Corporate governance and continuity of the family business: a relevant subject

The family business represents a particular case of interest in the field of corporate governance. Family organizations have distinctive characteristics that lead to the need to solve particular challenges.

Family businesses are organizations belonging mainly to one or more members of the same family, which is involved in different areas in decision-making. These companies have management mechanisms that usually go beyond the merely organizational level and involve family decisions and equity decisions. For this reason, family businesses mix decisions that go beyond the usual aspects of economic management, and involve values ​​related to trust, education and family culture.

Family businesses have traits that give them strength. Due to their history, they are usually strongly linked to personal values ​​and produce a strong personal involvement. However, sometimes personal management supersedes institutional arrangements, so that the organization can become highly dependent on the leadership of some prominent member of the family, usually the founder.

Unfortunately, this can create imbalances and lead to tensions in decision-making, but more importantly, it can lead to generational transition issues that could threaten the continuity of the business. Unfortunately, the survival conditions of family businesses are more adverse than for other types of organizations, in such a way that a significant percentage of them is not capable of surviving the second family generation, and there are even fewer organizations capable of moving towards a third generation.

The family business must not only resolve the issue of arriving at fundamental family agreements, but must undertake professionalization, which includes the incorporation of personnel from outside the family sphere. You must consider the stages of incorporation, work and retirement of your main members. And it must undertake a joint and coordinated work that allows the transfer of command or, where appropriate, the transfer of ownership.

But in addition, the family business is not exempt from the need to address the general issues of corporate governance of any organization. In recent times, the need to guide the operation to comply with environmental and social standards has been imposed. Likewise, business planning is a challenge, in an environment of uncertainty in which organizations need to acquire adaptability and flexibility.

In order to contribute to the discussion of the particular problems of family businesses, the National Association of Independent Professional Business Advisors (CNCPIE) has organized, for the second consecutive year, a symposium that will take place on October 21. The Association, which has a particular commitment to support the development and professionalization of small and medium-sized companies by strengthening their corporate governance structures, has prepared several conferences, with professionals in the field, with the aim of contributing to breaking the paradigm of the limited survival of family businesses.

In this way, the event plans to address issues related to the sustainability and sustainability of the family business, including the challenges and dynamics of these organizations; the formation of councils; the preparation of the succession; the definition of the family protocol; the diversity of the board; wealth management; and conflict management in the field of family relations, among other topics.

Undoubtedly, companies that manage to incorporate better corporate governance practices will have a better chance of overcoming the difficulties of a difficult economic environment. In societies such as Mexico, the strengthening of family businesses will allow better conditions for the social generation of value and for the healthy development of business.

*Managing Partner of Ockham Economic Consulting, specialized in economic competition and regulation, university professor and member of the CNCPIE.

@javiernunezmel