Family Business Charter
A Family Business Charter provides an opportunity to codify the ‘DNA’ of the Family business. It provides a framework for governance, sets a forward vision, manages behaviour and establishes a basis for maintaining Family harmony.
Family businesses can be problematic in regard to the inherent conflict between the dynamic of the Family and the business.
Purpose of a Family Business Charter
The Family Business Charter is a focus on the human side of the business. It represents the ‘DNA’ of the Family Business.
It incorporates the Family viewpoint, integrating Family values with business rationale.
The Charter sets out the principles and practices to be observed by the Family with regard to the management and ownership of the Family Business.
It spells out policies that tend to be the most controversial and crucial to the future of the Family Business, addressing the issues of who will lead the Family Business, who will work in it, and how Family Members in the business will be compensated.
All Senior Family Members should have an opportunity to influence the document at various meetings and discussions.
In this way, the principles and practices contained in the Charter are carefully thought out, discussed, written down and are contained in an easy to read and understandable document.
Scope of the Charter
A shared vision
The Family should develop a clear business vision that will reflect the aspirations, expectations and objectives of all stakeholders. It will provide the means by which a destination can be understood and enable a passage of change to achieve outcomes with the full commitment of all involved.
Business Values and Corporate Identity
The values and goals of the business represent the essence of the company’s identity. The stakeholders should agree on a set of values that will provide a set of guiding principles and will govern standards of behaviour internally and in B2B and B2C circumstances.
All key Family members should come together to draft a fundamental definition of the business. This statement of the primary goals of the business should be documented and agreed to by all stakeholders.
Family governance is the system which manages the interaction among members of the Family Group. This is distinct from the legal governance structures of the Family Business.
The Family may decide to establish a Family Council. The Family Council could be a representative group of the entire Family Group.
The purpose of the Family Council would be to provide the opportunity for Family Members to discuss issues of importance within a strong, supportive group environment.
As distinct from the Family Council, the Family Board is the legal entity to manage the Family Business for the benefit of the Family and other stakeholders. It will set policies, monitor performance and set the future direction of the Family Business.
The Family Business Charter can establish a formal communication process between Family members and provide a code of conduct for managing Family differences.
The Family can put in place a leadership mentoring program supported by a clearly explained organisational chart with defined roles and responsibilities. This can assist Family members to understand the contribution they make to the business and the definition of success. It can provide them with clear career path.
The Charter is one of the key foundations to an effective succession plan. Other elements include the transition of business equity, the treatment of Family assets and a sound estate plan.