Family Business: Governance in Family Business

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This system plays a pivotal role in steering decision-making, delineating roles, and ensuring accountability. Resisting the temptation of informal approaches, well-defined governance mechanisms are essential for fostering harmony, mitigating conflicts, and maximizing performance. The overarching objectives include promoting transparency, safeguarding family interests, and facilitating a seamless leadership transition. </p> </div> </div> </section>  <section class="defining-family defining-family-culturevalues" style="display:none;"> <div class="container-fluid"> <div class="family-bus-inn"> <h2 class="fs50 neuemedium clrblack lh50 text-center">Culture and Family Dynamics</h2> <div class="blue-dot-icon"> <img src="https://www.pfbi.institute/assets/img/family-business/blue-dot.svg" class="img-fluid " alt="Family business" title="blue-dot" /> </div> <div class="yellow-dot-icon"> <img src="https://www.pfbi.institute/assets/img/family-business/yellow-dot.svg" class="img-fluid " alt="Family business" title="yellow-dot" /> </div> <div class="row def-family-row role-of-family"> <div class="col-lg-4 def-family-grid"> <div class="def-panel"> <img src="https://www.pfbi.institute/assets/img/family-business/role-communication/culture-value-1.svg" class="img-fluid def-family-icon" alt="Family business" title="Family business icon" /> <p class="fs20 clrblack lh30"> Culture plays a significant role in shaping family dynamics. Different cultures have distinct values, norms, and expectations that influence how family members interact. In some cultures, collectivism is vital, emphasizing close-knit relationships and communal support. For example, the collectivist culture in Asia. </p> </div> </div> <div class="col-lg-4 def-family-grid"> <div class="def-panel"> <img src="https://www.pfbi.institute/assets/img/family-business/role-communication/culture-value-2.svg" class="img-fluid def-family-icon" alt="Family business" title="Family business icon" /> <p class="fs20 clrblack lh30"> In some families there are individualistic cultures that prioritize personal independence and autonomy. These cultural nuances influence communication patterns, decision-making processes, and the roles family members play within the unit. </p> </div> </div> <div class="col-lg-4 def-family-grid" > <div class="def-panel"> <img src="https://www.pfbi.institute/assets/img/family-business/role-communication/culture-value-3.svg" class="img-fluid def-family-icon" alt="Family business" title="Family business icon" /> <p class="fs20 clrblack lh30"> Joint families have been more conventional in Indian family businesses. They serve as a strong foundation of trust and loyalty, thus being an advantage. However, they have their own set of challenges to manage. Over time, however, nuclear families are becoming increasingly common in the Indian family business ethos. </p> </div> </div> </div> </div> </div> </section>  <section class="session-sec bgskyblue bgskyblue-familyvalues bgskyblue-essential"> <div class="container-fluid"> <div class="row session-row "> <div class="col-lg-12 session-grid session-grid-tabb connect-right"> <h2 class="fs50 clrblack neuemedium lh60 text-center">Essential aspects of family business governance:</h2> </div> </div>  <div class="global-inn"> <div class="row global-fam-row"> <div class="col-lg-4 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs25 neuemedium clrblack"> Ownership and Family Involvement: </h3> <ul class="cmp-cont-list"> <li class="fs20 lh30 clrblack"> Clearly defined ownership structure: It specifies roles and responsibilities for family members with and without ownership stakes. </li> <li class="fs20 lh30 clrblack"> Family council: It provides a structured forum for discussions and decisions on the family's involvement in the business and other matters. </li> <li class="fs20 lh30 clrblack"> Promotes Succession Planning: A well-structured family governance system facilitates the seamless transition of leadership and ownership from one generation to the next, minimizing disruptions and maintaining business continuity. </li> </ul> </div> </div> <div class="col-lg-4 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs25 neuemedium clrblack"> Decision Making and Control: </h3> <ul class="cmp-cont-list"> <li class="fs20 lh30 clrblack"> Formal processes: It defines structures and procedures for business decisions, incorporating