Q/A: Family Governance within Asian Families of Wealth

Q/A: Family Governance within Asian Families of Wealth

A Q&A with Christian Stewart, Managing Director of Family Legacy Asia

Overview

Q: What mechanisms should a large family of wealth have in place on making inclusive decisions?

Q: What are the problems that can happen when this is not the case and just one person makes the decisions?

Q: This all comes down to family governance issues, how does a family start to formulate a family governance plan?

Q: How often should the family governance system be reviewed and adjusted? Should it be reviewed annually?

Q: How do families involve through marriage or adoption non-blood line family members into the process?

Q: How do families incorporate a family council into the family governance plan?

Q: How early do you recommend engaging the younger family members into this process and how?

Q: How do families preserve their history and culture yet also adjust to changing conditions and social norms over generations?

AJR: what mechanisms should a large family of wealth have in place on making inclusive decisions?

CS: When I work with Asian families, the wealth creators, if they are still around, have a natural tendency to get a bit nervous if you start talking about widening up participation in decision making too much. The Asian way is to prefer identifying the family members who are perceived to be the most competent and appoint them to positions of authority. You might say the preference is towards “government by the most capable” as opposed to a “representative democracy”. As an advisor I do see it as my role to help increase some form of participation in decision making, and to do this there are a number of principles that I follow.

One principle is that it is very important to just observe how the family members make decisions today. what is the natural decision making process of the family? if I am helping the family to improve its decision making process, from experience, “evolution is better than revolution”. Small incremental changes are more likely to work than radical change. And when working with families, the timing often has to be right also.

Second, you have to ask, what kind of decisions are you talking about? It is always very useful to go through the process of de ning the different roles that are present in the family enterprise, and asking the question of “who makes what decision”? In other words, are you talking about, for example, the family council level, the ownership level, the board level, the management level? The family council level may be about inclusive decision making, while this would normally be inappropriate at the management level. So you ask, who makes what decision, and it is also very important to have good boundaries in place between different roles.

In summary, as an advisor you could say my role is often one of marrying together a “representative democracy” with what Aristotle defined as an “aristocracy” – meaning rule by the best and most qualified; while encouraging the inclusion of an advisory board, so that there is also some objective third party input.

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