Family Business Councils (CONT’D FROM PAGE 22)
Board Converting NEWS INTERNET DIRECTORY
Group. “But this topic can be a critical concern for a family council, which might well decide to set up educational sys- tems to prepare future leaders.” Management Conflict Sometimes the border between family and business is a bit fuzzy. The result can be a mismatch of goals. Take the area of risk tolerance. “Managers with incentives to grow the business rapidly may feel the best way to do so is to engage in acquisitions,” said Eckrich. “However, buy- ing other businesses often requires borrowing money, and that can be resisted by family members who want to dimin- ish risk by maintaining a low debt to equity ratio.” In such
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cases, said Eckrich, it’s not unusual for a family council to accommodate business goals with a compromise. “Rather than green light a huge acquisition, they may opt to take on a series of smaller ones.” Company initiatives that make sense strategically can also butt up against family values. Eckrich gives a com- monly encountered example. “Maybe a board decides to close the company headquarters located in a small town where a business grew up and move operations to a larger city. But the act of closing the headquarters grandma and grandpa created 60 years ago can end up exploding the family.” Wise boards run such sensitive initiatives by the family council for discussion and feedback, said Eckrich. A proactive approach can reduce the chances for conflict. Resolving such issues can have a beneficial effect on company profits. “In economic terms, the family council can strengthen the emotional connection between the family members and the business operation,” said Dartt. “The result is that the organization benefits from patient capital owners who are willing to leave their money in the business for long-term return.” This kind of financial loyalty can be especially important for those enterprises with fam- ily members residing in distant locations. “A council can ensure that widely separated family members understand they have a voice in decision-making, and feel a sense of pride in the enterprise.” A council can also serve as a useful venue for family CONTINUED ON PAGE 26
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July 7, 2025
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