Owning a Family Business? Top Governance Best Practices to Lead Compliance

Family-owned businesses form the backbone of many economies, accounting for two-thirds of all companies worldwide. At MBG, we've worked with numerous family enterprises to strengthen their governance structures. Here's what we've learned about implementing effective governance in these unique organizations:

1. Structuring a High-Performance Board
   • Lead Independent Director: Balances family and non-family perspectives
   • Family Council Chair: Liaison between family and board
2. Implementing Rigorous Succession Planning

3. Five-year succession roadmap:

   • Year 1: Identify potential successors (3-5 candidates)
   • Year 2-3: Rotate candidates through key business units
   • Year 4: External executive assessment and 360-degree feedback
   • Year 5: Final selection and transition planning

   Development program for successors:

   • Executive MBA or equivalent
   • External board experience
   • Mentorship by non-family board member
4. Family Employment Policy

5. Entry-level positions:

   • Minimum 1-year internship in the family business
   • Competitive application process against external candidates

   Executive positions:

   • Minimum 5 years external work experience
   • At least 2 years in a management role
   • Assessment center evaluation

   Compensation:

   • Benchmark against industry standards
   • Performance-based bonuses
6. Ownership vs. Management Separation

7. Ownership structure:

   • Voting shares: Limited to family members actively involved in the business
   • Non-voting shares: For passive family shareholders

   Management structure:

   • CEO: Family or non-family based on merit
   • C-Suite: Mix of family and non-family executives
   • Clear reporting lines and decision-making authority documented in governance manual
8. Communication and Transparency Protocols
   • Monthly financial dashboard for all adult family members
   • Quarterly town halls for employees (including Q&A with family leaders)

How MBG Can Help

Our tailored approach includes:

• Two-week on-site diagnostic: Interviews with all key family members and executives
• Custom governance blueprint: Comprehensive report with specific recommendations
• 12-month implementation roadmap: Detailed action plans and milestones
• Quarterly progress reviews: Ensuring accountability and addressing challenges
• Annual governance retreat facilitation: Aligning family and business strategy

Typical client outcomes after 24 months:

• 50% reduction in family disputes
• 30% improvement in strategic decision-making speed
• 40% increase in next-gen engagement in the business
• 25% higher profitability compared to industry peers

Every family business faces unique challenges. Let's schedule a consultation to discuss how we can adapt these best practices to your specific situation, ensuring your family legacy thrives for generations to come.

Contact us today!