Family Charter: Building a Sound Governance Foundation

There are many reasons why setting up a family charter makes sense for your family, but a focus should be to clearly articulate guidelines for the future transfer of wealth while reducing internal family conflict.

Communication, Communication, Communication.

The process is key in formulating the document. No one size fits all, so breaking the topics into chunks to tackle in family meetings by order of importance is more manageable. Don’t try to take an off-the-shelf approach to develop charters or ones that lawyers create. However, a final review by a lawyer might be beneficial. The development of the charter needs to engage the rising generation since they will be the ones impacted by the document. Here is an outline of things to consider.

Key concepts to discuss:

Purpose: Preamble statement describing the intent of this document

The purpose of the preamble statement is to provide a brief overview or introduction that outlines the intent or objectives of the document it precedes. It serves as a foundational statement that sets the context and clarifies the document's focus for the reader.

• How the family would like to make decisions

• Solve problems

• Resolve conflicts

• Govern their enterprise (or foundation)

• Communication vehicle

• Build a Positive Environment for the Family (Family Harmony)

• Shape the Next Generation

• Stewardship/Ownership of the Enterprise

Family History
A "Family History" summary typically entails an overview of one's familial background, including key events, relationships, and ancestral lineage. It may include information about past generations, notable family members, cultural heritage, traditions, and significant experiences that have shaped the family's identity and dynamics over time. The summary aims to capture the essence of the family's narrative and provide insight into its historical context and legacy.

• Family Story

• Enterprise Story

Family Values, Vision & Mission
"Family Values, Vision & Mission" encapsulate the foundational principles, future aspirations, and collective purpose that define a family's identity and direction. Family values serve as guiding beliefs, shaping decisions and behaviors, while the vision articulates the family unit's long-term aspirations and desired outcomes. Complementing this, the mission outlines the specific actions and strategies undertaken to realize these aspirations, reflecting the family's commitment to living out its values and achieving its vision. Together, these elements create a cohesive framework that fosters unity, purpose, and growth within the family, guiding its members toward a shared future grounded in shared values and aspirations.

• Vision Statement

• Mission Statement

• Values Statement

Membership in the Family Council

Membership in the Family Council involves participating in a governing body that represents family members' collective interests and voices. It typically entails roles and responsibilities related to decision-making, communication, and strategic planning concerning family matters such as finances, estate planning, and preserving family values and legacy. Members collaborate to address challenges, foster unity, and promote transparency and accountability within the family. Through active engagement in the Family Council, members contribute to the family enterprise's cohesive functioning and long-term success, ensuring that diverse perspectives are considered and that decisions align with the family's vision and values.

• Age requirement

• Rotation

• Death and Divorce

• Emeritus status

• Core Competency Requirements

• Who is included

• Number of members limit

Leadership Role
A summary of leadership roles involves delineating the responsibilities, traits, and skills required for effective family enterprise leadership. Leadership roles typically encompass guiding, inspiring, and directing individuals or teams toward common goals and objectives. Key aspects include decision-making, communication, delegation, problem-solving, and fostering a positive organizational culture. Leaders often serve as role models, mentors, and visionaries, influencing and empowering others to achieve their full potential. Effective leadership involves adaptability, empathy, integrity, and inspiring trust and collaboration among team members. Through their guidance and vision, leaders play a pivotal role in driving innovation, managing change, and ensuring the family council’s overall success and sustainability.

• Who is eligible to be the leader of the Family Council

• Core Competency Requirements

• Rotation

Chair/President

• Leads Council meetings

• Creates meeting agendas

• Ensures the agenda is followed

• Enforces Council Terms of Reference & Code of Conduct

• Oversees the creation/ review of Terms of Reference & Code of Conduct

• Communicates issues on behalf of the Council to Administration

Vice-Chair/Vice-President

• Supports Chair/President

• Leads meetings when the Chair/President is absent

Secretary

• Take meeting notes/minutes Support the promotion of the Council (i.e. meetings, events)

Committees

• Executive (i.e., Conflict resolution, Charter review)

• Education/Development (i.e., Requirements, Documenting)

• Meeting (i.e. Location, Arrangements, Materials)

• Welcoming (i.e. Onboarding)

• Program (i.e. Speakers, Activities)

• Philanthropy (i.e. Volunteering, Fundraising)

• Grievance (i.e., Disagreements, Charter conflicts)

Responsibility of the Family Council Membership
The responsibility of Family Council membership involves active participation in a governing body tasked with representing and safeguarding the collective interests of family members. Responsibilities typically include engaging in decision-making processes regarding family affairs, financial matters, estate planning, and preserving family values and legacy. Members collaborate to address challenges, promote communication, and foster unity within the family. They contribute to strategic planning efforts, ensuring that decisions align with the family's vision and values. Additionally, members uphold transparency, accountability, and confidentiality within the Family Council, playing a crucial role in maintaining cohesion and ensuring the long-term success and harmony of the family enterprise.

