Responsibility in a family business
Charles Wookey Co-founder and former CEO of the charity Blueprint for Better Business
Who are the family shareholders answerable to, and for what?
What, if anything, is distinctive about family businesses when it comes to responsibility? The language of “responsible business” is now happily mainstream, widely seen as a useful shorthand for accepting that a business has duties not only to its customers and its owners but also to employees, suppliers, the communities it depends on, the environment it affects, and the state authorities on which it also relies. It signals that business is a part of society, not apart from it. But there is a very distinct way in which the duty to be responsible plays out in family businesses, particularly those that have undergone one or more generational transfers. The word “responsible” means answerable, and often the most challenging situations in family businesses arise when it is unclear who exactly within the family is answerable to whom and for what. What I have seen in my own work is the necessity for great communication and clarity of expectations. The earlier these are captured the better, for instance in a family charter that is reviewed periodically. It’s so easy for lines to be blurred between family members about exactly what role is being played at any one moment. Am I meeting my uncle as my uncle or as my boss as the CEO of the business I’m working in? Are we having this conversation as cousins or as fellow shareholders? Misunderstandings can easily arise when one party has one view of the basis of a dialogue, and another has a very different one, even if over a family meal good conversations out of roles can be very valuable. There are as many ways of organising life as there are family businesses, and there is no ideal template. But the same issues will tend to crop up. One is how the wider family relates to the family members who are the custodian shareholders of the business.
Then there is the relationship between the family shareholders and the board. When the shareholder directors step into a board meeting they take on the Companies Act legal duties of company directors to promote the success of the business. They are therefore engaged in a careful balancing act, responsible both to the company itself as directors, and to the family who look to them to ensure their family investment is safeguarded and developed. And if there is a family CEO, are they given the freedom to lead the business? Do the older generation let them? Do they bring in external leadership in good time if there is need for that? As one family director put it to me, they have to ask themselves “are we thinking of the business as a cash cow or an orphan child”.
I love the idea of seeing a business as a child that needs care, security, and nurture.
The best family businesses are exemplars of this deep sense of responsibility for the future, to the long-term benefit of both business and society.
Charles Wookey now runs his own consulting practice, Charles Wookey Associates
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