Managing Partner, Bordier & Cie
Family-owned businesses are the oldest and most common way of organising economic activity worldwide.
Many definitions exist as to what constitutes a family business. Under EU rules, a family business is any business, regardless of its size or legal form, that is majority controlled by a single family or in which one of the family members fulfils an executive role. This ranges from smaller businesses to multinationals such as Walmart (US), Samsung (South Korea) and Tata (India).
A family charter is a non-binding document that sets out a family’s vision and values. It names the individuals considered as belonging to the family and lays down the key operational and organisational arrangements for the family business. Drafting this type of document is a means of sparking discussion and nailing down precisely what unites family members.
Understandably, each family business is different because every family is unique. However, the challenges and other issues that may arise with this type of company are often similar. This includes:
- identifying the family’s values and vision;
- allocating the capital among family members and the roles that each can play in the business;
- legal questions covering the relationships between family members and potential differences in treatment between executives and silent partners;
- passing on the business to the next generation.
A partnership contract is an agreement that provides the cornerstone for a partnership limited by shares and covers all the financial aspects of relationships between the partners.
A cleverly considered governance structure can therefore be extremely useful.
Corporate governance is the system of relationships between shareholders, corporate bodies and the executives. It determines how these participants control and govern the organisation. When it comes to governing a family-owned business, matters can become more complex because the hard-to-discern emotional aspects become entangled with the purely business-related considerations. Yet research shows that implementing the right type of family governance structure (whether codified or otherwise) will have a strong bearing on the success of the business. Families committed to this process appear to be able to strike the right balance between their personal wealth, business acumen, the charities they support and their position as role models in society.
Two Swiss family-business executives have agreed to share their vision and experience with us: Caroline Scheufele, Co-President of Chopard, and Grégoire Bordier, Managing Partner of our Bank.