If you’ve not already got a copy of January’s In-Cumbria Magazine, don’t despair. We have Sue’s ‘Family Business’ column right here. In her new, fuller column, Sue will be sharing her insight and advice for family run businesses. In her first January Issue “Family Fortunes – more than a game”, Sue talks about the importance of strong corporate governance and its role in protecting family business values.
Whether a family business is one year old or one hundred years old, a common trait running through almost all of them is that sense of strong family values. It’s these family values that separate you from your competition, engendering loyal support from customers and clients; so whilst your values may not officially ‘put bread on the table’ they are a priceless part of a family business. An asset that should be guarded and lauded as much any other family fortune.
Long term protection of a family businesses’ values can be difficult, balancing growth and innovation with values that may have been founded in the Victorian era could appear an almost impossible task. It isn’t, and the reason that successful family firms have not only survived the generations but thrived with each instead, is down to good corporate governance.
Well managed corporate governance protects those family values and not only does it enable businesses to succeed long-term but encourages them to grow, quickly adapt to changing markets and technological conditions and be inventive enough to stay ahead of the game where possible. I found a recent article published by the Institute for Family Business particularly insightful, it laid out the latest corporate governance principles as determined by a coalition led by James Wates CBE. Known as the ‘Wates Principals’ they form part of a number of changes made this year to the UK corporate governance framework.
The six principles are:
Purpose and Leadership – An effective board develops and promotes the purpose of a company and ensures that its values, strategy and culture align with that purpose.
Board Composition – Effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.
Board Responsibilities – The board and individual directors should have a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision-making and independent challenge.
Opportunity and Risk – A board should promote the long-term sustainable success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.
Remuneration – A board should promote executive remuneration structures aligned to the long-term sustainable success of a company, taking into account pay and conditions elsewhere in the company.
Stakeholder Relationships and Engagement – Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.
I’d be keen to hear whether you agree with the principles or whether you would encourage a different approach to your own government framework. Personally, I think they’re a sound basis, and the principles ring true, particularly around the Board Responsibilities and Board Composition areas. If you haven’t formalised your own corporate governance, perhaps try using these to help you manage your family business decision making whilst considering your own family business values. A strong set of values, backed up by a strong set of principles, in turn enforced by clear-cut processes are a strong foundation for a business that looks to the future, and is prepared for it. 2019 is here, make it your year.
If you’d like to read the rest of the January In-Cumbria magazine to catch up on the latest business news from around the county, click here.