The importance of family governance in today's age is extremely critical. I myself have seen families
drifting apart because of business conflict resulting due to poor set-up of
constitutional rules. I have seen families fighting over compensation,
ownership, inheritance and rights. It is often difficult to reach to a
consensus and the impact is either division of business and/or loss of family
love and relationship. Well the disputes can be settled through mutual
discussions governed by unwritten constitutions, it is prudent to learn about
the importance of family business governance.
One should be able to anticipate the problems
that could arise with newer generations taking up the business which should prompt the business leader to draft and sign a constitution long before the possibility of any tension would emerge. The core of a constitution is in the fact that it is
established in a collaborative fashion rather than dictated by the family
leader. It is important to understand that with next generations
taking control over business the issues like "Who would exercise the
maximum control? How the roles and responsibilities would be defined?,
etc" are bound to arise and it is in the benefit of the business that
these are avoided with the help of tools like constitutions.
Also, the role of board of directors as
an agent is extremely critical to maintain professionalization in a family
business. The formulation of board of directors is hence required to be done
with great sensitivity. The board should not be under the complete control of
the family else the purpose of the formation of the board stands defeated. The
interference from the family have to be minimum for the board. On the other hand,
the board is expected to maintain a balance in terms of accountability,
supervision, and strategy formulation. However the fact is that this perfect
board-family relationship is very difficult to find.
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