Family business councils are important for many reasons, including discussing the future of the business, developing the vision for that future, discussing the central values of the family, discussing how such values relate to the guiding principles of the operation of the business, how to handle the wealth of the family business and how to bring the next generation into the business.
Family councils will help your family business determine where the business wants to go, who can help it grow and how the family business can get there. For succession, how does your family business bring children into the business? Does the founder want to work forever? How should you take care of family members both in and out of the business? That is, what is the responsibility to working family members in the business and what is fair? (Equal may not be fair, and fair may not be equal.)
Family business councils help your family business grow. We recommend that family business council meetings be held three to four times each year. Note that these meetings are different from advisory board and board of trustee meetings.
Who should attend these councils?
- The working generation — all family members who are working in the business.
- The decision-makers.
- Spouses — this helps avoid the whispers. They should be included at least once per year for an overall financial review and discussion of upcoming issues and general state of the business. There should never be any surprises!
- Children — once per year at age 13 and older at year end to discuss philanthropy efforts. A good way to get kids to engage in philanthropy is to designate a dollar amount to each child and then allow them to pick a charity of their choice. Some councils double the amount of money if the child volunteers at the charitable organization.
What are some structural items to consider?
- Someone needs to take notes.
- What are the planned meeting sessions versus other times just to get together to hang out as a family.
- If the council is a retreat, does the company pay for it?
- Councils should bring family together to celebrate family and the business.
- Keep a history of the business. A written history is important.
- Don’t forget to discuss the future of the business, such as:
- Short term.
- Life events.
It’s a good idea to include a facilitator, which can be one person with family owned business experience. This is particularly helpful when the discussion is focused on succession planning, including complications involved with the founder “retiring.”
Please remember, however, that this is not a business meeting but a family meeting whose main purpose is to facilitate communication and information exchange and to share plans for the future of the business.
How should you handle the spouse and non-“in the business” family members meeting?
This meeting should be separate and include business owners who do not work in the business. I call this the “Leaky Roof” meeting as it is a way to discuss issues faced by the business that will require financial attention and may therefore lead to reduced dividend or distribution payouts. Again, there should be no surprises and these meetings help head off disagreements between those family members who work in the business and those who have only a financial stake in the family business.
Until next time,
Bea Wolper is president of the law firm of Emens & Wolper Law Firm, where her practice focuses on succession planning, estate planning, oil and gas law, contracts and the buying and selling of assets and businesses, with an emphasis on family-owned businesses. She is also the co-founder of the Conway Center for Family Business.