Responsibilities of a supportive owner

Company ownership is a two-way street. 

Owners have responsibilities to their company. They have certain duties and obligations they owe their family business such as defining clear direction for the company. 

Owners also have certain rights that allow them to receive benefits from their company, such as financial rewards. 

Understanding owners’ responsibilities and their rights is necessary to be able to perform well in the supportive owner job. First, let’s explore owners’ responsibilities: what are the obligations owners have to the family business they own? 

Effective owners communicate to the board and management their values, big picture goals, and guiding principles for the business. For example:

• Where do the owners want the business to be heading, broadly? 

• What values should guide board and management decision-making? 

• What are the owners’ goals for value creation? 

• What is the owners’ risk appetite?

• What are the owners’ guardrails?

Good owners align as an ownership team around their answers to key directional questions such as these. 

Then they speak with one voice to the board and management so the company’s strategic plan, operations, and culture can be executed in alignment with the vision, values, and goals of the owners. 

Owners do not set corporate strategy and should be careful not to interfere in management, but they should provide enough guidance so the board and management have confidence that their strategy and approach aligns with the owners’ goals, values, and priorities.

Supportive owners remain informed about these topics. They stay knowledgeable about the company and industry, and look out for the long-term interest of the business and family. They develop their point of view about important issues and constructively contribute to discussions through proper channels (such as at the annual shareholder meeting).   If a proper channel does not exist, the ownership group should suggest on to the board and senior management.

In the corporate governance world, the main vehicle for owners to steer and oversee their company is through the board. 

Typically, a handful of board seats are designated for family owner representatives while others are allocated to independent non-family directors. 

The owners with voting shares have the responsibility to define the role of the board and select board members. This typically happens through annual voting. 

In addition, the owners are responsible for ensuring the board performs effectively, through an evaluation or assessment, and that the business is being wisely governed.

Supportive owners stay informed about corporate governance best practices including the role of boards in general and the role of their own company’s board. They are knowledgeable about the future direction of the business and the related skills needed on the board, and spend time getting to know board candidates. They develop their point of view about the board and its candidates, and remain informed about its performance. They look out for the long-term interest of the company and family (not just their own branch) and constructively contribute their perspective through proper channels.  

Owners have a responsibility to provide stability to the company so management can exercise long-term thinking and planning and prudent risk-taking. 

Owners demonstrate this to management through their long-term commitment to the business, their unity/alignment as an owners group, and their capital. Owners are responsible for making sure the company has the capital it needs to succeed. 

Supportive owners publicly vocalize their long-term commitment to the company and their support of management. They act as positive emissaries for the company. 

They support a dividend policy that only issues affordable dividend distributions from the company, ensuring the company retains profits needed for reinvestment and growth. They contribute additional capital as needed. 

They align as owners, keep family conflict out of the company, and support ownership’s point of view.

The owners have a responsibility to know, at a high-level, how the company is performing. To do this effectively, owners should have some knowledge of the company’s industry and operations. 

Supportive owners learn how to read their family company’s financial statements. They educate themselves about the industry and future threats and opportunities on the horizon. 

If the right information is not provided to them in a timely and organized manner, they should request it. However, it’s important to note that owners are not entitled to all company information on demand. 

They attend shareholder meetings where they constructively ask questions and respectfully voice concerns about the company’s economic performance through proper channels. They keep company information they receive in strict confidence. 

The owners of a family business have a responsibility to the next generation of owners, to prepare them for future ownership. 

Cultivate a culture in your family that ownership is a job, not a birthright. Inform them what the role, responsibilities, and rights of owners are.

Future owners need time and a plan to build the knowledge and skills need to steward and care for the company.

Supportive owners align around the type of family culture they will cultivate with respect to ownership. They teach the next generation to have realistic expectations about owner behavior. They prioritize stewardship and responsibility over privilege and rights. They unite around building value for many stakeholders. They fund the development of owner talent so the next generation becomes skilled and prepared to step into owner roles at an appropriate time.