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Family Council

Provided by IFC Corporate Governance


Definition: Also called “Family Supervisory Board”, “Inner Council” and “Family Executive Committee”, the family council is a working governing body that is elected by the Family Assembly among its members to deliberate on family business issues. The council is usually established once the family reaches a critical size, i.e. more than 30 members. In this situation, it becomes very difficult for the family assembly to have meaningful discussions and make prompt and qualified decisions. The family council is established at this point as a representative governance body for the family assembly in coordinating the interests of the family members in their business.

Purpose: The composition, structure and functioning of family councils differ from one family business to another. However, the duties of a typical family council would include:[1]

- Being the primary link between the family, the board, and senior management.

- Suggesting and discussing names of candidates for board membership.

- Drafting and revising family position papers on its vision, mission, and values.

- Drafting and revising family policies such as family employment, compensation, and family shareholding policies.

- Dealing with other important matters to the family.

Membership: Just like any well-functioning committee, the family council should have a manageable size, i.e. from 5 to 9 members. These members are usually elected by the family assembly by taking into consideration their qualifications and availability to perform the council’s duties. Some families prefer to impose certain restrictions regarding membership in the council such as age limits and experience requirements, and non-participation of in-laws and family members that also serve on the board or are part of the company’s senior management. One good practice is to set limited terms for the council’s membership so as to allow more family members to be part of the council and create a feeling of fairness and equal opportunities within the family.

The family council should have a chairman, who is also appointed by the family assembly. The chairman leads the work of the council and is the main contact person for the family. It is also a good practice to appoint a secretary of the council that keeps minutes of meetings and makes them available to the family. Depending on the complexity of issues facing the family, the council would meet from 2 to 6 times per year. Decisions are usually approved by majority votes of the council’s members.

The following table outlines the major differences between the family meeting, family assembly, and family council:

 

Family Meeting

Family Assembly

Family Council

 

Stage

Founder(s) 

Sibling Partnership/

Cousin Confederation 

Sibling Partnership/

Cousin Confederation

 

Status

Usually informal 

Formal 

Formal

 

Membership

Usually open to all family members. Additional membership criteria might be set by the founder(s). 

Usually open to all family members. Additional membership criteria might be set by the family.

 

Family members elected by the family assembly. Selection criteria defined by the family.

Size

Small size since family still at founder(s) stage. Usually 6- 12 family members.

Depends on the size of the family and membership criteria.

Depends on criteria set up for the membership.

Ideally 5- 9 members.

Number of Meetings

Depends on the stage of the business’ development. When the business is growing fast, can be as frequent as once a week.

 

1- 2 times a year. 

2- 6 times a year.

Main Activities

- Communication of family values and vision.

- Discussion and generation of new business ideas.

- Preparation of the next business leader(s).

- Discussion and communication of ideas, disagreements, and vision.

- Approval of major family related policies and procedures.

- Education of family members on business issues.

- Election of family council and other committees’ members.

 

- Conflict resolution.

- Development of the major family related policies and procedures.

- Planning.

- Education.

- Coordination of the work with the management and the board and balancing the business and the family.



[1] Ivan Lansberg, Succeeding Generations: Realizing the Dream of Families in Business (Harvard Business School Press, 1999); Fred Neubauer and Alden G.Lank, The Family Business: its Governance for Sustainability (Routledge New York, 1998).

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