The Challenges of Family Governance

By Maxwell Lima Dias, Pereira, Dabul’s lawyer

Widely adopted by publicly traded companies, corporate governance remains a relatively unexplored system for a significant number of Brazilian companies, especially those of a familial nature. Although topics such as “strategy”, “planning”, “management” and “corporate governance” are of great relevance to both family and non-family businesses, implementing good governance practices in family businesses has proved to be a major challenge, given the complexity of balancing the interests and needs of the family with the interests of the company.

In this sense, one of the main challenges of corporate governance in Family Businesses is managing the generational transition. Often, the transition from one generation to the next can lead to family conflicts, power struggles and resistance to change. Another challenge is defining roles and responsibilities. It is crucial to clearly establish the roles and responsibilities of each family member and ensure that the interests of the company always take precedence over individual interests.

Professionalizing management is another important challenge. In many Family Businesses, management is based on personal relationships, which can hinder the efficiency and effectiveness of the business by complicating the already complex task of motivating and retaining external talent – which is, after all, fundamental to the diversification, evolution and innovation of any company. Therefore, creating clear and transparent policies for human resources, finances and operations, based on meritocracy is essential. Hiring qualified professionals for strategic positions is also crucial. Furthermore, demonstrating a trustworthy environment fosters predictability and respect, essential characteristics for retaining and attracting new external talents.

In summary, corporate governance in Family Businesses presents unique challenges that require specific approaches to ensure transparency, effectiveness and sustainability of the company. Family governance operates within the realm of the business family, addressing its relationship with its members, ownership, the company and stakeholders. Trough an integrated set of guiding principles, forums, standards and services aimed at aligning family members, family governance promotes greater harmony and actions guided by a long-term vision and the perpetuation of the legacy of values and socio-economic heritage.

Article Editing: Luiza Guimarães | Article Review: Alessandra Dabul

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*Source: Pereira, Dabul