The Three Forms of Governance

Abstract

Many books have been written on the topic of governance as it relates to family wealth. In this first in a series of three articles, the author notes that there are three separate family entities, each of which requires its own governance system. The series will outline the differences in the three entities and their respective governance systems, why they matter, and how acknowledging those differences from a governance perspective can empower families and their enterprises. By examining the purpose of each form of governance relative to the entity it serves, the author reveals an approach to governance which fosters smoother operations of the family business, the family office, and the family, while enabling each entity to thrive and more easily adapt to change. Building on the premise set forth by the author in “How Family Dynamics Influence the Structure of the Family Office” (Fall Issue, 2005)—that generational perspectives and family dynamics directly influence family office structure and wealth management decisions—this series of articles goes beyond the boundaries of the family office to explore the validity of the ‘three forms of governance’ approach and how the three forms integrate to foster, transfer, and protect the wealth of the family.