Family Business Governance: What to Know Before Getting Started

March 09, 2023
Travis Dunn provides an overview of family business governance, including its definition and purpose, benefits, resource commitment, and steps to begin implementation.

Strong family business governance is a common and critical characteristic among family businesses that thrive for multiple generations. Each family’s approach to governance is unique and suited to its individual circumstance. For all families, though, the journey to a governance system that works for them starts with asking what the family and the business seek to achieve by formalizing decision-making. In the article that follows, we discuss the general components of a family business governance structure, providing a framework to consider for your own family.

The Definition and Purpose of Family Business Governance

What Is Family Business Governance?

Definitions abound for family business governance. Admittedly, there should be multiple definitions to accommodate the wide range of unique family businesses in existence – large and small, first or fifth generation. In its most simple terms, governance is a set of processes for making decisions. Family business governance, then, refers to the processes in place to govern decisions made around the family, the business, and the intersection of the two.

Frequently, governance is associated with complex committees, policies, and procedures, which may be appropriate for families and family enterprises of a certain size. However, in other cases, family business governance is a simplified, disciplined process that is well-structured and balanced.

What Is the Purpose of Family Business Governance?

Family business governance structures usually serve two constituencies: the family and the business. A well-developed, implemented structure provides a framework for decisions and effective communication, unique to the family and business. At their best, governance systems create harmony between both constituents.

From the perspective of the family, family business governance serves to:

  • Provide a formal forum for routine family and family business matters
  • Gain transparency into the business, its operations, performance, and strategy
  • Communicate on key issues, both within the business and outside of its scope
  • Foster development of new ideas for the family (philanthropy, family trips, policies, and so forth) and the business

From the perspective of the business, family business governance serves to:

  • Create a forum for communication, “funneling” ideas from the family to the business and vice versa
  • Provide a consistent voice from the family for the business’s adherence to the mission, vision, and strategy of the firm and the family
  • Identify and groom talent within the family for positions within the business

What Are the Benefits of Setting Up a Family Business Governance Framework?

There are many benefits to implementing a strong family business governance framework – far too many to create a definitive list. One of the most powerful is the consistency it provides in the decision-making process. Decisions that materially affect the business – succession planning, ownership changes, liquidity, and so forth – should be made within the confines of a decision model that balances input from all stakeholders. A strong governance framework will ensure those decisions are made in the best possible environment.

Another benefit of a family business governance framework is the additional transparency provided by a committee. Charters, committees, and proper policies ensure that family members, stakeholders, employees, and management are on the same page about important aspects of the management of the business. Black-box decision environments can cause undue stress within an organization. Good governance is created by all stakeholders, which ensures that appropriate communications are set out in reasonable fashion.

Finally, an additional benefit of family business governance is the provision of continuity within the family and the promotion of the family’s culture.

How Does Family Business Governance Work?

As mentioned, family business governance can take many forms depending on myriad factors, such as the size of the family and the business and the family’s culture. With that said, there are several common bodies used in a family business governance framework.

The family assembly is a family-only body intended to gather around issues that are germane to the family and the operations and ownership of a family business.


The agenda for and charge of the assembly can also extend away from the family business and into more familial-focused topics, such as discussing family vacations, philanthropy, and financial literacy. Alternatively, the family can focus on business-specific topics, such as educating family members about their rights and responsibilities, electing family council members (if a council exists), and approving family employment policies.


In larger families, the family assembly could take place at a bigger venue with a formal agenda, or the assembly could take the form of smaller, informal meeting.

The family council provides a forum in which select family members can articulate their values, needs, and expectations vis-à-vis the company and develop policies that safeguard the family’s long-term interests.1 Thus, it carries information up to any nonfamily owners (should they exist) and back down to the family.


The council is typically charged with making decisions around policies that pertain to the intersection of the family and the business, including family employment, liquidity, succession, conflict resolution, and communication policies. It can be a voice for the family in the board of directors. Family board members often serve on the family council. In addition, junior family members not on the board are typically on the family council.

