This publication recently interviewed Katie Graves, of Withers Consulting Group, about its work in advising wealthy families about governance issues.

The ways in which wealthy families govern their affairs and wealth is crucial to the task of protecting assets – and important values – over the generations. This is a complex area, and advisors such as Withers, the international law firm, are working in this space. This publication recently interviewed Katie Graves, of Withers Consulting Group, part of the law firm. The interview explored how these issues work out in Asia, although the points made apply more widely.

Describe the services that Withers Consulting Group (WCG) provides.

We help families decide how they want to be governed in the future. The need for this arises as the family and their enterprise become more complex and the family’s natural way of governing themselves begins to struggle with this complexity. “Family enterprise” is a term we use to cover family businesses and family offices, which each ultimately involves a family, and includes entrepreneurs who are facing the “what next?” question.

What do you mean by governance?

Firstly, it involves clarifying the family’s vision of success, in other words why they want to continue being connected as a family through their enterprise. One family might want to maximise return and enable family to pursue their own aspirations; another might want to continue a family legacy and value family harmony over self-interest. These families will need to be governed – or organised - differently because they are trying to achieve different things. Advisors should never assume that everyone in a family has the same idea of success or try to impose whatever the adviser thinks the family should do.

We then help families create a blueprint for future governance that is designed to achieve success on their terms. The blueprint may include structures, like a family assembly or owners’ assembly. These can help to clarify the boundaries between the respective roles of the family, the owners and whoever manages the assets in the enterprise, including a clear answer to the important question, “who decides what?”.  

The blueprint will include policies on areas like ownership (who can be an owner, returns and exit) and others where the family has particular sensitivity over the involvement of family and outsiders, such as employment and remuneration of family members in the enterprise, confidentiality, conflict of interest, engagement with the media and family philanthropy.  

The blueprint can also include a plan for how the family will maintain the family glue or educate the next generation about what they might one day become involved in. This could all be summed up as a system of “organised accountability”, in place of a more informal set of assumptions, expectations and understandings, which is how most families try to cope.

Does culture affect this work in different parts of the world?

Absolutely. Family culture is an important variable and we ensure that we tune into the dominant culture of the family, wherever they are based in the world.

What do you think are the main cultural influences in Asia?

The family has traditionally been the basic unit of Chinese society. Filial piety (being loyal to parents and ensuring that good conduct brings a good name to one’s family) is more important in traditional Chinese culture than in other parts of the world. It creates an interdependent society that stresses the good of the community more than the good of the individual.

Do you come across a clash of cultures where the next generation have been educated in the West?

This has been happening in families for ages, and isn’t just a contemporary issue or only about education. Many families become international through travel and commerce as well as education and they constantly absorb ideas from outside their culture of origin that might help them move forward as a family and as an enterprise. When we describe this as a “clash” it could mean two different challenges.  

The first would be where business practices or family culture from abroad clash with indigenous business or family culture. For example in respect of family, the West’s emphasis on individualism seems to clash with Asia’s culture of family harmony; in business the idea of being publicly owned might clash with a cultural preference for private ownership.

The other challenge is the boundary between family culture and business culture; where does the family want families to be integrated in the business and where do they want a boundary between family and business so they are segmented and one cannot pollute the other.   

Every family has to decide where they want to establish boundaries so that the domains of family and business can operate in the way the family prefers. Some like a lot of integration and others feel it is best to have an impermeable boundary between family and business. Establishing boundaries is an important part of creating good governance. It is a challenge but families can resolve this without having to see it as a clash which implies, wrongly in our view that the outcome has to be victory of one culture over another.

So what about “best practice”?

It’s a myth. Beyond the basic and obvious - such as a family should plan for the future if they want to succeed - we don’t believe that you can prescribe a set of best practices for every family to adopt. Since every family is different, every family’s governance needs to be adapted to suit a particular family. We believe it’s helpful for families to have lots of information and ideas when deciding what they want to do, but it’s impossible to say that because something worked for family A, then it ought to work for family B.

Can you give more concrete examples?

Employment policies. Some families think it is good for family members to gain outside experience and then come back to work in the family enterprise; others like their family to grow up in the enterprise. Another would be the role of spouses; some families involve spouses in their enterprise and others see this causing nothing but trouble. There is no right or wrong answer to these questions or a “best practice”. The term itself would mean condemning any alternative as being “worst practice”. We think that is wrong because we’ve seen families achieve success in many different ways and we’re convinced that the best way is the way that the family works out for itself.  It’s just that sometimes they need a little help to do this.

Can you explain how Withers Consulting Group is connected to the law firm Withers?  

The law firm owns WCG but they operate entirely independently of each other. WCG does not provide legal advice. WCG is a separate business and we are putting together an international team of consultants, some of whom will be recruited from inside Withers and some from outside. I am one of the internal recruits and I now wear two different hats; one as a lawyer and the other as a consultant.  

WCG works with a number of intermediaries who value what we can do to help their clients. Also, after our blueprint is agreed by a family the implementation work is usually carried out by the client’s existing advisors and the only reason to change that is likely to be if that work is outside their area of expertise.