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ADMINISTRATION


A constitution holds the family office together


Wealthy families who want to stay together should seriously consider working on a family constitution, and advisers can be very helpful in providing resources to these families. Based on the following observations from the field, wealthy families are increasingly interested in family constitutions.


I


n Asia, families are beginning to turn to family constitutions as a tool to keep the family (and family business) together, adapting a ‘Western’ concept into their own close family systems. Families are


increasingly aware of the harm caused by internal conflict in times of generational transition. The oft- repeated proverb of ‘shirtsleeves to shirtsleeves in three generations’ resonates with families around the globe. Motivated families are seeking information about global ‘best practices’ to prevent that destructive family conflict. When a family decides to create its own family


governance, it should begin with a family constitution. Families should view themselves as a small country and ask themselves what rules they would make and how they would make them. Families use various terms to describe a family constitution: charter, mission, rule book, code of conduct, and so on. I promote using the word ‘constitution’ to keep the connection with country governance. A family constitution should be the core set of rules


about: ƒ what kind of decisions family members will make to apply to the family, and; ƒ how they will make those decisions. Families might also want to agree on certain areas


where the family will not interfere because those areas are kept as individual freedoms (such as in the Bill of Rights in the United States Constitution). Some family constitutions are more than 50 pages


long. Some families delegate the wording entirely to a consultant or a lawyer. Some firms are even selling family constitutions in book form. Family constitutions are most successful when the


family does the work (with the guidance of an experienced adviser) and has the hard discussions about: ƒ what kinds of rules there will be (and whether everyone will follow them), and; ƒ how those rules will be made (and changed).


44 FAMILY OFFICE: ASIA TOMORROW As John Ward has consistently argued, it


is the process of going through these difficult discussions and reaching agreement that gives the family the true value of a family constitution. (See his books, The Family Constitution: Agreements to Secure and Perpetuate Your Family Business and Unconventional Wisdom: Counterintuitive Insights for Family Business Success.) With regard to Asian families, Christian


Stewart, a colleague based in Hong Kong, was quoted in the New York Times (28 March 2011, “Business Dynasties Need to Plan for the Delicate Task of Succession”) as recommending that Asian families begin with the governance project of writing a family constitution: “A family constitution formalizes the rules about who is in the family council, how the council makes decisions, and how it votes. The key is to have a fair process for the family members to make decisions together,” Mr. Stewart said.


If the actual constitution focuses on the two


areas I propose, then specific decisions about family policy will carry similar weight, just as resolutions passed by a country’s parliament or bills passed by a country’s congress or parliament do.


“Families should view themselves as a small country and ask themselves what rules they would make and how they would make them”


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