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Governance

One of the most important steps in managing a family enterprise is to establish a governance framework. Not only will this satisfy the expectations of all family members, it can also improve business performance.

Why do I need a governance framework?

In business, as in life, families don’t always see eye to eye, particularly if family members have different expectations and ambitions for the business. Family disputes can have a significant impact on a business and endanger its existence.

According to KPMG, there are 10 Rules of Good Governance:

  1. Establish a family council to approve key strategic business decisions, resolve family disputes and decide how to distribute the wealth generated by the business.
  2. Appoint an effective board, including independent directors.
  3. Define the respective roles of board and management and appoint the best person available as CEO.
  4. Conduct board meetings constructively, making them business focused, not family focused.
  5. Make decisions methodically, covering all the relevant issues.
  6. Develop a clarity of vision that leads to a proper strategic planning process.
  7. Understand and manage your business risks.
  8. Look for the ‘bad news’, ensuring that problems and irregularities are not overlooked or ignored.
  9. Monitor and evaluate business performance, highlighting key trends and issues.
  10. Create an effective assurance framework embracing management controls and internal and external audits.

For more information, contact Family Business Australia on 1800 249 357 or via email at info@fambiz.org.au. Find out about the FBA Family Business Directors Course here.

Family constitution

What is a family constitution?

A family constitution (sometimes called a family creed, family charter or family agreement) is a document that includes the following elements:

  • the values and principles that underpin the conduct of the business;
  • the strategic objectives of the business; and
  • the way in which the family will make decisions that affect the ownership and management of the business.

Why does my family enterprise need one?

A family constitution can help families deal with change, particularly when the business transitions from one generation to the next.

It requires the family to think about important decisions before they have to be made and to agree on important family and business goals.

I need help to develop one, where can I go?

Family Business Australia has accredited advisers that can help you to develop a family constitution.

Use the Family Business Australia tool to find the right adviser to help.

For more information, contact Family Business Australia on 1800 249 357 or via email at info@fambiz.org.au.

You can also talk to other trusted advisors such as a lawyer or accountant about developing a family constitution.

Family council

What is a family council?

A family council is a regular, structured forum or meeting of family members involved, or interested in, a family enterprise. The family usually appoints an independent facilitator to manage the meeting process and to:

  • be the primary link between the family, the board, and senior management;
  • suggest and discuss names of candidates for board membership;
  • draft and revise family position papers on its vision, mission, and values;
  • draft and revise family policies such as family employment, compensation, and family shareholding policies; and
  • deal with other important matters to the family.

Why do I need to establish a family council?

A family council enables a family to maintain a reasonable level of communication regarding important issues that affect them and their family enterprise.

Who can help me to establish a family council?

Family Business Australia has accredited advisers that can provide advice about establishing a family council.

Use the Family Business Australia tool to find the right adviser to help.

For more information, contact Family Business Australia on 1800 249 357 or via email at info@fambiz.org.au.

You can also talk to other trusted advisors such as a lawyer or accountant about establishing a family council.

Board of Directors

Why do I need to establish a Board of Directors?

Establishing a board of directors that includes suitably qualified and independent non-family members is important to professionalise ownership and management responsibilities in the family business and introduce a measure of accountability.

An effective board is an important forum for discussing ideas, planning the future direction of the business, and developing short and long-term survival and success strategies.

If the family does not wish to create a formal board of directors or share decision-making power with them, it might instead consider putting together an advisory board made up of a small group of knowledgeable and experienced professionals.

Where can I get advice about establishing a board of directors?

Family Business Australia has accredited advisers that can provide advice about establishing a board of directors.

Use the Family Business Australia tool to find the right adviser to help.

For more information, contact Family Business Australia on 1800 249 357 or via email at info@fambiz.org.au. Find out about the FBA Family Business Directors Course here.

You can also talk to other trusted advisors such as a lawyer or accountant about establishing a board of directors.