A generative family is a huge endeavor. It brings together many people and a portfolio of businesses and financial ventures. It can contain a foundation, family office, vacation houses, and hold an important role in the community. Its reach is often global. The family can have multiple ownership agreements and several trusts, each with an operating document. It can contain multiple boards, a family council, and an owners' group. It convenes periodically as a whole family, has task force and committee meetings, and offers education programs for the next generation. And at its center, legacy values and mission statements from older generations that define the family's purpose, identity, and commitments. Even those in the center find it hard to track and absorb all of these agreements.

Where does someone go to discover or consult the rules of the game, the operating principles and practices for how this huge entity works? Nearly all generative families create some sort of guiding document that clearly sets forth these values, policies, and practices. It expresses, definitively and clearly to everyone, what the family does, what it stands for, and how it organizes its family and business governance activities. This chapter looks at the nature and development of this family constitution.

Constitutions outline the shared policies and understandings that family members are expected to adhere to. Each adult family member, as a signer, becomes a participant in what James Hughes calls a compact across generations.¹ Adopting the constitution is akin to claiming citizenship of a vital and working community. With benefits and privileges also come responsibilities that all family members need to observe.

A family constitution is an intergenerational document created and agreed to by the whole family. It clearly and explicitly states the values, expectations, principles, procedures, activities, and decision-making procedures that regulate family activities and use of its resources. Legal, shareholder, and trust agreements are integrated, summarized, and explained within it. The constitution defines the role expectations—rights and responsibilities—of a family member citizen. It organizes and binds the family into a working community as it grows, changes, adapts to new circumstances, and overcomes conflict.

But it is more than an organizational framework; it begins with a call to action, an inspirational statement of who the family is, why they are in business, and what they stand for. It is a private and personal document that is intended only for the family. Therefore, while newer families and advisors hear about them, they have not often seen one and therefore find them hard to visualize.

The families in this study report that a constitution most often emerges in the third generation. More than 80 percent of the families in this study have formal constitutions while the others have similar guiding agreements. Family constitutions and guiding agreements are a global phenomenon, appearing in equal measure in every country. While some look and sound like legal documents, the majority are more inspirational and personal. Constitutions range from a few pages to a booklet with fifty or more pages. They often contain family pictures and mementos such as letters from the founders. My research team and I collected about twenty examples, and this chapter draws from them.

The working groups composing the elements of family governance—business boards, family councils, and assemblies—are recognized with purpose, policies, and practices collected in this master document, which can be simple and aspirational or very detailed and elaborate. The constitution and the family council are two sides of a coin. Each is necessary for the other; together they constitute governance. This chapter explains how constitutions (or charters or protocols, as some families call them) are created and what they contain.

Generative families work together across generations to develop a statement of core purpose and values. While each family statement is different, there are some common themes and values. It is contributed to and agreed upon by all current family members. New family members who reach adulthood and those who marry in can learn from studying it, and are asked to sign on. It forms a charter for the extended family that makes them more than a clan or dynasty but a shared family enterprise.

The constitution is an evolving document. It is usually not a legal document, but a personal, moral document, with some aspects of it duplicated in legal shareholder documents. Each generation, drawing on the version of the previous generation, amends or develops its constitution. The members of each generation usually do this together, over a period of a year or so.

The Constitution Defines Business and Family Culture and Organization

The constitution often signals or affirms a deep change in the family culture. In political bodies, the constitution marks the end of a monarchy and instills a new regime of defined rights and responsibilities and collaboration within the community. For a family, signing a constitution signals a similar shift. It affirms that the family has moved from a single, often closed, culture where rules are random, hidden or implicit, to one based upon transparency, dialogue, and public deliberation. It also signals a shift from a single autocratic family leader to one where the leadership is constrained by rules and obligations that include participation of all family members. Otherwise, if one person decides everything, why would the family need a constitution at all? The creation of a constitution reflects cultural changes already under way as it formally recognizes that change is beginning.

The adoption of a family constitution, echoing a transformational social event like the signing of the Magna Carta, represents a shift from a patriarchal to a collaborative cultural style for the family. Such a culture shift, as we have seen, is difficult and often fraught with conflict. The process of writing a constitution offers a platform for different family perspectives to be integrated and to define rules, practices, and a structure that allow it to grow and adapt. (See Figure 12.1.)

