As family businesses grow over time, the number of shareholders across generations tends to increase. In many cases, the majority of family members who own shares do not work for the business. Yet, as family members and shareholders, many want to know what is transpiring at the company. They also have a right to access shareholder information about their ownership interest and the performance of the business. For that reason, communication with family members who do not have a role within the company is key. Many family businesses seek external objective advice from independent parties or family members and create family advisory boards or a board of directors. The benefit of receiving impartial advice not only increases communication between the family shareholders and the company, but also may result in higher productivity and happiness.
We work with family businesses to create communication and governance structures and ask them to consider a number of important questions, including:
- Who decides on the structure of the board of directors? How are directors identified, recruited and approved? How do the board of directors and the family owners interact?
- What consideration have owners given to creating a family council (and perhaps a family assembly) to organize family ownership and to potentially represent the family to the board of directors?
- What is the communications policy that governs what company information is shared within and outside the family?
- Does the family have regular family meetings? Who decides who attends?
- How does the business engage family members who are not employed in the business?