In a previous article, I addressed the importance of creating the right kind of corporate governance for your family. The failure to do so can affect the succession of leadership for multiple generations. When done right, your corporate governance is a guide, a map for how to lead your business based on the practices and values that your family embraces. Drafting this constitution, as I referred previously, requires a mission statement, governing articles, and the ability to clearly define the specifics around these articles/responsibilities.
While those are the fundamental pieces of creating a constitution, many struggle with where to begin when actually creating the document. No two family constitutions are the same, but most share similar foundational elements. The mission and objective of the company are basic elements, as well as a family employment policy and the structure of governing bodies. Below is a brief sample outline of a family constitution based on these shared qualities:
- Company Purpose/Mission
- Summary of what the family constitution addresses
- How the constitution is approved and how it may be amended
Who We Are
- Family and Company Values that everyone adheres to
Our Ultimate Goals/Who We Want to Be
What you hope the business will ultimately accomplish, both in its given industry as well as internally, in terms of becoming the company you’ve always envisioned. For example:
- Externally, you hope to become so well-known as a brand that you no longer need to use your name—everyone around the world recognizes your logo (e.g. Starbucks).
- Internally, you want your company to be the place for top talent in your field to work because of the top-notch environment, benefits, and reputation.
Our Relationship with Clients
What clients can expect from your company and what you expect from your clients. For example:
- We guarantee the best customer service in the industry
- Our customers are excited about new product launches and are dedicated followers on social media
Our Relationship with Shareholders
- What shareholders can expect from your company. For example:
- We plan to enter twenty-five new markets every five years
- How we plan to facilitate shareholder liquidity
Our Relationship with Vendors
- What vendors can expect from your company. For example:
- 100 percent guarantee on consistent quality
Policy for Employing Family Members
- How family members may enter the family business. Typically, these include rules such as following the same application and approval process as non-members, as well as no special privileges and salary expectations that are the same as nonmembers.
Ownership Expectations and Requirements
- Guidelines on controlling ownership and what principles/responsibilities owners are expected to adhere to, as well their limitations on authority and relationship with the company’s governing board(s).
Family Board and Company Board/Board of Directors Expectations and Requirements
- Guidelines for selecting board members, what principles board members should adhere to, responsibilities, relationship with other board members/owners, and limitations on authority
- Guidelines and expectations for meetings
- Including how often each board should meet and how often the family constitution should be reviewed to ensure the business is following agreed-upon best practices
- Purpose and goal of each board
Guidelines for Conflict Resolution
- How internal problems and conflicts can best be resolved on all levels, from team member to owners
- Guidelines for forming a conflict resolution committee, should one be necessary
Clear and specific guidance will help ensure a successful future of leadership and cooperation in your family business. Learn more tips for managing your family business by reading my book, https://ramezbaassiri.com/about-the-book/