Moral Agreements: Elaborating on Legal Documents

Every generative family has many legal documents, such as shareholder and trust agreements, wills, estate plans, and corporate charters. These are often inaccessible, hard to understand, ambiguous, and even obsolete or designed for an earlier time. As family members come of age and select marriage partners, they need to understand what their new family is all about.

Family members discover that they need to build upon the original family “compact” and legacy that led to where they are now and how things work. To create a constitution, family members do the following:

• Review existing documents and update them to current realities.
• Define the context in which the family has arisen by making explicit the values, intentions, and principles espoused by the founders for their successors.
• Define operating entities that make the agreements workable and operational, make decisions, and deal with differences that arise.

The result of this is governance, expressed through the master family governing agreement—its constitution.

For the most part, constitutions are not legal documents, though like such agreements, they are written, agreed to, and signed. They are often referred to as moral agreements, in that family members voluntarily agree to them because they care about each other. They do not substitute for or contradict legal agreements in place. Rather, they explain the existing legal agreements so that they are clearly understood and elaborate upon them in areas that are less clear or not mentioned.

For example, there may be an ownership agreement for a vacation property, but the family must allocate funds for its upkeep, select and buy furniture, pay for property ownership and upkeep, and allocate its use. Every company hires its employees, but family owners may specify special qualifications for family employees or executives. So the family may end up using the constitution to help family members understand, apply, and work with legal agreements, though they can, of course, consult the original documents as well.

Constitutions don't even look like legal documents. They are usually written in personal language by and for the family members. They begin by presenting the values, vision, and mission—what the family is all about—and then specifying how the family will work. What follows are sections about family policies, the organization of the family council and assembly, the foundation, input to the business, employment, education, and family meetings. Legal agreements often don't feel clear or fair to some family members, and they need to be explained or modified when the family considers how these agreements work in practice.

Legal documents are linked to specific entities, and do not usually explain the guiding purposes or values that lie behind them. Also, a family can contain many legal entities, each with their own guiding documents, that are not connected and may even contradict each other. By addressing the family as a whole, the constitution joins and links documents and allows the family to consider themselves as a single entity with many subentities. It can clarify or clean up ambiguities and contradictions. The constitution begins with a definition of the nature and purpose of the whole generative family, and then proceeds to detail the different parts and entities and how they fit together and link to each other.

Constitutions celebrate the legacy of the family, inspiring family members to be active in family governance and making implicit agreements transparent and shared by all. The examples my research team and I obtained contain pictures of the family founders, businesses, and homesteads. They frequently include early statements of values and vision. A few contain letters or documents from founders or elders about their experiences and hopes for the future. These are often a revelation to younger family members, who learn new respect and understanding of the family origins.

The constitution sets forth how family membership is defined, the roles of a family member, the purpose and activities of the family assembly and council, and activities that relate to the family and the business. It starts with a preamble, defining the family's core purpose, mission, values, and vision. Crafting this beginning is the most challenging task and takes the longest time. Family members need to reflect upon their legacy and history—the values and intentions of the wealth creators—and add new elements now needed to address the greater numbers of new family members, who have emerging values and changing circumstances that have emerged from the family's success and the growth of its business and financial resources.

Every family experiences some conflict when some members feel slighted and not treated fairly. Defining fairness is a challenge for every family. A constitution expresses the principles and values followed by the family, and how they are observed. Constitutions help family members understand what the family defines as fairness and how differences may be surfaced and resolved. They often are the result of contentious and difficult family discussions and the resulting resolution is hard won.

The constitution is a working, living document that guides the family in its regular interactions around its assets or work. It can be amended and updated by a process outlined within the document. Creating the constitution can also be the product of a process by which the family transitions to a new level of collaborative organization. For example, it may reorganize the family after the sale of its legacy business or the creation of a family office. It may be compiled to explain and clarify legal trust and corporate agreements as third- and later-generation family members grow up and marry. Every family has such agreements that need to be tied together as circumstances get more complex.

What Does a Constitution Do for a Family?

Like all governance activities, the constitution solves a problem for the family. It is based not only on legal or abstract needs but also on practical realities. A European third-generation family explains how the constitution evolved from the work of the family council and assembly:

The assembly elected a family council, organized by branches, empowered to do several things: preserving family values, understanding and keeping contact with the family business, education, philanthropy. There are four members from each of the four branches, a total of sixteen. And it was packed with the fifth generation.

