Consequently, one person needs to assume different roles. A major problem arises when the founder or chairperson remains the company boss for longer than necessary. Failure to manage the transition and handover can weaken a family businesses. You need to plan the training of the younger generation and the eventual retirement of the most senior manager representing the family, whether that person is the founder or a member of the second or third generation. It’s a business matter as much as one of personal development. Think of it this way: Removing someone who has dedicated their whole life to their job can impact their health, especially if they have few hobbies. Yet no one can be an effective manager past a certain age. Just as your 100 meter sprint time changes over the years, so do your management skills. That’s why it’s essential to start planning the transition processes well ahead of time. Unless the founder sets aside time to develop hobbies or engage in social projects, handing over in a timely fashion becomes difficult.

As for young people, if we expect the next generation to take responsibility in company management but have failed to define the criteria and mechanisms for preparing them, then appointing one sibling over another at the last minute will damage family relationships. Whereas if the rules are clear, then everyone knows who will take on which position and why. That’s why the earlier those rules are set and the roles differentiated, the easier it is to manage the transition. This process of differentiating roles deserves significant communication and preparation. The better it’s handled, the easier it is to remove the emotional aspect of the family relationship from the business. I’d like to conclude with one further point: I recommend that independent directors constitute the majority or significant portion of company boards.

Because that can also limit the effect of family relationships on management.

Management and governance are two separate yet mutually reinforcing concepts. It’s essential that we differentiate between the two, otherwise it becomes difficult to truly understand and embrace the concept of governance.

When governance isn’t strong, there’s a reluctance to hand over managerial authority. People have been establishing rules to manage conflicts and differing interests since the day they began living in tribes and small communities. You have to appoint people to manage everyday matters as organizations grow and problems become more complex. Governance provides guidance and oversight to management. Just like the principle of separating powers in government, or establishing boards of trustees in non-governmental organizations, the board of directors has a critical role in directing and monitoring management.

Governance determines the strategic direction of a firm and establishes the boundaries of management authority. Governance responds to the questions of “what to do” and “which boundaries and rules to respect in the process.” How to do it within those boundaries falls to management.

I’d like to add the following three governance principles to the four you stated. The first is consistency. Let me explain why it matters. Whatever people do, they do in relation to other stakeholders, whom they need. It’s quite costly to communicate to everyone what you’re doing, and why, every step of the way. So if you’re consistent, you’re able to manage expectations. Managing expectations is as critical for companies as it is for economies. If there’s consistency in your interaction with stakeholders, stakeholder trust in your company increases. That doesn’t mean that once you’ve chosen your way you’re never going to veer, but when you do change direction, you need to increase your communication and persuade people. This is why consistency is important.

I’d like to mention a second principle, and that is effectiveness. No one’s interested in a manager who’s transparent, responsible and fair but fails to get results. What matters is results, so we have to add the concept of effectiveness: the efficient utilization of limited resources to achieve a goal without undermining the company’s values or ignoring its rules, regulations, and ethical principles.

The final one is participation and inclusivity. This principal is critical, because listening to stakeholders at decision-making stages and allaying their concerns are important for the smooth running of operations.

For instance, if your suppliers are sufficiently well informed about your direction, they can invest accordingly. If they aren’t, they can’t invest, and you’ll face problems in procurement. Participation, therefore, supports transparency and accountability; it’s a culture that increases the reciprocal trust of all stakeholders. That’s why I believe we should add consistency, effectiveness and participation to the principles of good governance.