Knowledge and conduct of supportive owners

You want to be a supportive owner. You now understand the key responsibilities and rights of owners, and how owners organize themselves to be united and decisive by way of governance. But what does this actually mean for you in your role? 

To fulfill your responsibilities and be a supportive owner, what specifically should you be doing? How should you be behaving? What specific skills, knowledge, and understandings should you be building?

It sounds simple, but it is incredibly important: Show up to meetings. Attend shareholder meetings and participate in events organized by the family council. 

This means adding meetings to your calendar well in advance and making them a priority. These are the places to engage in meaningful conversations, ask good questions, and learn new things. 

Shareholder meetings in particular are also a place to demonstrate to the board, management, and even other employees that the family owners are engaged, committed, supportive, united, and paying attention. These signals matter.

To engage in owner meetings constructively, you need to be prepared. 

You are not expected to be a subject-matter expert or have advanced knowledge, but you should be able to review and analyze annual reports, financial statements, and other owner communications shared with you and form your point of view on topics such as those below:

1. Financial performance – Based on your reading of the financial statements, how well is the company performing? There are a host of online resources, written and video to help you develop your financial literacy. We recommend the non-profit Kahn Academy’s self-guided modules. 

2. Risk level – What level of risk is the current business strategy taking? What is your own personal preference of risk tolerance in business? What is your generation’s, and the whole ownership group’s risk tolerance? In your opinion, should the company take more risks, fewer risks, or stay the same in terms of its level of risk-taking? 

3. Company culture – What kind of culture do you think the company should foster in order to live out the owners’ guiding values and principles (and lead to continued success)?

4. Leadership and board performance – How well do you think executives and board members are performing? What data leads you to that opinion? What is your opinion on individual board candidates up for election?

5. Overall portfolio – How well does this company (this asset) fit into your family’s overall portfolio and help your family achieve its long-term wealth objectives? Are there things your family needs/wants from this asset that you aren’t getting? 

Information given to the owners should be done so in a way that is digestible. If it isn’t given to you that way, speak up and make a polite request via appropriate channels (either ask an active owner or the family council). 

If you are having a hard time understanding industry jargon or making meaning out of financial data, seek assistance so you can understand it. 

Remember to observe the company’s confidentiality policy about information shared with owners. That likely means asking someone inside the family or company for assistance.

Remember that the owners provide oversight of the board and provide guidance to the board (and therefore to management) about direction, values, and goals. 

Owners ensure that the board (and therefore management) are performing well and looking out for the best interest of the family and the company. 

Fulfill your responsibility by asking constructive questions at shareholder meetings. Do it respectfully. 

Maximize the benefits of family ownership by providing the board/management the things that give family companies strategic advantage: long-term commitment, patient capital, stable and unified ownership, the ability to make decisions quickly.

When it comes to management, owners should communicate with them through the board. In most family businesses, this means identifying a family owner representative on the board, and privately asking for a meeting to discuss a question or issue. 

Many enterprising families also have a Family Council that can serve as another appropriate channel to ask questions and relay messages from the family to the board. 

In your quest to become an engaged, supportive owner, make sure you ask questions only in appropriate settings. Don’t pop into the office and interfere with day-to-day management of the company. 

You are an ambassador on multiple fronts: You represent the family to the board/management. You represent the company and your family to the public. You exhibit solidarity by publicly supporting management and the board. You role model what it means to be a good owner to the next generation. 

In all arenas, you want to come across as competent, credible, responsible, supportive of the business and the family. Your actions reflect on the family and the business. 

Imagine you’re at a cocktail party for owners of family enterprises like yours, and someone comes up to you to learn more about your family company. A supportive owner should be able to answer the following questions. If you can’t answer these questions at a basic conversational level, you have some work to do.

1. What’s the story of your family business (from founding to today)? [elevator pitch]

2. What does your family business do? [elevator pitch]

3. What industry/ies are you involved in?

4. Who are your customers (profile, not names)?  What markets do you serve?

5. Where are operations?

6. What is the general size/scale? How many employees? 

7. What are the primary business units or divisions?

8. Who are the key senior executives and board members? Do family members work in your company or serve on your board? What are their roles?

9. Which generation owns your business?

10. What are the owners’ core values that are important to them in their business?

11. What are 2-3 recent public announcements or newsworthy events related to your business?

12. How are you different from competitors in your industry? What makes your company stand out? 

13. What are the 2-3 most talked about trends (could be threats or opportunities) impacting your industry? What is your company doing to remain future-ready?

To be a supportive owner, you need to build your general knowledge about the business, its operations, and industry trends so that you can have an informed discussion on the topics above. 

You also need to build your knowledge of other assets your family owns and activities it engages in, such as philanthropic activities, the family office, shared financial assets, governance, and other aspects of family life. 

Additionally, you’ll want to familiarize yourself with more internal topics, private to the owners, related to the ownership and governance structures and agreements in your own system. 

For example: 

• What is our dividend policy? 

• Do you have a family council, what does it do? 

• Who does the family foundation director report to? 

• What are your family’s policies around family employment or communication? 

• What are the key provisions of your ownership agreements and policies? 

If you struggle to make sense of these documents or wonder where to focus your attention, educate yourself. But also, don’t be afraid to ask another family member for guidance.

Owners receive financial rewards. That is one of the benefits of being an owner. However, if owners are too reliant on the family business to support their lifestyle, it can lead to unwise decision-making. 

Owners need to ensure that the business has the capital it needs to succeed. Don’t pressure the board to declare dividends if the company really needs reinvestment. Take proactive approaches to develop your own financial independence and diversification so that you are not overly reliant on the business. 

Owners need to know how to work as a team and communicate effectively. When family ownership groups encounter challenges it is often because they have not worked to cultivate these crucial skills in the owners. 

As a member of a team of owners, you need to build your EQ or “emotional intelligence” skills—to know how to express differing opinions, listen respectfully, and talk through challenging topics with others. 

These communication skills can be learned by attending programs or workshops, reading books and practicing together. Does your family help all owners build these skills? If not, it should.

You and your fellow owners need to be unified. That does not mean that you need to agree on everything at all times. 

But, it does mean that you need to be aligned on two key things: 1) your mission – where you want to go; and 2) your approach – how you will treat your assets and people (including one another) along the way. 

When conflicts and disagreements arise — which they will — set the right example for the next generation. 

Resolve owner conflicts as owners and family conflicts as family. Do not bring them to the company or board or allow them to contaminate the business or end up in the press. 

Find a way to discuss differences and reach consensus agreements that everyone can live with so that you speak with one voice. This is what will allow the business to benefit from the ownership stability that helps family business perform better than non-family businesses.