FAMILY BUSINESS ASSIGNMENT – Family Constitution
A family constitution is a formal document that outlines the rights, values, responsibilities, and rules that apply to stakeholders in a family business and establishes plans and structures for resolving issues that arise during the operation of the business.
Use your own family business, or if you prefer, identify one and seek to address the all aspects we have learned in class as you draft a family constitution.
For those with a family business, this will give you a chance to integrate and get an in-depth understand of your family business. For those that do not have a FB, it will allow you to get the skills on the intricacies of what is involved in designing a Family Constitution.
Hers is a list of articles that will help you draft the constitution. You can include additional ones if you consider them necessary for your family business. Please be specific but thorough with the policies rather than using long narratives that will only make the document long and confusing.
Articles of the FAMILY CONSTITUTION
Family’s vision and the nature of its commitment to the firm and its continuity.
1.What was the vision when the company was founded?
2.What is the vision today and the vision for the future?
Family values that have successfully guided the firm in its relations with customers, employees, suppliers, partners, competitors, and the community, and that need to be preserved.
Behavior of the family toward the firm and its management—
What is the desired behavior of family members who are employed in the firm?
What do family members need to be aware of in order to protect the company’s and the family’s reputation?
How can the family name be used, and how should the relations with the government and the media be managed?
Other important points that need to be stated?
Employment policy.
The requirements family members need to meet in order to be considered for employment.
requirements for employment in management posts
requirements for temporary employment,
requirements for lower-level positions.
Policy whether in-laws qualify for employment or are prohibited from becoming company employees.
Policy guiding the use of any relatives as contractors.
The family-member compensation policy
How family members’ performance on the job will be reviewed.
How decisions affecting their salaries and career opportunities will be made.
5- Next-generation family-member development.
What will be the family policies or procedures guiding the education and professional development of next-generation members employed or to be employed by the firm?
6- Ownership policy.
Stock ownership,
classes of stock, and
ownership transfer policies- possible restrictions to sale of business interests (shares).
Business-valuation processes
Buy–sell agreements in existence and preferences/limitations to future ones
Voting and shareholder representation on the board and other entities.
Legal documents governing transactions of any kind and authority of each.
7. Family bank and/or family venture capital fund.
Does the family want to have special funds allocated to sponsor the development of new ventures or new initiatives? What will be the rules should the family have one?
What are the overall terms of use of these funds?
8. Dividends and family benefits policy.
What is the standard dividend distribution policy and the ratio of reinvestment?
What are the expectations for returns on invested capital?
What if the business requires investment?
Is there any debt-to-capital ratio policy? Or other policies regarding other ratios?
9. Liquidity policy.
What will be the valuation method in case of buy-sell agreements?
Have current minority or majority owners any preference in purchasing shares?
Is there any existing buy–sell agreement?
10. The board of directors and advisory board.
What is the board authority, relation to management, shareholders, and other entities?
What are some decisions that require the vote and approval of shareholders? (company loans? issuing shares? other)
What are their primary functions and operating procedures?
Should family members always represent the majority?
Compensation?
Family meetings and/or a family council.
How should the family governance processes operate, and who should lead?
What are its primary functions?
How are its relations to the board and shareholder meetings?
How many members and who will be part of it?
What will be the standard procedures? (frequency of meetings, protocol, etc.…)
Shareholder meetings.
What is their authority?
How do they relate to the board and the family council? (communication, obligations, formalities…)
Please, follow the given structure. Since the report structure and outline is given, grading will be based on the following: Creativity, conciseness and clarity, thoroughness and thoughtfulness.
Answers such as “the family will not use buy-sell agreements” or “the family will not have bank or family fund”, or specifying just a couple of functions of the government bodies will penalize the final score.
Report Structure:
You are expected to include the following sections:
Title page
Company introduction
Body (2000 words ±10%. See note*) addressing the fundamentals as per the task above
Appendices (Optional)
References
Glossary (if needed)
Additional specifications
Your name,
Course and Cohort
Professor
Title of your report
Assignment name
Date
*Word limit guidelines:
The minimum word limit: 1800
The maximum can go to 2500 or some more if you need, but please, try as much as you can to stay in that range.