Our charter had family values and powers of the council and assembly. On your twentieth birthday, you're presented with a charter and sign it. It's got a list of values and a code of behavior. We used it to restate the corporation's values to align with family values. One of the lessons we picked up overseas was that as a family grows, they lose interest unless there's something holding them. Quite often, it's legacy, history, or values that link people to their business. As soon as you lose those, the business goes. They'll go, “Ah, yeah. We'll just sell the business. I'm not interested in that. We've lost interest.”

Governance cannot be created for the family by a consultant. An active, committed, and responsible group can't be organized in absentia. Several families in this study note that they initially hired someone to write a constitution for them or work with a single family leader. They frequently discovered that this was the right thing done in the wrong way. In each instance, the family rejected or ignored the document. This third-generation Asian family elder learned the following:

We had a weekend discussion, and I thought it was going to take us somewhere. But when I proposed a draft of the constitution that our consultant had written and I had commented on, they didn't accept it at all. They said, “We don't need all this.” They were dismissive and negative, and basically, they felt it was Anglo-Saxon hocus pocus. “This is too formal, too serious. Who do you think we are?” They took it very badly, and I was very disappointed.

If a small group begins to draft a constitution, the group needs to periodically step back, slow down, or start over again, being sure to include other family members in the process. That means that in drafting the constitution, the family leader, who as business owner can pull many strings in the family, must hang back and work with other family members inside and outside of the core business. A constitution is often organized as the family looks ahead to generational succession; the family creates documents organizing the pathway ahead. Some say they are writing the constitution for future generations, not the ones that currently exist.

The families in this study report that effective constitutions positively accepted within the family are most often created by a representative task force of family members from at least two generations:

I joined the working group called a family council task force. We would sit together and go over the examples of other family constitutions. We met every month for a year and a half to discuss the different policies and outline. It was a lot of discussion and debate. Now we have a document that has been accepted and approved. At the first family assembly, the family voted in the first family council. They've been quite active so far.

Another European family had just sold its legacy family business to a global conglomerate. Developing the constitution was an inclusive and evolutionary process, offering an opportunity for the family to redefine itself and come together in a new form. The family elder reports:

The ownership council created the family constitution and from time to time reviews that and potentially modifies that as required. Initially, vision and value evolved out of the history of where the family had come from. We endorsed and identified activities we felt most strongly about. We worked on the vision together.

I wrote a lot of the framework for the constitution, and we then fine-tuned it together in the ownership council. We chatted about it on a regular basis, and it took several years. It wasn't a five-minute job. The process of creating it was more important than the end document. It gave people an opportunity to discuss and raise issues, and we make decisions by consensus, not votes. It took a bit longer, but we got better buy-in as a result.

Since the constitution is an “operating manual” for family and business governance, some guidance and education must be provided to the family to learn how to use it, as this family leader notes:

First, they must take an interest in the process of ownership. We record our policies in what we call our family council notebook. For example, we have a board training policy, a training program for those who want to be on the board. We also have a code of conduct, conflict of interest policy, decision-making policy, a family employment policy, and a family loan policy. Our G4s developed the policies. They patiently sat through meetings as we “wordsmithed” the drafts to death. The good news is they haven't been turned away from it. Over that time, our objective was to bring them into governance and leadership. Something rubbed off—maybe this was something that they should be interested in. We commenced distributions/dividends a few years ago, and we have included them in the financial discussion of not only their trusts but also the business.

We do a business strategic plan every four years that contains a distribution policy. Fourth-generation members have taken great interest in the distributions. Thus, they became very interested in the success of the business, and they have taken responsibility toward business governance. Through the financial exposure and preparing the family council policies, we ended up with five fourth-generation members that are very enthusiastic about their future, the legacy, and protecting it. As annoying as some of the steps and processes might have been, the two generations stuck with it, and in the end it has been a success.

