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Lessons on Family Governance in Business

Key Takeaways from the Cornell/Loyola Family Business Roundtable

In early June, I was honored to be one of the faculty members at the Cornell/Loyola Family Business Roundtable. The event focused on Good Family Governance and the Multi-Generational Family Office.

The audience was comprised of family business owners and executives, ranging in size from middle-market to multi-national. Participation was by invitation only. While there are many family business events each year, this one was unique in that it was produced by two cooperating academic institutions of notable standing.

Ann Dugan (Family Office Exchange) and Carol Wittmeyer (St. John Fischer College) were the co-chairs of the event. The Educational Partners, Anne Smart (Loyola University Family Business Center) and Dann Van Der Vliet (Cornell Smith Family Business Initiative), produced the event.

The discussion was composed of four topics:

  • Evolving Intergenerational Governance in your Family
  • Balance and Control: Who is Serving Whom?
  • From Governance to Family Office
  • Family Forward: The Family Office and the New Generation of Wealth Stewards

As a faculty member, I was charged with leading discussions on conflict; business and family governance; and managing the competing interests of owners, boards and management teams.

Family Governance: From Family Assembly to the Family Office

This event covered the full spectrum of both family and business governance. On the family side, the governance spectrum runs from a family assembly, to a family council, to a functioning family office.

[Editor’s Note: Need a refresher on the different family governance structures? A family assembly is an official forum for family members to discuss business issues and share their opinions. Think of it as the roundtable of family governance. Once the family grows too large, a family council can be formed to represent the business interests of the larger assembly. The council consists of elected members that communicate on behalf of the family. Finally, a family office is a private firm that manages a family’s wealth from generation to generation. It invests the family’s capital, manages the family’s financial affairs and offers family governance services, among other services.]

That being said, each family office is unique, being driven by the needs of the family. There is no minimum requirement to have a family office other than to say “we have a family office” and do something to edify the statement. As the saying goes, “If you have met one family office, then you have met one family office.”

But if you want to start a family office or evolve your family governance, then consider these important tips, courtesy of the roundtable:

  • Communications and conversations are the heart of family governance processes.
  • Getting the unengaged to become engaged is critical to cohesiveness.
  • Shared values are the starting point to managing conflict and effectively managing the family.
  • Generational transition is often the best time to change the rules of family governance and business governance.
  • Education is to be highly valued.
  • It is best to have a working system of family governance in place before starting a family office.

Corporate Governance: From Decision-Maker to Fiduciary Board

On the business side, governance evolves from a founding decision-maker, to a Board of Advisors, to a Board of Directors. There is often a parade of consultants between the Founder and a fully functioning Board of Advisors. While the Board of Advisors is a more informal board made of experts, the Board of Directors is a formal body with legal responsibilities and fiduciary duties.The final step of governance evolution is when the family elects independent, non-family members to a fiduciary board.

The roundtable offered three memorable remarks on effective business governance:

  • History is critical to understanding and resolving conflicts. Before jumping into the dispute, always ask, “How did things get this way?”
  • There is an inherent value to having outsiders on a family board. They don’t have legacy relationship issues that influence their judgment.
  • For those aspiring to be an independent board member, you need to have something unique to offer to be competitive. Being smart and successful is not enough. Why do you have to be in the boardroom for the company to move forward?

It may be helpful to revisit these takeaways as your family business moves through the evolution of business and family governance structures.

[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: The Effective Director.]

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About Bruce Werner

Bruce Werner is the Managing Director of Kona Advisors LLC, which provides advisory services to owners and investors of private and family-owned companies. With exceptional experience in finance, strategy, M&A, governance, and succession planning, Kona Advisors creates practical solutions to the most challenging corporate problems. Mr. Werner is an experienced Corporate Director, leading businesses through…

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