Organizing Wealthy Families Around Value and Vision
By Gerald Le Van

Q: What is the surest way to preserve and grow family wealth?

A: Develop the competence and potential of each individual family member, while maintaining healthy and constructive family connections across the generations.

Q: What's the surest way to minimize family strife and avoid family lawsuits?

A: Organize an open and safe forum for family deliberations.

That forum is most often called a "Family Council."

To test drive a Family Council, please read on.

Some Family Basics:

  1. The family is our fundamental human relationship. Our families bore us, raised us, nurtured us, taught us, supported us, loved us, disciplined us, educated us, and challenged us. We share common genes and a unique history. We are the story we tell each other without speaking. Our unique stories bind us together.
  2. Family is a fundamental need.
  3. We cannot leave our families, even if we rarely see each other or never speak.
  4. We continue to share family with those who have died.
  5. Our family is a tether to our history, our genes, and to ourselves. Without family, we would be as lost as an astronaut on a space walk whose tether has parted, doomed to fatal drift.

Wealthy Families:

  1. A family's greatest wealth is its members. Their nurture, growth, development, welfare, well-being and happiness are the family's chief responsibilities and its surest way to preserve financial wealth long term.
  2. Wealthy families are joined at the wallet. Shared wealth either forces them closer together than other families, or further apart.
  3. Distance from family deprives individuals of non-financial support and resources that cannot be supplied by other relationships. Distance from family magnifies differences. Distance from family promotes alienation and invites litigation.
  4. Closeness compels wealthy families to organize.

Organizing a Family Council:

  1. A Family Council formalizes family organization.
  2. Organizing a Family Council only around the wealth overlooks other compelling family needs and rich family resources.
  3. Organizing a Family Council around family vision and value can maximize all family resources, including wealth.
  4. Begin family organization by identifying value -- what is ultimately important to the family? Admit that wealth is important. Now what else? Write down what is meant by family value.
  5. Once value is identified, move on to vision. What will this family be like in ten years, in twenty years, in fifty years -- if we do nothing? What might this family become if we commit to a greater vision of ourselves and our descendants? Write down your family vision.
  6. Once vision and value are identified, organize your getting together. Who convenes us, where, how often? Who is invited? Organize play time and catching up time, as well as work time. Write down how you plan to convene in the future.
  7. Once your Family Council is convened, what's the agenda and who prepares it? Who will have agenda input? Will it be distributed in advance? Write down your agenda procedures.
  8. What information do we share as a family? Business? Financial? Family news? Good news and bad? Do we limit our discussions to information sharing? Write down what types of information the Family Council should circulate while together and apart.
  9. Do we invite outsiders to report or give advice? Can we bring our own advisors to meetings of the Family Council? Write down your rules about inviting guests and advisors.
  10. Does our Family Council make recommendations or requests to family fiduciaries, to directors and managers of family companies, to individual family members or family groups? Do we give advisory opinions on matters affecting the family or family wealth? Do we make decisions? Write down what your family is authorized to do while it meets together.
  11. Who will lead deliberations at Family Council meetings? What are their duties and responsibilities? Write them down.
  12. Who will lead the family in the interim between meetings? To what extent do our leaders speak and act on behalf of the family when we aren't convened? How should leaders keep the family informed of pending decisions? What may they say or do with and without prior notice to the family or family approval? Write down what you expect from family leaders between family meetings.
  13. On actions to be taken by the family, who votes? How are votes counted? Must all agree? Does a simple majority rule? Or is a larger majority required on highly important matters? Write down your voting rules.
  14. If we disagree or can't seem to decide, how will we resolve deadlocks and opposing positions? Write down your family dispute resolution process.
  15. Combine your written vision, values, rules and procedures into a Family Charter, then follow it.

Some additional thoughts about Family Council organization:

  • There should be a written Family Charter.
  • The family may want to consider adopting a Code of Conduct for family behavior.
  • How votes are counted can produce fascinating discussions and tense moments, e.g. one-person one-vote or by family or ownership groupings.
  • The Family Charter should require that no legal action can be commenced against trustees, managing partners, or officers or directors of the family company without prior Family Council review.
  • List other matters that need to be considered first by Family Council to prevent "end runs" by family members around trustees, partners, management, etc.
  • Provide specifically for the use of shared family assets, e.g. planes, recreational facilities, club memberships.
  • Be vigilant about hidden or unequal perks, and others' perceptions of favoritism.
  • Carefully and systematically disclose all compensation and perks received by family members from the trust, family limited partnership or family company. Encourage recipients to disclose voluntarily, rather than being coerced.
  • Discretionary dividends and distributions are always delicate. Should there be Family Council input to persons exercising these discretions?
  • Be sensitive to ownership disparities among family groups. Some younger generation members come into their money before others.
  • Conversations about how other relatives spend their inherited money are seldom productive, and likely to do harm.
  • Consider a rule that no advisors for individual beneficiaries may attend meetings unless invited by Family Council.
  • Sometimes, company activities carry unintended but clear intimations of family support. The family may or may not wish to be identified with:
    • Company philanthropy
    • Company activism
    • Company paternalism—benefits, work rules, retention and discharge, downsizing
    • Company compliance, e.g. environmental, ADA, sexual harassment.
  • The Family Council can take a role in preserving family heritage. Few families lose their curiosity about their history, roots, identity, genetics, etc. Families continue to ask:
    • "Who am I?"
    • "Who are we?"
    • "How much of us is preserved in company archives, mementos, photos, minutes, etc?"
  • Public image and reputation are always important to business families.
    • Sensitize trustees and company management to family sensitivities, e.g. name, image, secrets.
    • Sensitize family members to trustee and company stresses, loyalties, frustrations, regulations, and to required public company disclosures.
    • Agenda suggestions for Family Councils:
      • Spend time on family news
      • Invite agenda suggestions from all family members, company management, and trustees
      • Emphasize learning and understanding.
      • Make allowances for different levels of business sophistication, business judgment, interest in the company, and attention spans.

Extracted from Le Van, "Organizing Wealthy Families around Family Value and Vision: Creating a Family Council", ACTEC Journal, Vol. 30, p. 150 (2004) All rights reserved by Gerald Le Van 2004