Sustaining a Family Dynasty: Key Issues Facing Complex Multigenerational Business- and Investment-Owning Families

Abstract

As a business family moves from the second to the third, fourth, and succeeding generations, and seeks to maintain shared family control of its often highly diversified financial and business assets, families around the world have created a complex web of structures, agreements, councils, and forms of accountability to manage their wealth. In working with such multigenerational dynasties around the world, we have begun to see that successful transmission of wealth, and sustaining of family connection, depends on a highly creative web of such structures. This article will focus on the structures and agreements that we have seen in such families. A family that owns a business, or substantial investments, is at the intersection of several complex systems and serves a multitude of masters, purposes, and constituencies. Facing continual change from the business environment, and from internal pressures as people develop, in order to thrive, the family must develop a clear infrastructure to manage the interrelationships of people, business, and investment. It must regulate and integrate the interests and concerns of the many people in many ways. As a family enters the third generation, it has become a complex structure with several family branches, diverse interests and stakeholders, and challenges to sustain collaboration and effectiveness. This article presents the key challenges that a family must face to create an effective dynasty over generations and illustrates models and best practices for how effective family dynasties develop a governance infrastructure as they grow into multigenerational family dynasties. It highlights the core structures that make up effective governance and the key agreements that allow a dynasty to work.