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Family Governance: Why? When?

By Family GovernanceJune, 2020March 18th, 20242 min read
Family Governance

When family wealth is controlled or owned by a single person (usually the wealth creator), things are simple. But at some point, the wealth will likely pass to more than one person – the wealth creator’s children. In respect of the family wealth, the members of the family are bound together through three circles of involvement: family, business and ownership. That adds a huge degree of complexity, as no decision gets made in isolation.

Strong governance establishes a process for decision-making and conformity within the family. Clearly defined policies and processes for governance, in line with a formal family vision and mission statement, can reduce the potential for conflict.

Family governance can also focus on strengthening the non-financial capital within the family – working on these can ensure it’s not “all about the money” (because usually it isn’t anyway).

For some families, there may be an advantages to separate ownership and management. This can ensure the sustainability of the family business and wealth through its management by professionals with the diverse skills needed. The family members govern (set policy, monitor), and others manage.

There is an emotional side to effective family governance which is often overlooked by the first generation. In order to be effective, family governance needs to take into account all interested family members in the planning process and to be consistent with the existing family culture which is likely to have evolved over multiple generations.

Consider This: Who owns and controls your family’s wealth? Who will own and control it in ten years? How many ‘hats’ (business, family, owner) does each family member wear? Are you aware of the diverse interests and aspirations of each family member (across multiple generations) in respect of the family wealth?

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