perspectives from both family and business considerations. </li> <li class="fs20 lh30 clrblack"> Separation of powers: It ensures distinct lines of authority between family members and management to prevent undue influence. </li> <li class="fs20 lh30 clrblack"> Conflict resolution mechanisms: It enables fair and efficient methods for resolving disputes within the family or between family and management. </li> <li class="fs20 lh30 clrblack"> Safeguards Wealth: By establishing guidelines for wealth management and distribution, family governance safeguards the financial wellbeing of current and future generations, ensuring a legacy. </li> </ul> </div> </div> <div class="col-lg-4 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs25 neuemedium clrblack"> Communication and Transparency: </h3> <ul class="cmp-cont-list"> <li class="fs20 lh30 clrblack"> Open communication channels: It enables regular and transparent communication among family members, management, and stakeholders. </li> <li class="fs20 lh30 clrblack"> Shared values and vision: It defines the family's values and align them with the business's mission and vision. </li> <li class="fs20 lh30 clrblack"> Education and development: It offers training opportunities for family members to comprehend their roles and responsibilities in the business. </li> <li class="fs20 lh30 clrblack"> Enhances Accountability: Transparent communication and defined roles within family governance enhance accountability and mitigate the risks associated with nepotism or favouritism. </li> </ul> </div> </div> </div> </div> </div> </section> <section class="global-family culture-family" style="display:none;"> <div class="container-fluid"> <div class="global-inn"> <div class="row global-fam-row"> <div class="col-lg-3 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs30 neuemedium clrblack"> History & Legacy </h3> <p class="fs20 clrblack lh25"> The values and principles practised by the founding generation through narratives and experiences serve as a guide for next generations. </p> </div> </div> <div class="col-lg-3 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs30 neuemedium clrblack"> Norms and traditions </h3> <p class="fs20 clrblack lh25"> Family traditions, rituals, and customs are repositories of shared values. </p> </div> </div> <div class="col-lg-3 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs30 neuemedium clrblack"> Communication and interaction </h3> <p class="fs20 clrblack lh25"> The way family members communicate and interact with each other shapes their understanding of the family's core values. </p> </div> </div> <div class="col-lg-3 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs30 neuemedium clrblack"> Role models and leadership </h3> <p class="fs20 clrblack lh25"> Family leaders who embody the values and exhibit the relevant behaviour serves as role models for the younger generation. Their actions greatly influence how values are perceived and embraced within the family business. </p> </div> </div> </div> </div> </div> </section>  <section class="session-sec bgskyblue illustration" style="display:none;"> <div class="container-fluid"> <div class="row session-row ">  <div class="col-lg-12 session-grid session-grid-tabb connect-right"> <h2 class="fs50 clrblack neuemedium lh60">Illustrations</h2> <ul class="ul-gridlist"> <li class="fs30 clrblack lh40"> In New Zealand, Barfoot & Thompson, a real estate business for nearly 100 years, now led by the third generation, upholds values of family, community, diversity, and people. </li> <li class="fs30 clrblack lh40"> Brazil's Energisa Group, celebrating its 115th anniversary, is the country's fifth-largest energy distributor, demonstrate the founders' values of safety, innovation, commitment, results, and customer focus. </li> <li class="fs30 clrblack lh40"> In Finland, the family promoters of Aho Group (travel and health care business), emphasize "brave and joyful entrepreneurship, long-term thinking, and sustainability." </li> <li class="fs30 clrblack lh40"> Dutch manufacturing business VDL Groep's core value is "strength through cooperation." </li> <li class="fs20 lh30 clrblack"> Source: EY-Eight lessons from the most successful family enterprises of 2019-20 </li> </ul> </div> </div> </div> </section>  <section class="session-sec" style="display:none;"> <div class="container-fluid"> <div class="row session-row"> <div class="col-lg-6 session-grid value-padding d-flex align-items-center"> <p class="fs30 