A family advisory board is a body external to the family and the business intended to provide objective industry and functional expertise to the board of directors and management of the family business. Family businesses often carry extensive industry knowledge, which a family advisory board can complement with objective, independent insight.


Well-functioning advisory boards can act as independent sounding boards for strategic business considerations. Critical to the success of a family advisory board is the ability to openly communicate with the business owners; thus, the board should have a strong relationship with the owners.

A well-functioning board of directors is an integral component of a governance system. While the purpose, scope, and process for setting up a board of directors are beyond the scope of this article, special consideration should be given to a family business board, which typically includes family council members, management, and nonfamily independent directors. According to Steve Salley and Judy Lin Walsh of BanyanGlobal:

A well-structured board of directors can serve as a “shock absorber” between divergent interests in ownership and management, acting as an honest broker between competing visions. It can provide a disciplined forum for healthy debate and sound decision-making. All potential points of conflict in the family business system – between majority and minority owners, executive managers and “outside" stakeholders, and the senior and rising generations – benefit from the understanding that the board is acting to achieve the stated objectives of the owners as a whole, rather than implementing any single agenda.
The board is, as a matter of law and commitment, charged with balancing all of those interests and the ultimate success of the business. If properly run, the board can be the arbiter of fairness in business decisions, giving all the divergent interests some assurance they were considered and their views respected, even when their agenda was not adopted.

Graphic showing range of governing bodies in a family business, including family assembly, family council, board of directors and family business advisory board. Graphic covers various considerations for each type, including purpose, family involvement, typical members, governing documents and meeting frequency.

What to Watch Out for When Setting Up a Family Governance Structure

The nearby table summarizes some key items to mind when beginning the process of setting up a family business governance framework.

Considerations When Constructing a Family Business Governance Framework
Time Commitments The time and energy commitments necessary to build a strong framework can be large. Understanding that the process will potentially take years to implement and tune will help manage expectations.
Stakeholder Engagement

Governance must be set up so that it is agreed upon by all stakeholders involved. Family assemblies can be established with input from all generations, and family councils can be built with input from both owner and nonowner family members and socialized with the board of directors.

Designating a “champion” who is well connected with the family and the business for this type of initiative helps drive it forward and socialize it with all the necessary parties. Understand each family member’s interest level and desire to participate (not everyone wants to engage equally).

Accountability or Decision Rights Ambiguity or a lack of social buy-in will create “half-measure” decisions that may not be followed. Documenting the decision rights once the governance framework is set up is imperative to make sure that the system functions properly and as intended.
Future Generation Needs

It is important to identify the business’s future governance needs. This involves understanding where the family and the business are in terms of ownership, and management evolution as well as having a well-understood vision for the business, ownership and family.

Governance ties to the stage and evolution of the family and the business. Understanding where the family and business are and where they intend to go will help to build a framework that addresses challenges at each stage.

How to Begin Implementing a Family Business Governance Process Today

The process of establishing a functional family business governance structure is iterative. As such, it is important to begin by identifying the most important needs that the family wishes to solve by instituting a more formalized governance process. Soliciting input on this process requires thoughtful outreach and structure.

To help set expectations for all constituents, it is necessary to create timetables for exploration, socialization, design, and implementation. Partnering with a trusted advisor with relevant experience can help avoid common pitfalls and imbue best practices into the development process.

Regardless of where the family and the business are in their progression, a discussion about how to implement governance is always a worthwhile exercise.

If you would like to discuss family business governance in more detail, please reach out to our Center for Family Business.

Contact Us

1 Gersick, K., J. A. Davis, M. M. Hampton, and I. Lansberg. Generation to Generation: Life Cycles of the Family Business. Boston: Harvard Business School Press, 1997.

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries. This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners. © Brown Brothers Harriman & Co. 2022. All rights reserved. PB-05764-2022-09-29

As of June 15, 2022 Internet Explorer 11 is not supported by

Important Information for Non-U.S. Residents

You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see

captcha image

Type in the word seen on the picture

I am a current investor in another jurisdiction