Family charter

Family charter refers to a written agreement between family members regarding business-related issues such as: ownership, voting/control and employment. A family charter may also be referred to as a family mission statement or a family constitution.




Components of a family charter

A family charter can address issues such as:
  • what is required of family members to enter and remain in the business
  • what is required for family members to become part of management
  • who is eligible for stock options. (Coates, 2006).
A family charter may also include a family code of conduct.

Benefits of a family charter

A written family charter can minimize family conflict by clearly laying out the "rules of the road" -- before specific problems arise.

Family businesses generally operate in a very informal manner -- with family members entering the business and interacting with each other with unstated expectations of each other and of the business. Clearly describing expectations regarding roles, responsibilities, ownership rights and decision-making can help to reduce the likelihood of disappointment and conflict. (Schoeffler & Oak, 2007).

Resistance to developing a family charter

Some family members may resist the development of a family charter because it can limit the influence of family members who already have a strong position in the family (Coates, 2006).

References


Further reading and external links



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Categories: Family governance