Good governance helps to create economic value, and assists the emotional well-being of the family, and others with a stake in the company. It demonstrates that the owners are taking responsibility for their employees and other stakeholders, and helps to ensure the long-term survival of the family enterprise.
In publicly listed companies, the discussion about good governance began with the publication of the Cadbury Report in the UK in 1992, the first governance code internationally. In many countries, specific codes and regulations for governance followed. Today, nearly all countries have a governance code, but these are mainly for publicly listed companies.
By contrast, there are only about 12 codes internationally for family enterprises. In Germany, the first governance code for family firms was developed in 2004 and revised in 2010. This code served as a role model for codes in other countries, such as Belgium, Austria, Finland, Switzerland, and Spain. International initiatives include Corporate Governance Guidance and Principles for Unlisted Companies in Europe (2010) by the European Confederation of Directors’ Associations and the IFC Family Business Governance Handbook (2008) by the World Bank.
In general, governance codes for family enterprises serve as an instrument or checklist that allows owners to organize their family business governance professionally and individually, depending on the situation of family and business. The codes do not generally provide specific recommendations or general solutions that apply to all family enterprises. Because of the diversity of family firms, this is not possible.
The codes for family firms are voluntary, in contrast with most of the governance codes for publicly listed companies. Families can use the questions in the code to develop family business governance, including a family constitution. The family constitution is, in turn, the basis for the articles of incorporation, inheritance documents, and other legal agreements.
With the help of the book “Governance in Family Enterprises” and e. g. the German Governance Code for Family Enterprises, which is also published in the book, families can develop their family business governance.
Governance in Family Enterprises – Maximizing Economic and Emotional Success, by Alexander Koeberle-Schmid, Denise Kenyon-Rouvinez and Ernesto J. Poza, Palgrave Macmillan, ISBN 978-1-137-29389-3, is available, entitled to a 20 % discount with the promotional code WORLDPALGRAVE20 if ordered through this site.