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Newsletter - Fall 2007
Governance in the Family Business
Michele Lipson, Partner, Tax & Business Services |
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In a family business, there is no shortage of interesting dynamics, particularly as each generation becomes involved in the ownership and management of the business.
Creating good governance procedures is one of the most important steps a family business can take to enhance the likelihood of success for the family and for the business.
Effective governance creates a real
sense of direction and establishes values
and policies for the family to follow. In order
to build trust and teamwork, it is vital that the
family come together to meet as a group.
There are many different models of
governance to follow. Several recommend
setting up a structure that includes:
- A Board of Directors
- A Family Assembly or Family Council; and
- A Family Employment Policy
Generally it is the board that has
outside independent representation in addition
to family members. The board must always
consider what is in the best interest of the
business. A family assembly should meet
at least annually and should include family
members as well as spouses. A family
assembly generally involves education
about the company, often in the form of
presentations by family and non-family
members. The family assembly helps to gain
knowledge, while building trust and teamwork
in the family and the business.
Governance helps the family make
the right decisions at the right time. These
carefully considered decisions further enhance
the chance for a successful business for
many generations.
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