Family council or family board?

The board governs the business

The board of the operating company is answerable to shareholders. Its job is the performance of the business. The board should contain people qualified to hold executives to account. Some of those people may be family members. Being a family member is not, by itself, a qualification.

The family council governs the family

The family council is answerable to the family. Its job is everything the board should not be discussing: education, employment policy, dividends viewed from the family's side, the constitution, the next generation and the arguments. This is where a shareholder who has no role in the business can be heard without dragging their grievance into a board meeting.

Why the distinction matters

When the two are merged, one of two things happens.

The business conversation crowds out the family conversation, because it is urgent and has numbers attached. Family matters are pushed to the end of the agenda and eventually fall from it altogether.

Or the reverse can happen. A board meeting turns into a family argument, in front of non-family directors who did not agree to arbitrate family matters and will not remain long. Matters proceed far more smoothly when the argument over dividend policy is kept in the forum built to hold it.

Build a workable solution

McAllen Agency encourages a firm distinction that works for each individual family. These entities should connect, not merge. Every family has a view, and every family needs a rule. A suggested workable arrangement:

• The family council forms the shareholders' view and communicates it to the board through the chair
• The board reports to the family council once or twice a year, in plain language
• One or two people sit in both rooms, so that nothing is lost between them
• The constitution defines which decisions belong where, so that jurisdiction is not argued case by case