Family Business: Governance

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Framework Primer
Family Business:
Governance
Presentation created by
Share-
holders'
Assembly
Family
Assembly
Share-
holders‘
Council
Holding
Board
Foundation
Investment
Office
Family
Council
1
2
3
4
5
6
7

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Contents
Overview
Governance Model
Core Elements of Governance
Templates
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A good Governance framework provides a map to the future of Family
Businesses
Presentation Overview
Building a Governance Model is an emotional minefield but healthy Family Businesses can
deal with that reality and build long-term value in the process.
Governance of Family Businesses must include the concerns of the numerous and diverse third generation. Establishing a
set of councils and boards is essential in addressing critical transition issues. With a Governance Model, Family
Businesses can address acute short-term challenges and prepare the business for subsequent generations.
Kickstarting the change process is sometimes the most difficult part of the sibling-to-cousin transition. Ideally, aunts and
uncles call the cousins together and say, “What has worked so well for us and makes us proud of what we have achieved
will not work for you. You must go out and find your own model.” When siblings are wise enough to give such a mandate,
the cousin generation has a greater chance of enlisting support from the earlier generation and being successful.
However, many sibling groups avoid or delay dealing with the issue, leaving it up to the cousins to organize themselves. In
most cases, highly educated and qualified cousins leave the business once they find the barriers to establishing
Governance Structures so high.
This Presentation provides a good understanding of the 7 Core Elements of the Governance Model. The 7 core elements
are the Family Business’ guideposts to structuring an effective Governance Model.
Given the way that Family Businesses tend to become more complex over time, it is often up to the third-generation owners
to redefine the role of the family and set the direction of the business. Setting up an effective Governance Model puts the
Family Business on a new trajectory for success.
This deck also includes slide templates for you to use in your own business presentations.
1 Shareholders’ Assembly
2 Family Assembly
3 Shareholders’ Council
4 Holding Board
5 Family Council
6 Investment Office
7 Foundation

A Family Business is an engine for Change and Innovation, requiring a
longer horizon of execution
Family Business – How They Differ
A Family Business is a classic example of “patient capital” and an invaluable
counterbalance to the short-termism of many non-family businesses.
Family businesses are unshackled from the quarter-to-quarter pressures of non-family firms.
Family firms can
invest for the long
term. They allow
good ideas the time
needed to prove
themselves.
Source: The Missing Middle, PwC, 2016
Stronger cultures and values
Measure success differently – more
than just profit and growth
Decision making is faster/more
streamlined
More entrepreneurial
Take a longer term approach to
decision making
Need to work harder to recruit/retain
top talent
Take more risks
Find it harder to access capital 32%
40%
48%
55%
61%
71%
72%
74%74%
72%
71%
61%
55%
48%
40%
32%

Contents
Overview
Governance Model
Templates

Share-
holders'
Assembly
A comprehensive Governance Structure can help resolve the tensions
that arise in the multigenerational Family Business
Governance Model – 7 Core Elements
The journey is never easy but having a sense of direction certainly helps.
Second-generation companies whose transition is on the horizon must give due consideration to a sound
Governance Model.
Putting the
fundamentals in
place makes the
transition from
generation to
generation a
systematic
challenge. Good
Governance, in
effect, provides a
map to the future.
There are 7 core elements that comprise the Governance Model for a Family Business.
Source: Building a House That Lasts, McKinsey, 2014
Family
Assembly
Share-
holders‘
Council
Holding
Board
Foundation
Investment
Office
Family
Council
1
2
3
4
5
6
7

A pragmatic Governance Model must include the concerns of the
numerous and diverse third generation
Governance Model – Structure
When family firms reach a certain size and complexity – of both family and business – the
adoption of a Governance Structure becomes crucial.
Establishing a set of councils and boards to address critical transition issues is essential.
This allows
Family
Businesses to
address acute
short-term
challenges
and prepare
the business
for
subsequent
generations.
Family assembly Shareholder’s assembly
Shareholder’s council
Family council Holding board
Corporate CEO/center
Business-
unit board
Business-
unit board
Business-
unit CEO
Investment office Family foundation
Education
Policies
Events and
communication
Family services
Real estate
Private equity-
type
investments
Liquid financial
investments
Business-
unit CEO

Kickstarting the change process is the most difficult part of the sibling-to-
cousins transition
Governance Model – Critical Process Steps
While a Governance process takes time, a more deliberate pace makes it possible to gain
consensus and educate interested individuals along the way.
Cases exist where highly educated and qualified cousins find the barriers to establishing Governance structures
so high that they leave the business.
There are 2 essential steps Family Businesses can take on to keep the Governance up and running.
Undertaking the Governance Process require putting in place
essential elements to make Family Business move forward.
Dividing work into separate projects.
Assigning each capable member to each task or project.
Establishment of a mandate, a deadline, and a well-
defined way to communicate with the broader family.
Creation of a steering committee to monitor overall effort.
Conducting periodic evaluation of work in progress.
1
2
3
4
5
Build the
Governance
structure.
2
Develop a clear
idea both of the
status quo and
of the desired
destination.
1
Identify key gaps in
the existing structure.
Set goals.
Decide and prioritize
what to do first.
Develop a
Governance blueprint
with the second
generation.

