Family and Professional Companies

I had the opportunity to work with defined control companies of different origins and stages. These companies could be classified into five groups:

(1) Company that meant for the family a means of survival. A platform for achieving the goals of the family unit;
(2) Inherited company;
(3) Publicly-held company under family control;
(4) Publicly-held company under control of a family office or family holding;
(5) Company built by entrepreneur.

In terms of sales such companies ranged from millions to billions or Reais; in terms of coverage either regional or national; and in terms of customers, served from individuals (B2C) to legal entities (B2B).

The experience was very broad and rich. Additionally, it allowed me to eliminate wrong preconceptions. The main one is that defined-control companies controlled by families or individuals would be, invariably, non-professionals.

When we think of professionalism, we are led to the following elements: technical standards, practice, skills, line of conduct and financial return.

In this sense, professional companies are those that are guided by the set of elements above, allied to the practices of government that guarantee its perpetuity and the achievement of its objectives.

Government has relation with direction and control. And a company counts with a set of internal and external bodies that form the basis of government:

(1) Shareholders or Partners
They are the holders of economic power, being the owners of the company.

(2) Bylaws or Articles of Incorporation
It is the document that establishes the company’s objectives, its form of government and regulation.

(3) Shareholders' Representatives
Representatives of the shareholders are those appointed by them to conduct the business of the company, who may be Directors (if there is an organ of the Board of Directors) or Management.

(4) Management
Represents the body formed by those who manage or direct a company, whether by indication of the shareholders or their representatives.

(5) Internal Advisory / Counseling Bodies
These are bodies that advise and advise the representatives of shareholders or management. One example is the Advisory Board.

(6) Legislation and Regulations
Represented by the set of laws and regulations produced by a legislative branch.

(7) External Regulatory and Supervisory Bodies
They represent the bodies or institutions responsible for ensuring that the laws and regulations are being fulfilled.

What these bodies will be aiming to ensure is that there is transparency and exemption in the decision-making process, and that those responsible (for making the decisions) are held accountable. In addition, the existence of a conflict between economic power (financial interest) and political power (management, decision making) is, to a certain extent, positive. Governance, in the end, aims to optimize the performance of an organization, taking into account the regulatory and competition environment.

And, what does all of the above relate to the family-owned business? Just that it is not the kind of shareholder that controls the company that defines its degree of professionalization, but how such shareholders can segregate their interests from those of the organization, or even how they manage to segregate the individual from the legal person !

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