A challenge for a family is how to keep the constitution accessible and available. One way is to post it and other family information on a shared web portal. In a large and dispersed family, this new technology enables a far-flung family to remain actively engaged and connected:

The portal is maintained by the corporation. Initially, it was a printed agreement that we called the family guidebook or handbook. It had everything you wanted to know about us. The portal now has several different tabs. A family tab that has that statement. It also has a family employee statement of values, a section on our business history, and the history timeline. We have videos and information from shareholder meetings and teleconferences. We keep our family tree and directory up to date. We have the family photos gallery that also has photos from our family meetings.

Then we have a whole section for the family council with a statement of purpose, council contact information, information from the family meetings, family surveys, finances, next-gen programs, newsletters. We do a newsletter twice a year. Then we've got a section on family in business; within that section, we have family surveys and roles and responsibilities. We have key policies and procedures and describe the summer internship program. Then there's a whole section on communications from the corporation—announcements, newsletters, quarterly reports, directors, biographies, governance, board committees, key contacts, general overview of the corporation, and the leadership team. Then there is the family foundation tab with policies, annual reports, directors, grants, and recipients.

Elements of the Constitution

Almost every constitution begins with some sort of preamble, statement of the purpose, what the family is and stands for. These often come from the first or second generation, perhaps amended by members of G3, and are meant to remind the family of who they are and call people to be part of all the things the family does together.

The constitution then clearly defines the often vague border between the board and management and the inactive shareholders. For example, one family's corporate bylaws provide for an advisory board of directors and a formal board of directors. The charter goes into detail on the role of the advisory board and how family members can participate. This is viewed as the official pathway for family shareholders to learn about and influence the business and deal with their concerns and differences. There are requirements for participation that the family member needs to adhere to.

The constitution separates the family's governance from business governance by defining the purpose and place of each family entity and clarifying the nature of the overlap between them. The experience of a generative family is that a constitution must be created collaboratively by the family and actively pursued by all the members.

The family's distribution policies for profits from its business and investments are usually explained in the family constitution. These policies are often embedded deep in trust documents and may not be shared with or clear to everyone. Family members need to know what these policies are, how they are administered, and how they may change over time. These policies make clear what a family member can expect from the collective family wealth. While trusts and boards make these decisions, if family members are not clear on the criteria and free to express their preferences and desires, conflict can easily arise. Some family members may feel that the agreements are not fair or that family members who work in the business are benefiting from reinvestment of profits in ways that family members whose lives are taking other directions are not.

One Asian family describes how its constitution clearly spells out family policies:

In 2004, our company became public. So the ownership structure must be even more clear because we are required to be very, very transparent. We needed a governance structure to run the family and the business and policies for how to manage the wealth within the family. I said, “Yes, we believe that the family should pay for education, but what is the standard?” Okay? Should the kids fly business class, or should they fly coach? When they travel, do they stay in a dormitory, or [do] they get to stay in a hotel? If we buy them a car, what is the standard? We were seeing our standards abused by family members. Some of them fly their children on business class and buy them a BMW for school. And I sense that this thing about the education, the family pays for education, if the family pays for medical, somebody gets sick, what is the right thing to pay? Somebody gets sick, and some Chinese friend said, “Oh, you need to eat this kind of crazy turtle that costs $10,000 apiece.” As the family grows, if you do not have a proper structure, then you start to have abuse. Some people will say, “Oh, I do not know this is a benefit. How come I never claim it?” and “Oh, do this and why I cannot do this?” You start to have more in-laws; you start to get more children.

We designed whole family governance policies and procedures and divided the benefits. For example, we have policies about supporting kids in school. We say that, okay, every university will tell us the cost of the tuition and living, and we provide more than the cost. We created a standard. If you go to United States, this is what we are going to pay. If you go to UK, this is what we're going to pay. If you stay in Hong Kong, this is what we're going to pay. And then we start to identify what kind of car we're going to give you. And then we say, okay, if you do not have a 3.5 GPA, you don't get a car and you fly coach.

The constitution can go into detail about special family activities. For example, there may be a section on philanthropy and social investment that outlines the family's values about the community and the environment to guide the investments and business practices of the family and its policies for contributing to the community. These social values express how the family allocates its social capital and are increasingly important to the rising generation as they decide how involved they want to be in family activities.

