Family Business Governance

To govern is to rule, control or manage. It can also mean to exercise a directing or restraining influence, to determine or to guide. Govern can refer to guidance which determines how something is done (as in the principles governing a case) or to have a predominating or decisive influence.

Governance then, is a system of control and/or authority, the act of governing. This system helps groups of people determine how they will make decisions and who has authority to make and to implement decisions. Families often have unspoken governance, i.e. everyone knows when to go to mom for a decision and when to go to dad! However, as groups of humans share assets or businesses and have a more complex web of decisions to make, a more formal method of governance needs to be established to assure clarity, fairness and a healthy process of operating ensue.

Thus in our work with family businesses and families of wealth, we help to establish governance that is appropriate to each situation and adds value to the family while preventing a waste of resources. For more detail see the essay on family business governance.

Boards of Directors

As abuse of governance has occurred in recent years, more attention has been paid to corporate governance, such as the recent passage of the Sarbanes-Oxley Act of 2002. This act mandated more independence in those who are governing from those who are managing business and more management accountability to shareholders (and the public) through the board of directors and through certification of financial reports. This has placed a great deal of attention on the effectiveness of boards of directors, in public and private companies. We have always offered services to assess and develop boards of directors as part of our governance/organizational development services. We work with boards of directors to enhance effectiveness. Our assessment includes:

• Clarity of Purpose of the Board
• Clarity of Roles and Boundaries
• Effectiveness of Structure
• Effectiveness of Process
• Board Composition

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