Governance : Why is it so hard to define?

 

Amy Schuman
Amy Schuman

This week I’ll be speaking to a group of family business owners in the Milwaukee area, and the topic they chose was “Governance”.  When they requested that topic, first I felt excitement – but it was soon followed by a bit of dread.

I felt excited because governance is such an essential component in family enterprise strength and continuity. I also felt dread because, even after years of helping families reap the benefits of governance structures like Family Councils and Boards of Directors, I still find it difficult to come up with a simple, clear definition of governance.

Like most people, my mind immediately seizes upon Boards of Directors as the prime example of governance. Indeed, a web search on the term ‘governance’ quickly yielded the following:

That relatively simple (!) definition may work for public companies, but, the complexities of family enterprise can require more of a multi-faceted approach to governance.

For example, as families become larger and more complex, they also appreciate the benefits of more formal family governance, most often in the form of a Family Council.

Families that pursue their own foundations and other philanthropic efforts come to appreciate the benefits of strong governance in the form of Foundation Boards.

As families move into the cousin stage – and beyond – they seek governance structures to serve their larger, more dispersed ownership group. Often called Ownership Councils, these bodies provide a structure for balanced participation and oversight on behalf of shareholders.

Families with Family Offices also find significant benefits from the oversight and expertise of an objective governance group of some kind.

Given all this complexity – what’s a good, simple definition of family business governance? To inspire you, I will go out on a limb and offer my own working definition – as follows:

  • Family enterprise governance provides an established set of systems and structures that ensure sound and fair actions and decisions, often by a small number of well-qualified people on behalf of a larger number of stakeholders.

I know this definition has plenty of room for improvement – what’s missing? What’s your current working definition of ‘family enterprise governance’  – and how does it help you get the results you seek?

Forgiveness is a selfish act

Drew Mendoza

I don’t know who first coined the expression but it rings true for me.

In my work with enterprising families I am astounded at the frequency with which past hurts have a tendency to continue to have a seat at the family table; sometimes long after the people involved are deceased .  Maybe it is because family firms tend to have great institutional memories.   Whatever the reason, forgiveness can be elusive in family firms.  And, more often than not, the thing that got in the way – the thoughtless act, the poor judgment, the words that can never be taken back – was probably not the root cause, just the straw.  The complexities and paradoxes inherent in multi-generational family business certainly explain the presence of the hurts.

And, sometimes it’s not a she, him or them we will not forgive.  Sometimes, and this I do see more often in founding entrepreneurs, it is ourselves.  Imagine this scenario:  An entrepreneur in the winter of her life.  She built a company from nothing that today feeds, clothes and insures almost a thousand employees and their families.  They have stopped outside competitors in their tracks from entering their markets.  Members of the community speak often of her generosity and what a great company it is to work for.  And yet – this same entrepreneur breaks down to tears because she listened to the wrong attorney and made an irrevocable gift of stock to someone she now wishes she hadn’t.  And, as a result, she has saddled the next generation, her children, with an owner who for all intents and purposes, should not have a seat at the table.  “I’ve spent my life to build this company and with that one stroke of the pen – I ruined everything!”

In 2005 the Journal of Personality reported research that demonstrated that those that forgive have an increase in cognitive flexibility, overall life satisfaction, positive emotions, and measurable decreases in anger, anxiety and depression.   The authors write that forgiveness increases self-esteem in the forgiver, personal hope, lifts the weight of psychological depression and reduces anxiety. 

Entrepreneurs are usually as hard on themselves as they are on others and, when it comes to self-forgiveness, I find them to be hardest of all which is ironic because business-owning families are, as a general rule, generous and forgiving; sometimes to a fault.

Speaking for myself, when I’m able to get over a personal hurt by forgiving the offending party – or forgiving myself for some stupidity, my back feels better.  The more upset I am, the more likely my back is going to go out. 

The funny thing about this particular blog posting?  A few days ago my 19 year old daughter came home with a tattoo on her shoulder:  Memento te esse morte (Remember, you are mortal).  I’m not sure how she managed to get to the tattoo parlor (she never has gas money let alone tattoo money).  Talk about irony!

Welcome to the new FBCG Blog

Stephanie Brun de Pontet
Stephanie Brun de Pontet

Welcome to FBCG’s new more active (and hopefully interactive) Blog. As we transition from our monthly newsletter, to a mix of new media: sending articles to all our contacts by email, developing comprehensive webinars to dive deep on a topic, and reaching out to a broader public via this blog space – we hope to touch a wider audience, and engage folks in conversation about all things family business. In fact, in our experience a lot of issues in family business are more threatening to the business or the family when ‘things are left unsaid’ than when we grab the bull by the horns and broach the topic as adults. We hope these short communications may serve as a vehicle to facilitate ‘starting an important conversation’ for a number of our readers. In addition, we hope to provide you with fun facts, tips, or advice that can help you navigate the complex world that is the family-business overlap. As with our earlier blog, we will certainly address topics relating to education, but we will also speak to issues on governance, family meetings, family relationships, best business practices, and many others. In fact, we would welcome your input on topics you’d like to see covered here. Also, if you have a general question on which you’d like our thoughts – please feel free to post this and we will share our thoughts and offer some advice as appropriate. We genuinely hope you’ll join the conversation and help us make this a great resource for all folks involved in family enterprises.