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.
As abuse of governance has occurred in recent years, more attention has been paid to corporate governance, such as the 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:
Once an assessment is completed, we work with the family and board to optimize the functioning of the Board.
Governance is also important for the family. While the Board of Directors represents shareholders and provides important oversight and guidance to the business, the family often needs organization as well.
We work with families to determine how best to establish organization, communication and decision making in the family. Often, this takes the form of a “Family Council.” Developing a charter, organizing leadership and structure and facilitating education and communication are important steps in this process.
Do you have questions about family business governance, or wish to discuss how we might be able to assist you? Contact us today!