Another important area covered in constitutions is how the family deals with conflict and disagreement. It can clearly define the principles of fairness that apply to each individual. As the family grows, conflict about what is fair or how rules are to be applied is the largest risk factor in sustaining the family connection and governance. How does the family deal with a major conflict without making the argument public and having a negative effect on the family's business? The constitution makes clear what happens if there is disagreement. Some families have begun to experiment with creating a judicial element to go along with the legislative function of the family council and assembly, and the executive function of the business management team. They set up something like a council of elders whose job is to listen to parties who are in conflict and guide them to finding common ground or to exercising the right to exit if the conflict cannot be resolved.

The family is at its core a community. The role of the constitution is to organize the activities of the community so that it can keep order, inspire and recognize contribution, and creatively initiate new activities to extend the family capital.

Writing the Constitution

Writing the constitution begins with the existing legal documents. They are read and explained so that they are clear to the family. This is more difficult than it seems, and often there are several drafts before the meaning and mechanics of each agreement is understood, consistent, and clear. Then, the drafters look at the informal policies and activities that have been created by the family council and other operating entities, like the foundation or family office. There are several parts to a constitution that refer, for example, to the family values, the activities of the council, business governance, trust agreements, and philanthropic activities and entities such as foundations.

The constitution is an amalgam and expansion of several individual agreements—created by the council, the owners' council, the trust, and the board of directors. The constitution is a unifying document used by the whole family. Family leaders may start to draft a constitution but soon discover many reasons to include other family members. They need to know what is on their minds, what their expectations and concerns are. Families that develop the most useful and accepted constitutions report that the process of creating them was inclusive, proceeding through several drafts over a period of a year or more. The constitution draws from many documents—legal and shareholder agreements, for example—and expands upon how they work in practice. By searching out and carefully reading these documents, the drafters are able to explain them to the family, which often leads to the need for clarification and even change.

Which comes first: the constitution or the institutions it defines—the council and the assembly? The families in this study report that these elements evolve together in parallel. Sometimes the family members begin to meet and write a statement about who they are and what they are doing. So the constitution is drafted by this self-created group. Other times, family leaders begin to write a constitution and soon discover that they need to include others to consider what they want for the future.

This cannot be done by a lawyer or consultant. When family members read and reflect upon existing agreements, questions occur, gaps are located, new conditions are recognized, and contradictions surface. Different family members see the agreements differently and raise different questions, especially members of the rising generation. To make a constitution that all can live with, everyone must have input and questions must be responded to.

Constitutions do not last forever. Enterprising families face major changes each generation as a new group of family leaders emerges. The constitution often starts as a short document, a few pages of values and polices, and then over each generation further sections are added. After a new generation, a constitution adds policies as well as family history and traditions; it can grow to become a small family monograph.

A constitution evolves as the family faces new challenges and as old rules and policies are reevaluated. Here is one evolutionary story:

The first version was for the second generation only. It was a three-page paper where they wrote things that they could or could not do as brothers and shareholders. It was very simple, but they put that into practice. That's what amazes me: they have very strong personalities, so they got together for almost three years to build this family constitution. In the beginning, it was a lot about separating family, business, and ownership, so they had simple things. For example, a shareholder's wife cannot bring her car to get fixed in the company; she cannot use the gardener to work in her house. They each could have a company car.

Last year, we signed the second family constitution, created by the second and third generation together. It covered all five of our major family holding companies. A working group from each holding would nominate one person to represent that holding in the constitution task force. The new constitution grew from three to more than forty pages.

I think the rules also grow. It's amazing because our constitution has a lot of policies that we may not use, that we hope to never use. For example, if someone wants to leave the family business, to sell their shares, how are we going to do that, how are we going to pay for that? Now we have all the little rules that the third and the fourth generation understand and can live with. For example, right now the business can no longer give a car to all shareholders, so we understood that benefit was only for the second generation.

Mission and Values: A Call to Action

Unlike legal documents, constitutions begin with a statement of the family's purpose, principles, and values. This takes the form of an inspirational call to family members about their nature as a family and as a family enterprise. It is especially important for family members to be involved in defining this core statement of the mission and values they share as part of a generative family, as this family reports:

A group within the family took that task. It took about a year to develop the mission statement and values. This committee put something together and then sent it out to the family at large saying, “Give us your input. What do you think?” We started the values process by sending an email that asked each person to “put down your values, what you think should be included in our mission, vision and values.” You can only imagine with more than twenty people giving input how many values we had. But we incorporated it because we felt like it was important that everyone had a voice.

