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Who Belongs on a Family Council

Dear Advisor,

Who belongs on a family council?

As our family has grown over the years (we currently have G2 and G3 involved in the business), we have decided to set up a family council for the first time in order to better manage the family/business overlap. However, we have run into a problem before we can even start, as there is a serious disagreement among family members about how, and if, to include spouses. Some members of our family want spouses to be included in all meetings and to have a vote for decisions, while others (some of whom are single or whose parents’ went through a divorce) believe strongly that we should include only blood descendents. Help! This is tearing us apart before we even get the family structures in place that should be there to help us navigate such issues.

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All enterprising families wrestle with this question at one time or another. It is a natural outgrowth of family members wanting to be inclusive on some levels but exclusive on others.
 
In our experience, you and your family are beginning with the wrong question – namely, who should be on our family council? A better starting point may be this: What are we trying to accomplish? What are our short-term goals to better manage our family/business overlap? Further, do we have clarity on the role and responsibility of the family council? How does this differ from, say, a family meeting? (See Family Business Leadership Series book “Family Meetings: How to Build a Stronger Family and a Stronger Business,” as well as the audio CD “Governance Councils in the Family Enterprise.” Both are available at our web site: www.thefbcg.com.)
 
Family meetings are often a more than adequate venue to educate the family and discuss challenges facing the family. But when there are too many family members and shareholders, having everyone in the same room at the same time to discuss a specific agenda proves inefficient. Typically, this is when a formal governance structure, such as a family council, is invoked. A family council can serve to resolve issues more quickly, but in practically all cases, the elected officers of the smaller family council are still expected to report back to, and be accountable to, the family at large.
 
Many business-owning families are drawn to the ideas of family meetings and family councils, as they can serves as effective venues to educate and develop current and future family members with regard to the enterprise they own together. The difficulty arises, quite understandably, when the time comes to design the invitation list. Should spouses attend? Are spouses not part of our family?
 
Family councils are usually a smaller representative group, whereas family meetings generally include all members of the family, including spouses, partners and children. The agenda can be crafted in a way that carves out time for the shareholders without children and spouses.
 
Your family may do better to hold a family meeting to discuss and define the term “family.” Once agreed upon, try to tackle this next question: What are the responsibilities we all – as family – have to the family and to the enterprise? We believe that the answer to this second question will make deciding whom to include on a family council self-evident.
 

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