Owners Council might make sense for your family business

Owners Council for Clear Vision and Timely Decisions

It’s no secret that developing well aligned and engaged owners can be a powerful strategic advantage for the family business. One highly effective structure you should consider to achieve that goal is the owners council.

What is an Owners Council?

An owners council is a representative group of owners that focus on understanding how shared ownership impacts shareholders, family, and the business itself. It doesn’t replace the corporate board or family council, although it can be a committee of the family council if there are no non-family owners.

Develop Clarity of Ownership and Direction

The owners council articulates its “vision” for the company, including:

  • Growth and profitability targets
  • Distribution targets
  • Values for operating the business.

The council aims to ensure the asset remains appropriate for each owner. It helps owners forge alignment and creates a forum for difficult, but crucial, discussions when shared ownership may no longer make sense for some.

Inform Owners and Encourage Timely Business Decisions

Another important goal of the owners council is to actively develop informed and engaged owners through:

  • Education about the company’s industry, past, and projected performance
  • Discussion of owner satisfaction with company direction, performance, and leadership
  • Understanding the risk landscape the company faces
  • Understanding liquidity and reinvestment requirements of the company

The owners council expresses to the corporate board its “vision,” and the board must also communicate to shareholders what is possible, realistic, and required to achieve that vision. This creates a healthy forum for company strategy development. The process encourages realistic expectations about what it takes to achieve owners’ goals, reducing the potential for conflict and facilitating timely decision making in the boardroom.

Protect Business and Family Agendas

Integrating difficult ownership discussions with board or family meetings can be counterproductive and is often unavoidable. Establishing an owners council can keep these discussions in the appropriate forum and prevent disruption of the board process or family agendas.

In summary, an owners council helps to:

  • Educate shareholders regarding company performance, risk landscape, liquidity, and reinvestment needs
  • Inform strategy to align with shareholder expectations
  • Ensure transparency
  • Evaluate shareholder agreements and policy
  • Influence distribution policy
  • Minimize disruptive discussion at board and family meetings regarding ownership issues
  • Inform the directors of owners’ vision for the company

When an owners council can align owners and the corporate board to learn together, build trust, and practice good decision making, it can become a powerful competitive advantage for the family enterprise.

Could developing an owners council be a powerful advantage for your family business? Contact us to help you evaluate your unique needs.

Learn more about how we approach Family Governance and Corporate Governance.