lh40 popsemibold clrblack spacing-bottom-50 connect-right-alone"> In a family business survey conducted by PWC (2019), Maltese family businesses reported that the values and purpose have framed their company’s vision and are communicated on an ongoing basis to employees. </p>  </div> <div class=" col-lg-6 session-grid">  <p class="fs30 lh40 clrblack spacing-bottom-50"> The values and purpose stemmed from those running or owning the business and have become stronger over the years. </p> <p class="fs30 lh40 clrblack popmediumitalic spacing-bottom-50"> "The Maltese people are characterized by their use of the Maltese language and adherence to Roman Catholicism, they trace their origins to a diverse mix of colonists from Sicily and Calabria who repopulated the Maltese islands." </p> </div> </div> </div> </section>  <section class="session-sec bgskyblue" style="display:none;"> <div class="container-fluid"> <div class="row session-row" style="display:none;"> <div class=" col-lg-6 session-grid connect-left "> <div class="ses-img"> <img src="https://www.pfbi.institute/assets/img/family-business/culture-values/context-bg.svg" class="connectimg img-fluid " alt="connect-img" title="connect-img" /> </div> </div> <div class="col-lg-6 session-grid connect-right text-context"> <p class="fs30 lh40 clrblack"> Mr. Luiz Alexandre Garcia, the third-generation Chairman of Brazil’s Algar Group described it in this way: “Algar Group has operated for 90 years in many different fields and the business has changed a great deal in that time. But the principles, purpose and values of the company have never changed. That’s our primary legacy. It is what has brought the company to its position today and what will carry us into the future.” </p> <p class="fs20 lh30 clrblack"> Source: KPMG- The enduring legacy of business families 2021 </p> </div> </div> <div class="row session-row"> <div class="col-lg-6 session-grid value-padding d-flex align-items-center"> <p class="fs30 lh40 popsemibold clrblack spacing-bottom-50 connect-right-alone"> Mr. Luiz Alexandre Garcia, the third-generation Chairman of Brazil’s Algar Group described it in this way: </p>  </div> <div class=" col-lg-6 session-grid">  <p class="fs30 lh40 clrblack popmediumitalic spacing-bottom-50"> “Algar Group has operated for 90 years in many different fields and the business has changed a great deal in that time. But the principles, purpose and values of the company have never changed. That’s our primary legacy. It is what has brought the company to its position today and what will carry us into the future.” </p> <p class="fs20 lh30 clrblack spacing-bottom-50"> Source: KPMG- The enduring legacy of business families 2021 </p> </div> </div> </div> </section>  <section class="session-sec transfer-sec transfer-sec-governance"> <div class="container-fluid"> <div class="row session-row "> <div class="col-12"> <h2 class="fs50 clrblack text-center neuemedium lh60">Various Family Governance Structures:</h2> </div> <div class="col-lg-6 session-grid connect-right"> <ul class="ul-gridlist"> <li class="fs25 clrblack lh35"> <b>Family Council:</b> A Family Council serves as the central hub for communication and decision-making. Comprising family members from various branches, it fosters dialogue, mediates disputes, and helps align family values with business strategies. </li> <li class="fs25 clrblack lh35"> <b>Family Assembly:</b> This larger forum gathers all family members to share updates, celebrate achievements, and cultivate a sense of belonging to the collective family enterprise. </li> <li class="fs25 clrblack lh35"> <b>Ownership Council:</b> Certain families may choose to form a separate owners forum to discuss and decide upon vital matters pertaining to economic matters and deployment of VC funding for entrepreneurial pursuits of next generation. </li> <li class="fs25 clrblack lh35"> <b>Independent Board of Directors:</b> A board composed primarily of external, independent directors provides professional oversight and guidance on business strategy and performance. This separation of family and business decision-making can enhance transparency, credibility, and accountability. Family members can participate on the board in smaller numbers or advisory roles to ensure alignment with family values and interests. </li> <li class="fs25 lh35 clrblack"> <b>Professionalized Family Office:</b> A dedicated team of professionals manages the family's wealth, business interests, and legal affairs. This