What is it about?
A Family Protocol is the result of a process of communication and agreements among owners of a family business that are collated in a written document that includes a set of rules and procedures for governing family business relationships and is signed and ratified by each family member. Family Constitutions address the firm history, the future vision of the family firm, include norms and rules for family members regarding their incorporation into the business, succession planning, shareholder agreements (transfer of shares, dividends, firm valuation), and develop power structures in the firm and the family in regard to the company (Board of Directors, Family Council).
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Why is it important?
It is challenging for family firms to find the right governance mechanisms. Family Constitution is a relevant instrument that is used in practice for facilitating the continuity of family businesses. We perform in-depth interviews with expert consultants to grasp primary components of a Family Constitutions. We observe that family businesses that implemented a Family Constitution had significantly improved performance within 2 years after the implementation. The positive relationship between the implementation of a Family Constitution and future firm performance is stronger for firms that had a nonfamily CEO, had multiple family owners, or were controlled by later generations.
Perspectives
I hope this article encourages family firm scholars to develop future studies regarding the topic of Family Constitutions. I also expect that this research promotes that business families engage in this complex and lengthy communication and agreements process with determination.
Susana Menéndez-Requejo
University of Oviedo
Read the Original
This page is a summary of: Family Constitution and Business Performance: Moderating Factors, Family Business Review, September 2017, SAGE Publications,
DOI: 10.1177/0894486517732438.
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