CORPORATE GOVERNANCE IN FAMILY BUSINESSES

According to the Brazilian Institute of Corporate Governance (IBGC), Corporate Governance it is “the system by which companies and other organizations are directed, monitored, and encouraged, involving relationships between partners, board of directors, board of directors, supervisory and control bodies, and other interested parties”. Its four pillars are: transparency, equity, accountability, and corporate responsibility. Briefly, it can be said that the main objectives of Corporate Governance are: to ensure that the actions of the company's executives are aligned with the interests of the shareholders and to make company information more accessible and reliable to all stakeholders.Corporate Governance practices have gained prominence on the corporate agenda in recent decades, mainly motivated by financial scandals that occurred since 1990, involving renowned multinational companies. Despite the relevance of the topic, there are still companies that underestimate its importance, which often results in management problems, conflict between shareholders and adverse impacts on Performance of these organizations. Family Businesses have an extra challenge when trying to implement good Corporate Governance practices, since their shareholders and executives commonly deal with personal and family conflicts, not necessarily related to the organization's daily life. In the case of Family Businesses, it is essential to distinguish between ownership and management. Although technically it seems simple, in practice it is not trivial to ensure that all partners, who are also relatives, are able to define clear rules for common situations such as: the performance of partners in executive positions, distribution of dividends between executive and non-executive partners, offering economic benefits to heirs and family members, etc. Some measures, already common in publicly traded companies or pulverized control, are also recommended for Family Companies. They are: constitution of a Board of Directors with independent representatives, preparation of a Strategic Plan, formalization of the Shareholder Agreement, monitoring of the Corporate Budget and Indicators of Performance, etc. In the next editions, FC Partners will thoroughly explore each of the measures mentioned above, as well as the main difficulties experienced during the implementation of its invested companies and clients in recent years.

Article written by Pedro Fenati - Associate of FC Partners

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