Here are some ways that an advisor could help a family business instill better governance practices:
- Provide guidance. Each new corporation or LLC document should be accompanied by guidance on governance activities that are required and recommended. In the family business context, this may be as simple as outlining whether a board of directors must be appointed, and how. Or, even if a board of directors isn’t legally required, outline some of the benefits of having one. For example, studies have shown that a family business with independent board members may have a better chance of succeeding across generations.
- Outline required and recommended procedures. How often should meetings be held? How are directors and officers to be elected and removed? By making clients aware of the default provisions, it becomes possible to spark conversations about how they actually would want things to run so they can tailor it to their own style.
- Recommend additional resources. There are more than enough books and related resources about corporate boards, shareholder relations and corporate best practices. Rarely are these shared with family businesses until a conflict arises. And, that’s when the underlying governance—whatever it is—will become apparent as one source of the problem. General resources would be helpful.
- Conduct check-ins. Make it a regular practice to have “check-ins” with clients, on at least an annual basis, to review ongoing issues including governance.
- Develop interdisciplinary teams that are appropriate for each stage of a family business. For some, an outside facilitator might be needed to get meetings off the ground. For others, sharing educational resources on an ongoing basis might help clients carry through with best practices.
- Compare with other family businesses. Identify practices that have helped or hindered other families in similar situations.
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