ISSUE 6 November 2008

Baron Paul Buysse, President of FBNet Belgium, was instrumental in creating the Code that bears his name. At a recent FBN event he said, ‘A family which was in the grip of a major problem succeeded in resolving it through the inspiration of the Code’s recommendations. So it works.’

The Code’s recommendations for the governance of family businesses include the following:

1. The Family Forum

The Code recommends a family forum in family businesses where:

• the shares are held by several family members or several branches of the family;
• within a single branch, several generations are involved in various roles in the company (whether or not active in the enterprise, whether or not shareholders).

The family forum serves as a platform for communication, information and, as appropriate, consultation in connection with the family business.

2. The Family Charter

The Code recommends that the family establish in a Family Charter a number of playing rules to which the family members can refer. For example, it is recommended to establish rules with regard to:

• the family values and vision;
• the ownership of the family business;
• the financial objectives of the family;
• careers in the family business;
• compensations attributable to family members active in the family business;
• the governance of the family business;
• family governance;
• the management of the family business;
• the role of non-family members in the family business;
• communication;
• conflict resolution arrangements;
• training of family members;
• philanthropy and similar issues.

It is highly recommended that the Charter has a legally binding character.

3. Consultation with the shareholders

The professionally-managed family business benefits from clarity about just how much freedom of action exists for developing and implementing corporate strategy. This requires from the family and shareholders a long-term vision about the direction in which the enterprise should develop, the desired culture of the family business, their willingness to take risks, and their involvement in the enterprise.

The board of directors and the management must take well-targeted steps to promote the involvement of all shareholders in the enterprise. This can be done for example by holding a consultation among the shareholders, the board of directors and the management at least twice a year. The Code recommends doing this in any event if important developments appear likely to occur in the near future, for example a strategic reorientation, a major takeover, sale of parts of the business or company transfer.

4. Succession

The timely organisation, proper preparation and careful accompaniment of a succession is one of the most crucial processes in the family business. This process must be addressed in a professional manner, with the best interests of the family business serving as the decisive frame of reference. A thorough, step-by-step succession plan is therefore essential. The Code recommends putting control of the process in the hands of the board of directors, and in particular its chairman. It is wise to give the board of directors a significant advisory role in assessing succession candidates. Great care must be devoted to ensuring that there is a solid basis of support for the successor within the wider family circle. The appointment of the successor will preferably have the assent of the shareholders.

5. Resolving Conflicts

Conflicts between family members must not be covered over, but instead openly discussed. There must be a mechanism for effectively resolving long, drawn-out conflicts. An authoritative leader within the family can sometimes engineer a solution.

An outside chairman of the board of directors who has authority and the confidence of all parties can also be helpful. If necessary, one can call on a professional mediator. The Code recommends first identifying potential sources of conflict and then taking contractual or by-law steps which make a rapid resolution possible.

To read a full copy of the Code Buysse (in English) please visit
www.codebuysse.be/downloads/CodeBuysse_EN.pdf

Further information is available at www.codebuysse.be/fr (in French) and www.codebuysse.be/nl (in Dutch).

In this issue

Ready for tighter credit
Three reasons why family businesses usually have lower leverage

What type of business family?
What type of business family do you belong to... and would you like to change it?

Four barriers to long-term thinking
Falling into the trap of short-termism

Social Responsibility
How do family firms put it into practice?

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