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Family business values - beyond legal structures
IN September a few years ago, my LGT colleagues and I spent a week at Liechtenstein Academy in Switzerland, a training institute owned by Princely House of Liechtenstein, where we rowed in the lake in the morning, walk in the woods in the late afternoon, and etch or draw during the rest of the day.
We also listened to and learnt from good-humoured scientists and experts who explained why we should not multi-task, and how we can be more self-aware and self-caring.
Throughout the week, we were also forbidden from answering work calls and participating in work meetings. On our return, invigorated and encouraged by what I had learnt, I looked again at the Latin words on my course folder and had renewed appreciation for the programme: A healthy individual contributes to a healthy organisation.
On recounting this experience to an audience of Asian family business owners, the discussion turned to the question of how family values can nourish the businesses they own, and how to have these values guide businesses when family members are no longer in active management roles but can exercise their influence through ownership.
When families talk about their goal of legacy building, this sometimes becomes a shorthand for philanthropy as a legacy.
Entrepreneurial families, families with an influential and affluent background, appreciate that with wealth comes responsibility. A good owner is committed not just to his family and his business but also to his employees.
One of the chief responsibilities of a good owner is ensuring that transitions between generations are smooth and effective. Most times, this means a family and business succession plan, other times this means getting a family business ready for sale to a better owner.
Those of us who work with families on their succession plan are aware that the loftier goals of being a good owner may need to be grounded with some help on housekeeping - many busy founders of businesses may have established wealth holding structures that may have served families well in the early years but which have failed to grow in step with the family's evolution. A review of these usually provides the springboard to identify governance structures that families may consider slowly incorporating into their existing arrangements.
Going beyond wills and family trusts, families that own businesses may already be considering more formal family governance structures - such as family office, councils and assemblies - to help their families manage their decision-making in relation to their family issues and wealth, and the businesses owned by them.
The involvement of a well-educated, well-trained 'next generation' in such family-succession planning can help lift the burden from the shoulders of the founding generation already challenged by the jargons in such discussions.
Ultimately, what families are trying to determine is if an arrangement is the right one for them.
For many, it helps to talk to other business-owning families that have successfully used and adapted similar governance structures, and get an understanding of how they are put into practice.
The Princely Family of Liechtenstein is well-known for having transferred the family wealth over 30 generations. As business owners with independent wealth and who contribute to their community rather than rely on taxpayer funding, their insight on what works for their family can be a helpful reference for others.
Prince Philipp of Liechtenstein, chairman of LGT, and Prince Max of Liechtenstein, LGT's CEO, bring in perspectives from two generations to answer questions such as how their family use the House Law to regulate their respective rights as family owners, how they utilise their Family Council, and how they inject sustainability and social responsibility into their family business.
Like the Liechtensteins, most family owners who have successfully transferred wealth through the generations use a combination of family governance structures to manage family issues and decision-making through the orderly and timely provision of curated information on family wealth to family members so that conflicts get nipped in the bud, especially during a crisis. Families are often surprised to learn that governance frameworks undergo renewals and that that responsibility falls on the new generation.
How can a family gain the confidence to let the next generation get it right? How the next generation can best learn the values and skills required to be successful leaders and owners of family businesses is often posed at family exchanges with the Liechtensteins. By participating in such dedicated forums, families can exchange experience with one another and receive knowledge on topics like values, communication, responsibility, next-generation development, and how to deal with wealth.
Author Leo Tolstoy said the most powerful warriors are time and patience. In today's busy world, the true commitment of a family that cares for its members, their business and their employees, is the time devoted to learning and the patience to start over 'when at first you don't succeed'.
- The writer is regional head of wealth planning, LGT Private Banking Asia