Governance Structure, Policies & Process

Governance — the mechanisms through which owners exert direction, accountability and control in their enterprise — is the primary focus of our work.  While a strong Board of Directors may be necessary for managing a complex family business, that is only one aspect of governance design. A well-functioning governance system includes all of the structures, policies, and processes that build trust among the key stakeholders — the family, the shareholders, the Board and the senior management — and provides effective decision-making for the benefit of the enterprise and its owners.

LGA ON GOVERNANCE DESIGN

Governance Structure

LGA’s work in governance begins with an assessment of the architecture of the Board of Directors, Family Council, and Shareholder Assembly. We help clients understand the fundamental purpose of these three forums, and we assist in customizing each one to fit the evolving needs and requirements of the family and its enterprise.  Then we expand the analysis to explore the range of structures (boards, councils, committees, task forces, trusts and wealth management entities, family offices, holding companies, foundations) that are needed to accomplish governance most effectively.  The plan that emerges from this work considers what organizational and legal forms are most appropriate, who needs to be involved and with what skills and profiles, and the optimal procedures for effective coordination.

Governance Process

If structures are the engine of governance, the oil needed to make them function smoothly is governance process –- no oil, no movement. LGA’s work places tremendous importance on helping families to work effectively within the structures they create.  This includes education on the rights, privileges, and responsibilities of ownership, coaching younger family members on their duties and responsibilities as directors, and helping independent directors understand the unique process in family-owned enterprises.  Often we are directly involved in facilitating meetings of the Board, the Family Council, the Shareholders’ Assembly, and the Family Foundation, in order to help family leaders deal with the common process impediments to governance functioning:  conflict, apathy, personality clashes, aging and diminished capacity, substance abuse, separation and divorce, chronic and traumatic illness, and the eventual strain of “governance fatigue”


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Governance Policies and Protocols

Many enterprise families benefit from articulating their values and compiling their agreements, policies, and governance documents into a comprehensive guidebook for governance.  Following the Continuity Audit, we often help create a family constitution or protocol that compiles all of the key policies, including:

  • Policies for Board participation (such as term limits, compensation, and relationships with management)
  • Policies for ownership transfer and liquidity
  • Policies for employment in the operating companies and career advancement
  • Policies for conflict of interest
  • Policies for philanthropy
  • Policies for family office services and oversight

LGA ON FAMILY CONSTITUTION