the family and their business. The policy can also include a requirement that all PR issued by the business must first be circulated among the family and may, in some cases, require to be approved by the family.

Who can attend?

The role of the Family Assembly and the power and influence it can wield, will be linked to the decision about who can attend. In each case the answer to this question will be influenced by the family’s view on matters such as the age at which family members are felt to be mature enough to participate in a Family Assembly and whether or not spouses should be involved.

The constitution of the Family Assembly will also need to specify how it will be administered, how often the Assembly will meet, what formality is required to convene and run the meetings and how any formal decisions are to be taken. Sometimes it is helpful to appoint or elect a separate group with responsibility for running the Assembly and to be the main governance link between the wider family and other parts of the enterprise, such as a board of directors. This separate group is called a Family Council and the following illustration shows how important a role it can perform in overall governance.

Screen Shot 2013-03-21 at 12.20.41

An important part of creating these structures is deciding how the different roles in the structures will be populated. Family governance structures, like the Family Assembly and Family Council can create opportunities for family members to have a meaningful role in governing their enterprise without necessarily having to join the enterprise as a career.

 

The information and any illustrations and models contained are the copyright of Withers Consultancy Group LLP and Withers Consulting Group LLC. If you would like to reproduce any of them please contact WCG at info@withersconsulting.com or by phone on +44 (0)20 7597 6850.

©2013: Withers Consultancy Group LLP and Withers Consulting Group LLC