The uniqueness of a family business is the involvement of the ‘family’ in business. The meeting of the professional and the personal – often leads to blurring of boundaries, causing co-mingling of family and business issues, which may potentially lead to misunderstandings and conflicts. In today’s rapidly changing world, such misunderstandings and conflicts are becoming more and more common as business families try to navigate the complexities of modern life while attempting to preserve their values, goals, and cohesion.
UNDERSTANDING FAMILY CHARTERS
A family charter is a formal document that outlines the family’s values, goals, and principles, serving as a guiding framework for both the present and future generations, for decision-making and interactions among family members and in relation to the family business. The charter inculcates a sense of responsibility in each generation to protect, preserve, enhance and perpetuate the family and the family business. Additionally, the exercise of creating a family charter fosters dialogue amongst family members, and thereby improving communication amongst family members.
While each charter is unique in its application and content, charters generally also govern some other formal aspects, such as: (i) understanding amongst family members in relation to operation, management, control and ownership of family business; (ii) code of conduct, entry and exit from family business; and (iii) prevention of future disputes and amicable settlement of ongoing matters. Most importantly, a family charter aims to create and maintain a fine balance between the family and the business.
It is therefore important to create such a formal governance framework for the family and the family business – so that the succession of the family and the family business is safeguarded. Without such a formal governance framework, conflicts can escalate into long drawn court battles and affect the continuity of the family business. With the pressures and stresses of modern life, clear communication channels can help prevent misunderstandings and strengthen family bonds. Additionally, unresolved conflicts also lead to breakdown of familial relationships, partition of the family business, damage to the family reputation and the overall erosion of the value of the family business.
EVOLUTION OF FAMILY CHARTERS
Historically, family charters have been linked to succession of family business and preservation of family wealth and legacy. However, in the modern age, the requirements of the families have evolved, and the scope of such charters has been expanded beyond financial concerns to a broader range of issues relevant to a modern family. This shift in the thought process reflects the change in societal values, including increased emphasis on personal fulfillment, individualism, and family dynamics. This change in the thought process has led to families focusing on maintaining family unity (by organising family gatherings and family holidays), conflict resolution (by taking the assistance of trusted advisors to de-escalate tensions), family roles (giving importance to the growth of family members not involved in the family business) and personal growth (giving importance to education of family members and to personal wealth of family members).
In addition to focusing on the family and the family business, there has been a surge in the number of families looking to play a key role in the development of the country and to take up philanthropic initiatives, as a part of the family culture and heritage. For example, a family focusing on sustainability is undertaking practices to reduce plastic waste generated by the family business, support eco-friendly small businesses, and educate younger generations about environmental responsibility. Similarly, a family focusing to build upon family unity, has bestowed additional responsibilities on the senior members of the family to organise family dinners on auspicious events and to conduct family gatherings, from time to time.
CONCLUSION
In the modern era, family charters have evolved from documents focused primarily on financial and operational matters to comprehensive frameworks that address a wide range of family dynamics and goals. By articulating shared values, establishing governance structures, defining roles and responsibilities, and promoting effective communication, modern family charters help families navigate the complexities of contemporary life while preserving their cohesion and purpose.