can provide expertise in areas like investment, tax, and legal strategy, particularly valuable for complex multi-generational businesses. </li> </ul> </div> <div class=" col-lg-6 session-grid connect-left "> <div class="ses-img"> <img src="https://www.pfbi.institute/assets/img/family-business/governanace-business/various-family-icon.svg" class="connectimg img-fluid " alt="connect-img" title="connect-img" /> </div> </div> </div> </div> </section> <section class="session-sec bgskyblue bgskyblue-familyvalues bgskyblue-essential bgskyblue-structuring"> <div class="container-fluid"> <div class="row"> <div class="col-lg-12 session-grid session-grid-tabb connect-right"> <h2 class="fs50 clrblack text-center neuemedium lh60">Structuring Family Governance:</h2> </div> </div>  <div class="context-para"> <p class="fs30 text-center lh40 clrblack"> Implementing a comprehensive family governance structure involves a systematic approach: </p> </div> <div class="global-inn"> <div class="row global-fam-row"> <div class="col-lg-3 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs30 neuemedium clrblack"> Assess </h3> <p class="fs20 clrblack lh25"> Evaluate the family's needs, values, and goals to tailor the governance structure accordingly. </p> </div> </div> <div class="col-lg-3 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs30 neuemedium clrblack"> Design </h3> <p class="fs20 clrblack lh25"> Develop a clear framework with roles, responsibilities, and communication protocols, aligning them with the family's vision. </p> </div> </div> <div class="col-lg-3 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs30 neuemedium clrblack"> Educate </h3> <p class="fs20 clrblack lh25"> Provide ongoing education to family members about the significance of governance, their roles, and the business itself. </p> </div> </div> <div class="col-lg-3 global-fam-grid"> <div class="global-fam-inn"> <h3 class="fs30 neuemedium clrblack"> Engage </h3> <p class="fs20 clrblack lh25"> Encourage active participation and open dialogue among family members through regular meetings and forums. </p> </div> </div> </div> </div> <div class="context-para"> <p class="fs30 text-center lh40 clrblack spacing-bottom-30"> Flexibility and adaptability are key, allowing the structure to evolve alongside the family and business. The best governance structure for a family business will depend on the specific needs, dynamics, and aspirations of the family. Careful consideration of factors like size, complexity, and family culture is vital for establishing a framework that fosters both family harmony and business success. </p> </div> </div> </section> </div><footer class="theme_footer_pfbi"> <div class="social-feed-footer"> <div class="container-fluid"> <ul class="nav footer_feed spacing-bottom-50"> <li><a href="https://www.youtube.com/user/PFBIInstitute" target="_blank"><img src="https://www.pfbi.institute/assets/img/icons/youtube.svg" class="img-fluid" alt="youtube" title="youtube"></a> </li> <li><a href="https://www.linkedin.com/company/pfbi" target="_blank"><img src="https://www.pfbi.institute/assets/img/icons/linkedin.svg" class="img-fluid" alt="linkedin" title="linkedin"></a> </li> <li><a href="https://www.facebook.com/PFBI.Institute/" target="_blank"><img src="https://www.pfbi.institute/assets/img/icons/facebook.svg" class="img-fluid" alt="facebook" title="facebook"></a> </li> <li><a href="https://www.instagram.com/pfbi.institute/" target="_blank"><img src="https://www.pfbi.institute/assets/img/icons/instagram.svg" class="img-fluid" alt="instagram" title="instagram"></a></li> <li><a href="https://twitter.com/PFBIInstitute" target="_blank"><img src="https://www.pfbi.institute/assets/img/icons/new-twitter.svg" class="img-fluid" alt="twitter" title="twitter"></a> </li> </ul> </div> </div> <div class="footer-context"> <div class="container-fluid"> <ul class="nav footer_menu spacing-bottom-30 "> <li><a href="https://www.pfbi.institute/spotlight"> Spotlight</a></li> <li><a href="https://www.pfbi.institute/knowledge-centre"> Knowledge Centre</a></li> <li><a href="https://www.pfbi.institute/pfbi-story"> The PFBI Story </a></li> <li><a href="https://www.pfbi.institute/contact"> Get in Touch</a></li> </ul> <div class="row align-items-center justify-content-center"> <div class="col-auto"> <p class="text-center poplight fs20 lh30"> © 2025 Parampara Family Business Insitute. 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Family Business: Governance in Family Business