Duties of a typical family council would include: The primary link between the family, the board, and senior management. Suggesting and discussing names of candidates for board membership. Drafting and revising family position papers on its vision, mission, and values. Drafting and revising family policies such as family employment, compensation, and family shareholding policies. Dealing with other important matters to the family Family Business Constitution (“FBC”) Unlike a Family Counsel, whose objective is to provide a sounding board for family members and to assist in conflict resolution and/or arbitration, the Family Business Constitution is a written document that serves as a roadmap for business continuity and family harmony. A family constitution is blue-print that clearly states the family vision, mission, values, and policies regulating family members’ relationship with the business. The FBC is a living document that evolves as the family, its investments and its businesses continue to evolve. As a consequence, it is necessary to regularly update the constitution in order to reflect any changes in the family and/or the business. The difference between the FBC and a shareholders’ agreement are the signatories. All family members are party to the FBC, not just owners. Components: The form and content of family constitutions differ from one family business to another depending on the size of the family, its stage of development, and the degree of involvement of family members in the business. However, a typical family constitution will cover the following elements: Family values, mission statement, and vision. Family institutions, including the family assembly, the family council, the education committee, the family office, etc. Board of directors (and board of advisors if one exists).
Senior management. Authority, responsibility, and relationship among the family, the board, and the senior management. Policies regarding important family issues such as family members’ employment, transfer of shares, CEO succession, future Trustees, future “head” of the Family, etc Defining the family dreams, goals and vision for integrating the family business into family life. A balancing of commercial interests against: Family preferences Paternal attitudes towards: Employees (family conduct towards family & non-family employees), Pensioners (how to treat retired or retiring family business members), Tenants of family owned building (commercial, residential, etc…) local residents vs family members living out of town Structuring communication between family members on: Business & Non-business matters Family issues Conflict resolution mechanisms Informal process, or Formal process – Family Counsel Family employment/personnel policies Compensation guidelines Frequently encountered and predictable problems Family governance Family policy and guidelines for acceptable behavior Emergency planning Possible inclusions in the Family Constitution (operating companies): Long-term goals of the family Business succession Retirement of family members – from the business and support of family members upon retirement Governance Family Involvement Commercial (non-family) management Training – new leaders from within the family – not just in the business, but in life matters and family matters Rectification of errors – what is the mechanism for rectifying incorrect decisions/choices? How are these errors identified? Each objective or purpose gives rise to a range of specific issues that will need to be considered; a list of examples is outlined below Purpose – operating companies Policies and procedures to be considered – operating companies