• Meeting attendance

• Code of conduct

• Privacy

• Preparation

Roles and Responsibilities of Inactive Family Members

The roles and responsibilities of inactive family members within a family structure typically involve maintaining awareness of family affairs, respecting decisions made by active family members, and being available for consultation or participation when necessary or requested. Inactive family members may not engage directly in day-to-day operations or decision-making processes but often hold symbolic significance within the family unit. Their role may include preserving family traditions, values, and legacy and supporting and respecting the decisions and efforts of active family members who are more directly involved in managing family affairs. While they may not have formal responsibilities, inactive family members contribute to the cohesion and continuity of the family by maintaining connections, fostering unity, and upholding familial bonds across generations.

Format of Meetings

Meetings have a predefined agenda and schedule with designated roles. The format includes opening/closing remarks, updates, presentations/discussions, and participant engagement. Meetings follow protocols for decision-making, time management, and communication. They may incorporate technology for remote participation and productivity. The aim is to promote transparency, collaboration, and accountability and to foster an environment conducive to productive dialogue and decision-making.

• Annual/Quarterly/Monthly

• Length of time

• Location

• Operating System (i.e. EOS)

Communication

Effective communication involves both sending and receiving messages clearly and accurately to ensure understanding and mutual respect. It encompasses verbal and non-verbal cues, active listening, empathy, and feedback mechanisms to facilitate meaningful interactions and relationships. By promoting transparency, clarity, and collaboration, effective communication fosters trust, engagement, and synergy among individuals and contributes to the success and harmony of relationships and the family.

• Between family council and annual meetings

• Family Newsletter

• Family Facebook page/website

• Commitment to be transparent and respectful in all discussions

Conflict Resolution

Conflict resolution is the process of addressing disputes in a constructive manner. It involves understanding differing perspectives and seeking solutions that satisfy the needs of all parties involved. Effective conflict resolution requires active listening, empathy, and open communication. Strategies may include negotiation, mediation, compromise, or collaborative problem-solving. The goal is to de-escalate tensions, build trust, and strengthen relationships for positive outcomes.

• Consensus/Majority

• Executive or Grievance Committee

• Moderator

Guidelines for Employment in Family Enterprises

Family enterprise employment guidelines provide a framework for managing family members in a business. They address succession planning and emphasize communication, conflict resolution, and professional development to promote transparency, accountability, and sustainability while nurturing respect and collaboration.

• Requirements for employment (education, work experience, age)

• Privileges and responsibilities of family members when it comes to working in the family

business

• Understanding of all forms of compensation (salary, bonus, dividend, stock)

• Conflict and Performance Management

Guidelines for Ownership

Guidelines for family enterprise ownership ensure fairness, transparency, and long-term sustainability. They may address eligibility criteria, governance, succession planning, and conflict resolution. These guidelines promote responsible stewardship of family wealth and assets while maintaining family unity and preserving the enterprise's legacy.

• Access to shares

• Share transfers

• Enterprise Evaluation

• Dividends

• Share Distribution

• Prenup Agreement

Guidelines for Family Development

Family development guidelines foster open communication, mutual respect, and a sense of belonging among family members. They include strategies for promoting shared family goals, traditions, and rituals. Include strategies for educating younger family members about the family's wealth, business, and values. Encourage their involvement in discussions and decisions. They aim to cultivate a supportive and cohesive family culture that promotes resilience, unity, and well-being across generations.

• General Development

• Family Business Basics

• Governance

• Family Legacy

• Next Generation

• Philanthropy

• Succession

Succession Planning

Succession planning is the process of identifying and preparing successors to take over leadership roles in a family-owned business. This involves assessing potential successors and outlining timelines, responsibilities, and developmental opportunities. Succession plans also address governance structures, ownership transitions, and contingency measures to ensure a smooth and sustainable leadership transition.

• Preparing Timeframe (i.e. 3-5 years ahead)

• Who is involved (i.e. Board of Directors)

• List of potential candidates

• Establish a timeframe for review (i.e. annually)

• Develop and agree on a comprehensive set of selection criteria

• Formal assessment from multiple sources (i.e. Disc, Devine, Strengthfinders, Meyers Briggs)

• Who interacts with internal candidates

Exit Strategy

An exit strategy is a plan for exiting or divesting from an enterprise. Exit strategies may involve selling the enterprise, transferring ownership, merging with another entity, or liquidating assets. They also address legal, tax, and regulatory considerations to ensure a smooth transition.

• Family Buy/Sell Agreement

Amendments

Amendments to a document involve making changes, revisions, or additions to its content. The process usually entails reviewing the existing text, identifying areas requiring amendment, and documenting the changes. It may involve collaboration, legal review, and approval processes to ensure accuracy, consistency, and compliance with relevant standards or regulations. Amendments aim to improve a document's clarity, effectiveness, and relevance while maintaining its integrity and purpose.

• How to alter this document

Other

By having an "Other" category, the family charter ensures that all important aspects of family governance are adequately addressed, providing clarity, transparency, and consistency in managing the family's affairs and relationships.

• Have room to discuss other items of importance to the family

Remember, this is a marathon, not a sprint. Take time to hash out each area with the next generation to vet an issue fully. As family members are added, consider their feedback. There will always be a topic not initially addressed, so allow for addendums to the document. Enjoy the journey!