On 14 December 2022, the Board Leadership Center welcomed Philippe HaspeslaghCatherine Noel, Olivier HamoirGuido Vanherpe and Patrick De Schutter for an insightful and engaging discussion on the governance of family-owned businesses. This article summarizes the key takeaways for boards.


Family-owned businesses bring a unique angle to governance – a familiarity and emotion that comes from the personal connection to the business. Family shareholders can be deeply passionate about the business; they know it well and they care about the longevity of the company. This also brings a certain energy, and while this can create opportunities, it can also bring challenges.

The governance needs of a family-owned business evolve throughout its lifecycle, with each passing generation and as the business grows. In the founder generation, leadership is clear and alignment is easy. In the second generation, alignment is generally still relatively easy to find, especially where the siblings have grown up together and with the business; they are close to the founder’s (their parents) values and vision. With each successive generation though, alignment – between the family, shareholders, board and management – becomes more challenging and having clearly defined roles becomes more important.

Structure is your friend

Governance is a practical matter. Written policies, family councils and independent directors are a few of the ways that family businesses can instill structure. Through written policies – such as a family charter, shareholder agreement and company charter – companies can define the roles at each level. Having a delegate from the shareholder committee on the board can enable communication – they can explain board decisions to the shareholder committee and vice versa. At a minimum, shareholders should write a clear statement to the board, explaining the vision and values of the company and expectations of ownership towards the board. This statement should provide the parameters within which the board can exercise judgment. 

Family Charter

Family charters take time to write properly, but it’s often the process of writing them, which brings the most value. It’s through this process that the family has the time to think through what they want, why, how they will get there, who will be involved, in what capacity and how they will be governed. It can stimulate discussions, which bring out the elephants in the room, put processes in place for decisions involving differing priorities, such as philanthropy and more. For each company, the answer as to whether an external partner should be involved in the drafting process is a personal one and will depend on the circumstances. Once the charter is written and agreed, though, governance should be put in place to ensure the charter is complied with. 

Family Council

The creation of a family council can also be used to bring structure. One Belgian family-owned business used two councils, in addition to their general assembly and board, to do just that: a Family Forum and a Family Council. The Family Forum created an ecosystem of shareholders to connect the family members and enable the older generations to share their legacy, while engaging the next generation in the future of the company. The Family Council, made up of the family board members and the Chairman of the board, aims to “connect, learn, involve.” It’s responsible for organizing the activities that create engaged shareholders, such as site visits. It also organized sessions to involve the next generation in creating the company’s sustainability 2030 vision. This vision was then presented to the board and management, who were energized by the invested and involved shareholders. 

Independent Directors

Independent directors can bring added value and objectivity to family boards. However, while they can be the rational voice in discussions that might otherwise be emotional, they are not meant to be a referee, but an independent voice around the table that brings an objective view. So, it’s important that they be given the scope to not only question but to challenge shareholders. At the same time, there should be understanding of, and respect for, the emotions that come with family-businesses. That requires an additional set of competences than those needed by non-family-business boards: the ability to create and manage engaged shareholders; to channel the passion of family owners into positive energy through communication, fair reward and recognition (not only financially), growth and development.

Outside investors and deciding to list

Opening ownership to outside investors, such as private equity (PE) firms, can bring new opportunities but also raises additional challenges to family-owned business governance. To mitigate these challenges, first and foremost, it’s crucial to identify the right partner at the right moment, and it should be a real partnership, where the parties listen to each other and make decisions together. There should be an alignment and commitment towards a common goal and a clear shareholders agreement. It’s also important that decisions are not taken on an emotional basis. They should be based on facts with a view toward creating long-term value. Here, companies should look at how to bridge the time horizons of the PE firm, which may be shorter-term, with those of the family. This is a particular challenge upon the exit of the PE firm, so monitoring this process is important.

Listing a family-businesses adds yet another dimension to governance. At times, there may be a certain attractiveness to the stock market. However, before making any decisions, the owners should consider their reason for listing – e.g. is it for the visibility? for an external valuation? for liquidity reasons? for additional investment capabilities? On this basis they can determine whether listing is indeed the best or only solution.

If the company does list, the owners should be aware of changing expectations and the need to professionalize processes and increase discipline. Working family members should be compensated at market rates; roles not based on experience may need to be reconsidered or redefined; corporate and personal expenses must be clearly separated. However, once the processes are in place, these growing pains tend to get resolved.

Preparing the next generation

It’s never too early to start preparing the next generation. They need to be exposed to the passion, vision, etc. early on to develop an emotional connection with the company, in order to become engaged shareholders. If the process is not managed well, family-businesses may find themselves with third, fourth or fifth generation owners who are far from the company.

Family-businesses could consider appointing someone to be responsible for identifying talent within the family and creating opportunities for them to grow, as well as creating learning and experience initiatives.

One company does this through a structured training program for the children in the family that helps them learn about the company, encourages cohesion through team building, teaches them how to read reports, introduces them to management, etc., so they are prepared when it’s their turn to lead the company.

    Each family-owned business is unique, but regardless of the governance structure, one critical success factor is trust among all stakeholders, built on openness and transparency.

About the Board Leadership Center

KPMG’s Board Leadership Center (BLC) offers non-executive and executive board members – and those working closely with them – a place within a community of board-level peers. Through an array of insights, perspectives, and events – including topical seminars and more technical Board Academy sessions – the BLC promotes continuous education around the critical issues driving board agendas.