What is a Family Charter?
The Family Charter is a good starting point for family business governance. It can set the tone for all future governance discussions and often forms the foundation for all family governance.
A Family Charter will cover the views and attitudes of the business owning family on matters such as
- What are the values of the business owning family?
- Who is family?, i.e. does that include the spouses, step-children, adopted children?
- What is the overall purpose of the business? i.e. wealth generation, employment opportunity for family etc.
- What are the employment policies for family members?
- What experience or qualifications are required to sit on the Board?
- How does the family communicate its needs, views and opinions to the Board in a constructive way?
- How do you deal with conflict?
The process of putting a family charter, or constitution in place should not be one that is rushed or based on an ‘off the shelf’ solution. The process itself can take many months and is based on in depth discussions to reach a consensus as a family on the important issues affecting the family’s interaction with the business. Great care and attention should be paid to this process as it is often the discussions themselves that provide the ‘value’ rather than the final document.
The Family Charter will become a living document and one that is referred back to on a regular basis to ensure that the views of the family continue to be represented by the Charter.
Is a Family Charter legally binding?
In short, no.
However , it should be considered as ‘morally binding’ on the family given that it is something that you have discussed, debated and agreed upon, possibly over a prolonged period of time. There are elements of the Family Charter that may well lead to the introduction of more formal or legally binding documents such as a Shareholders Agreement or a Pre-Nuptial Agreement for example.
The establishment of a Family Charter is something that can can many months, and this should not be seen as a bad thing. For something as important as your family business, it is equally as important to take the right amount of time and care over establishing your Family Charter.
How to get started
Starting the process of implementing a Family Charter can be a challenge, it requires everybody to at least be accepting of the process but ideally actively involved in the process.
It can mean having difficult discussions and some may see it as being introduced to curb their behaviour or their freedom within the family business. In my view, the Family Charter is there to help you as a family to formalise your approach and harness the passion that you have for your business. The discussions may be uncomfortable in places but when you consider what is at stake it is better to have those difficult discussions whilst things are going well than it is to wait until there is some conflict or an issue to solve.
If you are already holding family meetings to discuss the business, it may be that you can raise the idea of a Family Charter at that, presenting it as a positive step to formalise your ambitions as a family. It is also important to understand, as a family, what you are looking to achieve through the introduction of a Family Charter. If it is to deal with a single issue or a particular character within the business, it is perhaps not the best idea to go through months of discussions whilst not really addressing that particular ‘elephant in the room’.
You may require external facilitation to ensure that all the relevant discussions are held and that momentum is maintained toward your desired outcome. They will be able to use their experience of similar discussions with other family businesses to help guide your discussions should they need to.
Avoid ‘Off the Shelf’ Solutions
If you are just going to copy and paste your family name onto someone else’s Family Charter, you may as well not bother. There will be very little value in that and you will be in danger of creating more tension and conflict than simply not having one.
If you would like help in getting started, please do get in touch. I am here to help.
Listen to this episode of The Family Business Podcast to find our more about Family Charters, or you can head over to www.fambizpodcast.com/governance to listen to the entire playlist dedicated to the topic of Family Business Governance.
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Inviting an external consultant into your business and your family is a big step, I appreciate that, and it is not a responsibility I take lightly. The first step in moving forward is for us to have a chat about what you are trying to achieve and how I can help.
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