The constitution came from the same group. I gathered examples of other constitutions to form a template. The committee filled in the blanks. Once we got to where we felt like it was in a final format, we shared it with the whole family during the annual business meetings of the family assembly, and they came back with revisions. We revised and shared it again, and it was enthusiastically approved.

As a family becomes a multi-household tribe that includes its rising generation, it can draw from everyone's personal values and mission to create a shared mission statement:

We came up with a family mission statement that evolved out of all our individual mission statements. That's one of the activities the family council worked on. Everyone came up with their own personal missions. Based on that we developed a collective value table, our values, and then a group mission. We have a family employment framework we worked on at the family council and then took to the operating companies for feedback and tweaked it a little bit to make sure it was connected to their human resource policies.

A South American family emphasized the role of values as a guide to their life together:

In the community and with each other, every family member is clearly aware of a set of values that guide their personal and business dealings. Each of them feels that these values form the foundation for their continuing success. The values are clearly and explicitly honored in action, not just rhetoric. The close attention to defining core values came from a family tradition of studying philosophy as well as commerce.

Another family drafted a constitution² in a half dozen family meetings over the course of a year. The family's charter and mission statement was created by two generations: the second-generation family CEO and his two sisters, one of whom also works in the business, and the nine adults among their eleven third-generation offspring, ranging in age from the twenties to forty. Their constitution begins with the charter and mission statement:

We are a family committed to our members and descendants being responsible, productive, well-educated citizens who practice the work ethic and make constructive contributions in the local community and the world at large.

Each member is encouraged to develop and use self-supporting, marketable skills that contribute to the enhancement of their own self-esteem and independence.

We urge family members to adopt lifestyles that are healthy, personally satisfying, and at such a profile as to preserve the maximum level of family privacy, given the public nature of our business.

We urge the continuation of the orientation of prudent, careful investing with a long-term view of outcomes so all descendants of our founders may enjoy the benefits of the foundation they built.

We believe clear, constructive communications are at the core of our long-term success as a family. We encourage all efforts to further harmony, develop humor and perspective on life, balance long-term concerns while enjoying the present, and to enhance communications, caring, and amicable relationships among family members.

This mission statement is followed by concrete guidelines for family employment and creation of a family business advisory board. The family all signed off on it even though the family CEO was clearly in charge as controlling owner. Now he has handed the chairman and CEO roles to the next generation while remaining on the board as a member.

Why is defining mission and values so essential for a business family? The family has a legacy of values and mission from the founder and second generation. While the members of G3 want to respect this legacy, they face new challenges to sustain themselves as both a business and a family. They may feel some values need to take on a different meaning or find that the mission and values are primarily about the business and that they need to adapt and extend them to the new arena of family governance. And the new generation may have new emerging values and principles they want to add to the family. We need to integrate these “roots and wings,” legacy and innovation, as described in previous chapters. For example, some rising generations want to incorporate sustainability or social responsibility into their business or investing. So the process of defining mission and values is deeply collaborative and involves negotiation across generations.

A creative tension sometimes exists between the old and newer versions. Some families ask the members of G3 to come together and adopt their principles for their generation as they enter leadership. One family had the elders of G2 write “legacy letters” to the members of G3 before they met to begin work on the family constitution. Then, the members of G3 were free to express their own reinterpretations and even take the family in new directions.

One global fourth-generation family found that creating a family constitution led the whole family to see the enterprise differently:

Separating the business from the family allowed the family narrative to shift. Gradually we developed a new narrative of who we were and what we were doing beyond just the business. It's difficult. How do we do it? I started working with my siblings first. But G4 has thirty people when we included their children. I proposed to them, “Well, since we didn't grow up together, would you like to grow old together?” That was the invitation.

Because we live in different parts of the world, we are very individualist. We got together every quarter to talk a few days, and after three years, I said, “We need closure with the family.” We talked about another initiative to draft the family charter, which includes the whole family so that there's already a consistency and understanding from the generation above to a generation below us.

Doing the family constitution enabled my three siblings who'd grown up together in the early years, but who now lived far apart from each other, to get closer together. From a generational standpoint, to get the patriarchal generation to change their ways is not going to happen. It's up to this generation, in their forties and fifties, and their children, in their twenties, who've been studying abroad, to say, “Yeah, we know about this concept of corporate governance or a family-type constitution.” So I think there is increasing awareness and acceptance of these concepts.