Contents
Overview
Governance Model
Templates

Large family groups are governed by both a Shareholders’
Assembly and a Family Assembly
Shareholders’ and Family Assemblies – Overview
Shareholders’ and Family Assembly ensure cohesiveness within the organization
diversified it may be.
CORE
ELEMENT
Shareholders’
Assembly
FUNCTIONS
Deal with classical legal
functions.
CORE
ELEMENT
Family
Assembly
FUNCTIONS
Foster family unity
amongst spouses and
the next generation.
Instill family values in the
next generation and
raise responsible
shareholders.
Align all generations
within the family and
makes them an integral
part of the process.
FREQUENCY OF MEETING
Once a year at a weekend
event with both a social and a
professional agenda
CORE DECISION AREAS
Overall direction or vision of
the company
Ownership structure
Large investments
Sales of business
Dividend policy

A Shareholders’ Council is the most important link to the
company
Shareholders’ Council – Overview
The Shareholders’ Council, being the guardian of the company and the family shareholder
group, sits at the center of the entire Governance system.
CORE ELEMENT Shareholders’ Council FREQUENCY OF MEETING
Twice a year meeting is sufficient
once the council is up and running.
CORE DECISION AREAS
Dividends
Exit and liquidity policies
Stay private or whether and how
much equity to float
Signs off all major investments and
divestitures
Approves appointment of CEO and
members of the board
FUNCTIONS
Regulate the relationships among family shareholders and
between shareholders and the business.
Represents the larger group of shareholders and makes
fundamental decisions on its behalf.
Serves as the intermediary between the family and shareholders’
assemblies and the board.
Promotes unity and takes on the hard work of exposing and
overcoming divisiveness.
Serves as a representative body of shareholders, relieving the
pressure to have too many family members on the Holding
Board.
Concentrates on long-term matters of importance to
shareholders, including culture, values, risk orientation, and
overall strategy.
Informs the Holding Board of its decision.

The Holding Board is the link between management and the
Shareholders’ Council
Holding Board – Overview
Board composition should reflect the diversity of the group’s holdings, whether related
to function, industry, or geography.
CORE ELEMENT Holding Board FREQUENCY OF MEETING
4 to 8 times a year
CORE DECISION AREAS
Mergers and Acquisitions
Divestitures
FUNCTIONS
Responsible for the overall performance of the group and its
CEO.
Have an overview of the entire portfolio and the last word on
major issues.
Takes charge of allocating capital.
Influences how decisions are made and represented.

It is the Family Council’s mission to transfer values and traditions
across generations
Family Council – Overview
The family council must not exceed 10 members to preserve effective decision making.
CORE ELEMENT Family Council FREQUENCY OF MEETING
In the beginning: every other month
Once it has stabilized: 1 to 4 times
per year depending on size of
family and activities
CORE DECISION AREAS
Conduct of regular seminars to
educate young members.
Organization of task force to
formulate policy to facilitate entry of
new family members.
Conduct of regular family activities
to promote bonding.
FUNCTIONS
Serves as an important communications bridge between the
business and individual family members.
Devises policies regarding family members’ behavior vis-à-
vis the business, such as employment, use of the family
name, and conflict of interest.
Encourages cohesion

The Investment Office manages the family’s assets other than
the core business
Investment Office – Overview
An Investment Office can either be in-house with a committee that oversees asset
managers or outsourced to an independent entity.
CORE ELEMENT Investment Office FREQUENCY OF MEETING
As necessary
CORE DECISION AREAS
Estate planning
Tax advice
Financial reporting
Concierge services
FUNCTIONS
Helps reduce tension.
Provides a sense of security to those distant from the
business that their interests are being considered.
Allows families to separate value creation and wealth
preservation.

The Foundation is responsible for the family’s social and
charitable investments
Foundation – Overview
Foundations are essential in keeping families committed to the business.
CORE ELEMENT Foundation FREQUENCY OF MEETING
Once a month or depending on
projects being undertaken
CORE DECISION AREAS
Social and charitable investments
FUNCTIONS
Nurture consensus from generation to generation on the
direction of their philanthropic activities
Create a discretionary spending budget to allow family
members to finance projects that interest them.
Provide opportunities to serve on the board or staff of the
foundation
Provide opportunities for family members to participate
directly in philanthropic projects through onsite visits and
volunteering scheme. This is a powerful way to engage the
next generation early on.

Contents
Overview
Governance Model
Templates

Insert headline
Family Business Governance Model (7 Core Elements) – TEMPLATE
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Share-
holders'
Assembly
Family
Assembly
Share-
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Council
Holding
Board
Foundation
Investment
Office
Family
Council
1
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3
4
5
6
7

Insert headline
Family Business Governance Model (7 Core Elements) – TEMPLATE ALTERNATE
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Shareholders'
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Family
Assembly
Shareholders'
Council
Family
Council
Investment
Office
Holding
Board
Foundation

Family Business Governance Model (7 Core Elements) – TEMPLATE ALTERNATE
Insert bumper.
• Insert filler text, filler text,
filler text, filler text, filler
text.
text.
text.
Share-holders' Assembly1
Family Assembly 2
Share-holders‘ Council3
Holding Board 4
Family Council5
Investment Office 6
Foundation7
Insert headline

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Flevy (www.flevy.com) is the marketplace
for premium documents. These
documents can range from Business
Frameworks to Financial Models to
PowerPoint Templates.
Flevy was founded under the principle that
companies waste a lot of time and money
recreating the same foundational business
documents. Our vision is for Flevy to
become a comprehensive knowledge base
of business documents. All organizations,
from startups to large enterprises, can use
Flevy— whether it's to jumpstart projects, to
find reference or comparison materials, or
just to learn.
Contact Us
Please contact us with any questions you may have
about our company.
• General Inquiries
support@flevy.com
• Media/PR
press@flevy.com
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