Family Meetings: Communication Or Governance Tools?
12th April 2016 Carlos Arbesú
Governance of the family business is a complex area and the role of family meetings needs to be clearly understood in the broader context of the family and the business.
Since the beginning of family business literature, family meetings have been considered as a powerful tool for the communication and then unity of the family. Decisions have been understood as relating to the business only, not to the family. The members of the family have to be well-informed but they don't have to make business decisions. Decisions belong to the business governance bodies and not to the family.
That's why authors like John Ward have said that Boards with independent directors and family meetings are the most important developmental tools for families in business. There is an implicit parallelism through which we understand the idea: 'communication is for the family and decisions are for the business'. This idea, although helping to advance the professionalisation of family firms, is not true.
There is communication to promote in the business governance area as there are decisions to make in the family governance arena. The communication of family members is crucial to enhance these family decisions but it is not the end, it is a means to an end.
This over-simplistic approach to the role of family meetings has generated great confusión regarding its different forms. Thus family meetings have been named as family assemblies, family councils, family associations and/or family forums without regarding to the nature of the meeting and its ends. Most of the times authors and consultants refer to all those bodies as integrated by all the members of the family to interchange views and share opinions about the family business.
It is necessary and convenient to clarify concepts and differences among those family bodies:
- Family Forums: for all family members with a particular nature, that of communication.
- Family Assemblies: we refer to them as formal meetings of the whole family members that adhered to certain family rules of governance. It is not a communicational body but a governance one. Relevant decisions could certainly be made.
- Family Associations: we talk about them referring to the members of the family that subscribe to rules of governance, as a family constitution. There could be members of the family that do not suscribe the rules or constitution and then, they not belong to the family association.
- Family Councils: we talk about family council to stress the fact that it is a governance body, not just a fórum to interchange views. When there is a family council the family has governance rules for it to look for. Family councils can include all family members in the first or second generation but tend to be 'representative' by third generation and onward.
When the family has adopted whatever rules of governance, codes or constitutions we refer to those who signed it as the family association. This family assocation could meet as a family assembly and when formally convened to, as a family governance body. This family association could call for a whole family meeting (with spouses or young members) just for communicational and sharing purposes, of which case we should talk about a family forum or just a family meeting.
Family assemblies can, when they get large usually at third generation and beyond, elect some family members to serve its governance purposes by delegation. We refer to this delegated body of governance as a Family Council. This Family Council can have delegated just powers of management and coordination of the Family Assembly goals, or the full power of decision on behalf of it.
The truth is there is a long way ahead to investigate and define more clearly the governance role of those family governance bodies, as well as their coordination with business, wealth or philanthropy governance bodies and decisions.
About the Author - Carlos Arbesú is a world renowned family business consultsant and has founded, and is consultant to various Family Business Chapters or Associations in Spain, Chile and Peru, which are linked to the Family Business Network. In addition, he helped to establish Family Business chairs at the University of Oviedo (Spain), Pontificia Universidad Catolica de Chile (Chile) and PAD Business School (Perú). For more information he can be contacted via his website here