Code of Conduct: Encouraging Respectful Communication and Behavior

Closely related to the values statement is a code of conduct, which links the values to resulting behavior and communication style expected from family members. As new family members become adults and others enter by marriage, the code of conduct explains that being a family member entails some clear standards for behavior that accompany the benefits.

It must be remembered that generative families are families first. Old patterns of communication and memories of past hurts are often raw and emergent in interaction. When there is stress an individual often regresses to old and childish behavior, especially when they are family. While a set of rules cannot enforce respectful communication, they offer a clear statement of what is expected, and sometimes are linked to provisions for how family members can challenge inappropriate behavior. Generative families find that codes of conduct provide a common foundation for asking family members to overcome bad habits and let go of old slights and grudges.

Here are the principles from one family's code:

We want to maintain the traditional values in our family system but modified to meet changing business conditions. Staying together was a key point of the code and to maintain a high moral standard, honesty, and values, then to cultivate and strengthen the bonds of trust in each other and in the family. Then to recognize the continuing family security and growth was from hard work, initiative, and frugality and accept, honor, and follow decisions arrived at by consensus; to give each individual maximum opportunity, morally, educationally, and professionally, to develop both for the family and for himself; and to enable senior members to reside or retire in their countries of choice. There are eighteen “principles,” but that's just the flavor.

In a fractious or divided family, the code provides principles that define how to deal with emotional or difficult issues and specify how the family can act together. It defines a safe space, a way for the family to interact even when there is stress and conflict. The family has to affirm that the code is an aspiration and that some may find it difficult to adhere to, but having it written down allows family members to hold one another to behaviors and call each other to account.

A European family leader recalls, “The family created a set of rules to address conflict and build unity within the ownership group. This code of conduct set a standard of positive behavior for all family members to follow. It also translated into a set of values and guidelines for nonfamily managers to set the tone for the culture of their businesses.”

In another family, a third generation of several siblings had a family legacy of lots of conflict and rivalry across genders and those working in and out of the business. They were finding that this tendency was passing to their children as they developed their family governance. They convened a task force to define standards that family members would aspire toward in their interaction. This code did not end conflict, but it set some useful and practical standards of behavior that they could challenge each other to follow:

The Code of Behavior is designed to promote harmony and unity among all family members. It is intended to help the family reach its highest goals.

1. We strive to maintain a sense of gratitude for the gifts from our ancestors, those currently generating wealth for the Trust, and for all family members.
2. We strive to offer support and appreciation to one another.
3. We desire to listen when others speak and wait our turn before speaking.
4. We aim to keep a light heart and do our best to keep the mood pleasant, respectful and productive.
5. We want to respect that diverse opinions exist and acknowledge that very few things are completely black or white, right or wrong, good or bad. We know that coming to an understanding may take time.
6. We strive to address family, and family business conflicts privately and not argue in front of a client, employee, customer, or advisor.
7. We value the importance of respectful communication when trying to find understanding. If needed, we try to arrange a meeting, set a date and time limit for the meeting, arrive prepared to listen to the other person and do our best to reach a peaceful resolution. It is helpful to use equal timed speaking turns with listener remaining silent, and reflect back and acknowledge what you heard the other person say before beginning your turn to speak.
8. When conflicts arise, we try to recognize and acknowledge our feelings and take a break until we can remain calm and work towards resolution once more.
9. We never want to speak negatively about anyone behind their back, but rather speak directly to the person we are at issue with.
10. We understand that blame and accusations are not productive places to start conversations. We want to approach each other with dignity and respect. We ask to be heard and try to remain inquisitive.
11. We recognize that the Family Council has developed tools and resources to assist with intra-family conflict. We try to take advantage of what the Family Council has to offer.
12. We want to take responsibility for our actions and mistakes. We try to use mistakes as learning tools and reflecting back to acknowledge.
13. When offering help or advice, we strive to inquire first to confirm that it is welcome.
14. We make every effort to abide by the agreements we have made; we will aim to not make changes to agreements unilaterally. Instead, we make changes with the people involved.
15. We make every effort to honor our time commitments, to complete tasks on time, arrive at scheduled meetings and events on time and be ready to participate.
16. We try to acknowledge when we have over-committed our time or energy. We seek to be willing to speak up and ask for help if we need to lighten the load of our responsibilities. If we remove ourselves from a responsibility, we want to allow others to proceed as they see fit.
17. We do our best to hold ourselves accountable for our actions and decisions.

