Is this the time to review your key documents?

By Charlotte Lamp

Have lifecycle events in your family, such as marriage, birth or divorce, created business ownership issues? Are some family members experiencing a need for higher income from their investment in the business? Is there a need for increased liquidity because of an estate settlement? Have there been outside takeover bids or owner lawsuits? Is a change in management or board membership imminent? Are young adults graduating and pressing for a position with the company?

If you answered “yes” to any of these questions, it is time to revisit your family constitution, your company bylaws and other legal documents, as well as the policies and procedures that provide governance for the family, the business and the owners. It is time to take these documents off the shelf, dust them off and open them up! Unless you are one of the more diligent families who dutifully review all or part of these documents every year, now is the time for another look.

But first, a quick reminder of why these documents are important. Many members of the family business community are familiar with the “three-circle” model of the family business system, in which three interlocking circles represent family, business and ownership. Most of the time, we dutifully dwell in one circle or another. The intersections are where we can get into trouble.

These governance documents not only provide definition (who are we?), direction (where are we going?) and discipline (how do we proceed?) within each circle, but also outline the rules of engagement at the intersections. Good governance guides smooth interactions between the circles, much as traffic laws coordinate the smooth flow of vehicles through controlled intersections. By giving coordinated guidance and direction, governance works to build greater cohesion among the business, family and ownership circles.

Review of your governance documents must involve the whole business family. If you have a representative governing body, they should lead the review, but bring everyone to the table. This topic can be part of the annual meeting or, perhaps, a one-day family workshop. Input from legal counsel is also important to ensure harmony between family governance and legal documents such as bylaws and employment contracts. One way to go through the review is to consider three questions: (1) What do you have? (2) What do you need? and (3) What do you need to tweak?

What do you have?

Remember: Good governance provides definition, direction and discipline. Suggested governance documents are listed in the sidebar on the next page. Some of these documents may be included in your family charter; others may be contained in policies and procedures statements within company documents, ownership manuals or family handbooks. To start this review process, outline what is in your family constitution.

The family charter is the document where alignment with the business begins. It should be broad enough to not need much work. However, it is important because it is the source from which policies and procedures flow.

For most of us, the family charter probably starts with a mission statement, a list of family values and a vision statement. What do these statements contain? Do they truly define who your family is? Does the family’s values statement align with the company’s values? Do your policies and procedures reflect your values?

You may have separate vision statements that reflect the vision for the family itself and the family’s vision for the company. Do these vision statements guide your strategic plans? Vision statements should remain relevant and align with the business vision. With a strong family identity, the family’s influence will flow into the business. Does your family influence the business, or does the business influence the family? Remember, a true family business is one in which the business is deeply influenced by the family, not the other way around.

Now turn to your definition of the family. This definition should be carefully attended to because for most of us, who is “family” also defines who can “own.” Do your ownership bylaws and transfer policies align with your definition of family? Is one more inclusive than the other? For some families, only descendants can attend the business meeting, while married-ins, step-children, and adoptees attend the education and family meeting; other families include everyone at all of the meetings. In still other families, the definition of family guides a company policy on who gets his or her way paid to the annual meeting.

Your charter might also contain family council provisions for officers, committee structures and meeting protocols. Are these provisions still relevant? Too much change in this area might indicate a need to move some items into the policies and procedures manual rather than the family charter. Additional protocols among the policies and procedures might address the intersection areas of the family business system: owners’ rights and responsibilities, dividend and redemption policies, the family employment policy and a family director policy.

What protocols do you have? Look at the list in the sidebar and check off the governance documents that you have in written form.

What do you need?

The list of suggested documents in the sidebar is just that: a suggestion. Before considering the items you have not checked off, take another look at the documents, policies and procedures, guidelines and bylaws you have. Are they formal (written) or informal (unwritten)? Beware of informal unwritten policies and procedures. Rather than being left to the whims of the an individual’s interpretation, these unwritten rules are better off written down. Research shows that when expectations are clearly understood by all stakeholders, appropriate behaviors ensue. Let the family members, owners and business employees clearly know all policies and procedures necessary for good coordination within each circle and across the intersections. These unwritten protocols should top the “What do you need?” list.

When assessing the suggested documents that you don’t already have, consider these questions: What pertinent issues are not currently addressed? What documents may be needed in the future that do not exist now?

The actual writing of these documents is the business of the family, perhaps via a task force task or a family council project. Where the documents intersect with the business and/or the ownership, an ad hoc committee made up of representatives from the pertinent circles could be assigned the initial writing. This should not be an onerous task, but when intersecting with company bylaws or ownership manuals, care should be taken to keep the legal details in order. Above all, make the task fun—and definitely celebrate when the new protocols are adopted.

What do you need to tweak?

All systems grow and change, as do the environments in which they exist. The family business system is complex, with each circle having its own lifecycle. With these lifecycle dynamics, ever growing and changing, it is no wonder that governance documents must be updated to be relevant. Think about the significant changes that have occurred in your business, in your family and among your owners. Then look at the list of documents you have. Changes in your business and family can point you to particular bylaws, policies and procedures, and other governance documents that might need updating.

Of course, rather than wait for a significant event to happen, the better course would be to schedule a document review as part of your strategic plans for the board of directors, management team, family council, and shareholders’ group. Perhaps you could schedule a review of the whole constitution every five years. Or, to make the task a little less onerous, review one or two parts or policies every year.

The need to review our governance documents came to mind recently because succession is taking place in several different areas in our company. I started thinking about how these events could affect some of our business family policies. It occurred to me that for those of us who have some form of family governance, it is a good time to revisit our family constitutions, charters, policy and procedures documents—whatever we may call those governance papers that lend definition, direction and discipline to our business family.

Some of my questions revolved around our vision and values statements. How do we use our values —both the company’s values and the family’s values? How are we doing in fulfilling our visions and strategic plans? Are our council procedures still relevant? The policies and procedures that govern our family’s intersections and overlaps with the business and the ownership seem to be working seamlessly, but perhaps we should revisit them for a check-up before one is needed.

Happy reviewing, one and all!

Charlotte Lamp, Ph.D., a family owner of Port Blakely Companies, is the principal of Rockwood Consulting LLC.







Suggested governance documents


Definition (Who are we?):

• Family Values Statement

• Family Mission Statement

• Definition of Family

Direction (Where are we going?):

• Family Vision Statement

• Family Vision for the Company

• Strategic Plan or Road Map

• Family Employment Policy

• Family Director Policy

• Redemption Policy

• Dividend Policy

• Transfer Policy

• Philanthropy Policy

Discipline (How do we proceed?):

• Owners’ Rights and Responsibilities

• Family Council Committee Structure

• Communication Protocols

• Annual Meeting Attendance Policy

• Prenuptial Agreements

• Estate Planning Guidelines


• Other documents that have come to mind that might be useful in adding definition, direction and discipline to the work of being a solid business family.

• Check for harmony between family governance documents and legal business documents.




Copyright 2013 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact





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March/April 2013

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