The ability of the family leadership to build strong and viable businesses is dependent upon maintaining the support and confidence of its shareholders.
Leadership should never take for granted the support of its shareholder team, and especially so where there has been a family business transition. Shareholder engagement must be active and planned.
Hopefully, your transition process has involved the creation of a family charter and that process has supported the development of a robust governance structure. This governance structure will be necessary to underpin the growth of the business and the engagement of the family. As a minimum, agreement should have been reached across all shareholders in matters including:
- The separation of family and business meetings, likely through the creation of a family council.
- A formal board of directors to oversee the various businesses with appropriate governance and reporting processes.
- The appointment to all positions on merit and need.
- Clear levels of delegate authority which set out what directors and the CEO are permitted to authorise without shareholder approval. And the levels of shareholder approval required, e.g. majority, special resolution or unanimous.
- Independent oversight of levels of remuneration and performance by family members holding senior positions.
- A clear basis for appointment and dismissal of family members working in the business.
- Annual business plans and budgets for approval by the board and shareholders.
- Active engagement of the shareholders in the strategic planning for the business.
- Regular performance reports and briefings to shareholders.
- The appointment of directors based on shareholder voting.
- The process for sale of shares including valuation and terms of payment.
A board and management team that has the unified support of its shareholders will be able to focus their efforts and talents on growing the business.
But it will take excellent communication skills to sustain that support and also strong robust governance processes.
Active Knowledge Question:
What processes have you put in place to ensure the ongoing confidence and support of your shareholder group?
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All the best in the success of your business,
Richard Shrapnel