As with mission and values, the code of conduct is negotiated across generations. As families include new generations in governance, this enables them to agree on and share expectations for responsible behavior. For example, several families mentioned the need to be clear and explicit about the meaning of confidentiality of family information. The behavior of family members in public situations was also included in these codes. One family stated clearly that family members were expected not to be written about in the local news and social media. Others specify when and how a family member can comment on family-related business issues.

A family constitution is an impressive achievement. But whatever form it takes, to become a generative family, a family must have a meaningful mission and purpose for being, prescribe behavior, and create policies and practices to guide itself. A generative family is more than an intention; it is a complex vehicle to achieve many aims and goals for the family. Each generation it grows more complex. The existence of an evolving family constitution is one way that the generative family is able to thrive across generations.

The constitution is not a product or something that can be drafted and then implemented by a family. As we learn from the examples of generative families, it evolves and is developed by the family as it designs its governance process. It does not take place before or after this, but at the same time, alongside it. In addition to codifying and explaining family legal and business documents, the constitution is a shared activity that, by their participation, inspires and invites rising generations to become involved. It vividly shows how to do that, and the benefits and responsibilities of taking on a stewardship role. The constitution also helps the family navigate and overcome differences and conflict and integrate all the different activities and ventures that are emerging in the family. Without a constitution, the family risks working at cross-purposes and not being able to align and continue its long-term success.

Taking Action in Your Own Family Enterprise

The constitution is the outcome of many family activities that can be done separately, but ultimately, they come together to produce the intergenerational guide that is the constitution. Here are some of important activities that help build a constitution.

Legacy Letters (or Videos)

There is much wisdom that the older generations can share. It is often implicit, or tacit, in that their actions reflect it but it is not really known or useful to the rising generation. Family elders can share their learning and expectations with new generations in the form of a letter or a video. This is very moving, especially when young people who knew them slightly or not at all view it after they have passed. It also adds vitality and emotional expression to what might be dry expectations or directions in trust documents. Often these letters are included in the preamble or beginning of the constitution.

Finding the Meaning and Practical Relevance of Legal Documents

Legal agreements, corporate by-laws, trust documents, and shareholder agreements too often live only in family or lawyers' offices. They are thought to be arcane and irrelevant, when in reality they are the foundation for family organization. Each new generation should be introduced to them and have an opportunity to meet with advisors and family members to become familiar with them. This briefing often precedes the drafting of a constitution. The briefing usually raises questions and areas of ambiguity that have to be addressed. Many family disagreements and feelings of unfairness arise because young family members do not understand these agreements. After reviewing and understanding agreements, a family gathering can define questions to ask advisors or family leaders, and also areas where further development is needed.

Convening a Family “Constitutional Convention”

Creating a constitution is not a one-step process, or something that an advisor can draft. Advisors can help, but they can only emerge from a body that represents the leading voices of the family. It is not separate from or different than the starting of a family council or other family governance processes. It should rather be considered one of the first activities in a new family council or assembly, or the beginning of these groups.

The process can begin by bringing the family together at a family assembly and presenting the nature and reason for developing a constitution. It is meant to clarify the values, rules, and practices that guide the family enterprise. It is done by a group of family members that represents each branch, key constituency, and generation, but includes the older leaders. This group of from 4 to 8 family members gathers the existing documents, and begins the process defined above for generating the constitution. They will want to communicate in person with the family, to share drafts and ideas. After their work together, they will convene a large family session to read and consider the constitution part by part. This may take several meetings.

You begin with the big picture, the mission, purpose, and values of the family. Then you might meet to talk about the nature of each key family entity—council, board, and other ventures, and how they are organized. This process is not a one-time event and often takes place with large and small meetings until a workable draft emerges. It can then be used and tested over a year and then revisited to make mid-course corrections.

After a constitution is drafted, it is important that there are regular opportunities to review it and a process for making changes. No family constitution can stand without regular updates.