Perhaps more importantly, shareholders and family are the same group. Therefore working for the best interests of the family, as most of us want to do, is the same as working for the interests of the owners. Typically, if there is not trust between these segments, the business has to be sold or liquidated. It is extremely difficult to maintain a family business where there is lack of trust among these groups, whether that distrust originates with business issues or from personal aspects of family relationships. In much of the world outside of the U.S., trust is also very important as an element in the business transaction.
Contracts come later.
Family businesses have an advantage here because they understand that dynamic better and because the potential partner is going to better understand them and how they operate. The following figures graphically illustrate some of these differences. As Figure 1 shows, in the publicly-held business model the relationship is linear, with the board expected to represent the best interests of the shareholders and monitor the activities of management as well as to advise management. Trust One cannot take trust for granted in a family business. As in other aspects of family relationships, a key factor in building and maintaining trust is communication.