This is one coaching work I am particularly proud of. After a series of sessions and weeks of intense exchanges among Gen 1, Gen 2 and Gen 3 family members, I am almost finished with the family covenant on conflict of interest and self-dealing policies.
This 5,000 strong family led enterprise with diverse interests in property and manufacturing started in the 70’s, moved their headquarters in Singapore in the 90’s and their growth has been nothing less than spectacular.
With their relative success, one may wonder what could have triggered the group from engaging my firm, W+B Family Business Advisory to revisit their vision, values and mission? And why was there a clamor from family members to review the family charter (constitution)?
With a semi-retired patriarch in his 80’s and five (5) children in their 40’s and 50’s actively managing the day to day affairs of the business plus over a dozen Gen 3 cousins joining the pool of management trainees, the time has come for them to regroup and assess the relevance of their agreement I personally initiated 7 years earlier.
One of the primary objectives of this recent policy initiative was to preserve the family business reputation for honesty and integrity, two values that have been the cornerstone of the group since its inception. The family members wanted to articulate in the strongest possible terms their integrity DNA to the succeeding generations and the only way to inject this powerful value is to adopt and enforce stronger guidelines for family members to avoid any conflicts-of-interest, real or perceived.
Let me share 8 of the many COI rules the family enacted with the hope that business owners can follow their lead and mandate members to do what is right so they can continue to enjoy a reputation of honesty amongst employees, customers, competitors, suppliers and community.
Rule Number 1: The enterprise shall not engage in business with any family member and/or spouse who has his or her own enterprise or who is employed in another company. It is the intent of the enterprise to use suppliers and service providers who are unrelated to the founding family in any way.
Rule Number 2: Family members, their spouses, and their children, whether or not they work inside the business, will not be permitted to avail themselves of the services or the resources of the enterprise for personal use.
Rule Number 3: Family members, their spouses, and their children shall attempt at all times to avoid any perception of impropriety in business matters. They may not directly or indirectly derive any personal profit or advantage by reason of their birthright.
Rule Number 4: The personal interest of family members should never prevail over the interest of the company. Their single minded loyalty to the company is non-negotiable.
Rule Number 5: Family members will not invest in companies that are suppliers of the enterprise nor seek to benefit financially from information and opportunities gained as a result of their association with the enterprise
Rule Number 6: When an actual or potential conflict of interest should arise on the part of family members, it should be fully disclosed and the concerned family member should not participate in the decision making.
Rule Number 7: When a family member has a continuing conflict of interest and it is discovered, he or she should resign or if the Family Council deems appropriate, be expelled and be meted the most stringent penalty
Rule Number 8: Copies of the Enterprise Conflict-of-Interest Policy will be distributed to all family members, company employees, and suppliers