Michael J. Nathanson
Michael J. Nathanson
THE BIG PICTURE
2. A family council: Councils are especially helpful for larger, multi-branched families. They give limited representation to various family members or branches as needed when it is otherwise inefficient or inappropriate to involve everybody in key decisions. The family council often plays an important leadership role within the family, and its members often come with expertise or experience that helps the family pursue more specific goals.
3. Family committees: A single family may have multiple“ family committees,” which are useful for attending to and acting upon key areas of focus for the family. For instance, there might be a philanthropy committee that coordinates grants and volunteer efforts, an investment committee to oversee family holdings, and a governance committee for larger families who require more concentrated attention on their policies, procedures, and leadership.
Those participating in these bodies should understand their roles and responsibilities in advance, and all meetings should be chaired by a designated leader responsible for generating and adhering to an agenda. Topical presentations can be made by family members, outside experts, and advisors as needed.
Governance And Family Business
When the family owns a business, things become more interesting— and the governance will need to be more structured and refined.
Decades ago, Harvard professors Renato Tagiuri and John Davis noted the three groups involved in a family business: the family members who own the business, the members of the broader family, and the people actually running the business.( They called this the“ three-circle model.”)
1. Family: All family members should be interested in the family business if it is part of the family’ s identity and responsible for producing much of the family’ s wealth. Yet some family members, such as spouses, may not be owners of the business. Other family members, such as children or those who lack the interest, capabilities, or experience, may not be employees of the business. Nevertheless, family-assembly meetings and the family constitution should address the importance of the business to the entire family and allow all family members to understand and be updated and educated about it.
2. Owners: For those family members who are owners of the business, some may be actively involved in the business, and some may be passive owners. Often, a family council, advisory board, or family-business committee can help family owners formulate and communicate their input into and express their opinions on the business, especially when they are not directly involved in it.
Business Management
Family
Ownership
3. Business management: A substantial family business, like any other business, should have a board of directors or board of managers that oversees it. The board need not, and in some cases should not, consist solely of family members, but the board must be able to communicate and work with the family through its family council or others. In effect, the board becomes yet another critical family-governance body, though it may not consist entirely of family members. It is also common for some family members to be actively involved in the business if they are capable. In any event, the business and the family must find ways to work together to promote the interests of the business while also accommodating the interests of the entire family.
It should be noted that sometimes these groups overlap. In reality, however, family members often belong to just one or two categories.
The Family Office Many families with wealth establish a family office to manage it and offer financial planning, estate, tax, and other services to their family members. Many more families engage a multi-family office or some other type of advisory firm to perform these functions, sometimes in coordination with outside lawyers, accountants and other service providers.
When a family office or another advisory is in the picture, family governance should involve regular interactions at all levels with the firm. The firm, which may employ or otherwise engage with specific family members, can be a helpful facilitator of the entire family governance process. It can also make reports and offer education to the family assembly, council or investment committee at least once a year( and more frequently as needed).
Even Those With Modest Wealth?
All families, regardless of wealth, can benefit by uniting around a common mission, vision, purpose, and values. All families can benefit from empowering better communication, proactive conflict resolution, and continuous education.
Strong family governance is, in fact, a solution to the“ shirtsleeves” problem. It establishes guardrails protecting the family’ s wealth from reckless financial decisions made by members in the future, and, more important, ties wealth to transcendent concepts such as purpose, values, responsibility and legacy in a way that makes reckless behavior less likely.
The“ shirtsleeves” problem isn’ t just about future generations with no rudder squandering family wealth. It’ s also about the sad tendency of people to forget where they came from, what their parents and grandparents stood for, and what they and their own children might stand for one day, with or without riches. Family governance offers a solution for these problems, since it helps people preserve their family’ s wealth and to preserve the wealth of values. Even the wealthiest families might concede that the latter is just as important— or more important— than the former.
MICHAEL NATHANSON is chairman of Focus Financial Partners.
16 | FINANCIAL ADVISOR MAGAZINE | MAY / JUNE 2026 WWW. FA-MAG. COM