Governance is a hot topic in the world of family business. Do you have a family council, a board of directors and/or a board of advisors? In this post, we will examine the roles and responsibilities of each to help you determine what may be appropriate for your family and your family business.
Family Council
The role of a family council is multi-fold. On the family side, a family council is tasked with sharing stories about the history of the family and what family members are currently doing, exploring what it means to be a family member, developing a family mission, affirming the family’s core values and preserving traditions to pass along to future generations. Families that address relationships and concerns in a forum together develop a stronger sense of family. On the business side, the group provides a forum for discussion of family members’ expectations concerning the business as well as a medium through which family members who neither work in the business nor have ownership in it can be heard. The council also serves to clarify boundaries and manage relations between the family and the business. It’s a venue to share views for future company ownership, develop opportunities for learning (e.g., communication skills, estate planning, etc.), and explore joint investment and philanthropic opportunities. In summary, it’s a bridge between the family and the family business.
Board of Directors
The role of a board of directors is to consider, protect and represent the interests and goals of a business’s shareholders. It is a group elected by the owners of a business to govern the affairs of the organization. This group provides skills and expertise for seeing the big picture, appoints the CEO and oversees his/her performance, reviews corporate objectives, and advises and monitors the performance of senior management and the company. It also helps to formulate and evaluate long term strategic plans, approve major acquisitions, divestitures, capital expenditures and operating budgets, and considers major organizational restructuring. In addition, the board of directors approves debt/equity ratios and lending activity, authorizes the selection of the company’s public accountant/auditor and assures that dividend policy effectively balances the needs of the family and the business. Finally, the group guides and ensures contingency and succession planning and helps mentor the younger generation.
Board of Advisors
A board of advisors is typically made up of people from outside of a business. The group has relevant industry contacts, knowledge and experience. Often, they play a complementary role to the company’s senior management team. An advisory board, unlike a board of directors, does not have decision-making authority in a company but cares about the company’s future and makes recommendations to either the board of directors or the senior management team and provides guidance on best practices.
For more information on the different types of governance in family business, please reach out to us, or visit the family business governance section on our website at https://fambizconsulting.com/family-business-consulting-services/family-business-governance-strategies/.
David Karofsky is President of Transition Consulting Group, Ltd. He has over 20 years of experience coaching and consulting to individuals, families and companies to develop better cross team communication and build alignment among the senior management team. The recipient of multiple achievement awards, he received his A.B. from Bowdoin College, an Ed.M. from Boston University in Counseling Psychology and a MBA from Northeastern University. David can be reached at [email protected] or 508.875.7751
