Decisions reserved for the owners
The balance of power that is inherent in the legal structures in a family enterprise does not always match the expectations of an enterprising family.
For example, in a company the shareholders have relatively limited influence over many major decisions and most power is delegated to the board. If each of the shareholders have the same number of shares and are each on the board, the distinction between the respective powers of the board and the owners will not matter. Their system is in perfect equilibrium; whether the decision is taken at a board meeting on the basis of one person one vote, or at a shareholders meeting on the basis of one vote per share, the same people will take the decision and achieve exactly the same result.
A case in point would be 4 shareholders each owning 25% and each on the board. Then consider the shift in the balance of power if one of these shareholders was not on the board or if the shareholdings were split 45%, 10% 16% and 29%. If the prevailing sentiment is that shareholders should control “big” decisions that involve significant risk to their wealth or reputation, it becomes necessary to decide which decisions will be reserved for the owners and how to constitute an Owners’ Assembly as the forum where these reserved decisions will be taken.
FBS has experience of helping families identify the types of decisions to be reserved for owners. This establishes a clear balance of power between the owners and the board, although, since it is impossible to predict every situation that will require decisions to be made, it is impossible to prescribe every decision that should be reserved. The policy needs to be implemented with sound judgement by those in the key governance roles of owner, board member and senior manager based on a sound understanding of the overall governance structures and processes in the family enterprise.
