Family and corporate governance: a dynamic balance

The uniqueness of family businesses lies in the interplay between family dynamics and business demands. While this duality can be a source of strength, it may also lead to setbacks if not properly managed. Achieving alignment between family and corporate governance structures is thus essential to unlocking this potential and turning it into a sustainable competitive advantage.

« Achieving alignment between family and corporate governance structures is essential to transforming potential into a sustainable competitive advantage. »
— Sophie Cuendet

Family and corporate governance: two worlds to reconcile

 Family governance focuses on preserving the family’s values, vision, and relationships. It often relies on institutions such as family councils, family assemblies, and a family charter that defines members’ rights and responsibilities.

 On the other hand, corporate governance ensures the professional and effective management of the business. It operates through structures like the board of directors, executive management, and strategic committees, aiming primarily to optimize economic performance and ensure the company’s longevity.

 Although distinct, these two governance frameworks must work in harmony. Misalignment can lead to internal conflicts, inconsistent decision-making, and a weakened overall strategy.

 Pillars of effective alignment

 To avoid such pitfalls, family businesses must implement mechanisms that foster alignment between their family and corporate governance structures. The key levers include:

1. A shared vision and clear ownership strategy

Alignment starts with a shared vision between the family and business leaders. This vision should be formalized, encompassing a long-term ownership strategy, guiding principles, and strategic priorities.

2. Clear separation of roles

Clearly defining the roles and responsibilities of each governance body is critical. The family council can focus on values, succession planning, and integrating younger generations, while the board of directors addresses business strategy, performance, and risk management.

3. Smooth communication

Regular communication between family and corporate governance structures is vital to avoid misunderstandings. Joint meetings, written reports, and mediation sessions in case of disagreements can facilitate this process.

4. A strong relationship of trust between chairs

The relationship between the family council chair and the board chair serves as the primary conduit for alignment. When built on regular and structured communication, mutual respect for roles, and reciprocal trust, this relationship becomes a powerful lever to harmonize family aspirations and strategic imperatives, ensuring sustainable performance.

5. Effective downstream governance

The adoption of professional corporate governance practices is essential. Board effectiveness is key to making well-informed strategic decisions and ensuring optimal risk management, aligning the interests of all stakeholders. Additionally, a strong relationship between the Chair and the CEO will be crucial in establishing deep and lasting business convictions.

« A shared vision and clearly defined roles are the cornerstones of aligning family aspirations with strategic imperatives. »
— Sophie Cuendet

The benefits of successful alignment

 When family businesses align their governance structures, they reap numerous benefits. They become more resilient during crises, as family cohesion strengthens their ability to navigate uncertainty. Successful alignment also fosters innovation and attracts talents. The stability derived from harmonious family relationships allows business leaders to focus on ambitious projects knowing they benefit from the back-up and co-responsibility of a united family.

 Conclusion: a dynamic balance

 The alignment between family and corporate governance is not a fixed state but a dynamic balance requiring constant adjustments. By harmonizing and professionalizing their governance structures, these businesses can overcome the challenges inherent in their dual identity and become models of performance and innovation. It is a daunting challenge but one that matches the unique ambitions and potential of family enterprises.

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