What a family council is for, and what it cannot do
Three bodies now sit around most family enterprises. Only one of them speaks for the family, and it is the one most often given a room, an agenda and no authority at all.
A family council is the body through which a family speaks to its enterprise with one voice. It sets expectations of owners, resolves disagreement between them, and settles the questions that belong to the family rather than to the business.
It cannot direct the operating company. It cannot approve a transaction. It cannot overrule a board that holds a duty the council does not.
Most councils that disappoint were never given a question they were allowed to answer. The body was created and the authority was left where it already sat.
A family enterprise usually ends up with three.
An investment committee, a family council and an advisory board. They arrive in that order more often than not, because each answers a pressure the one before it could not.
The investment committee comes first, because capital arrives with questions that have dates on them. The advisory board comes when the enterprise outgrows the people who built it. The council comes last, usually after an argument.
None of the three is a subcommittee of another, and none of them can do the work of another. They are three different authorities over three different subjects, and a family that treats them as tiers of one hierarchy will find that the wrong body is answering.
What each one may actually settle.
The test is not what a charter says the body is for. It is which decisions stop when the body is not sitting.
- The investment committee
- Authoritative over the mandate: what may be held, in what proportion, within which limits, and who may commit at which threshold. It is the narrowest of the three and the most likely to be genuinely authoritative, because its subject is measurable and its decisions have dates.
- The family council
- Authoritative over the family: who may join the enterprise and on what terms, how a member exits, what the shared capital is for, and how an owner raises a grievance. It is the only body of the three whose subject is the owners themselves, and the only one that can settle a question about them.
- The advisory board
- Authoritative over nothing, by design, and useful precisely because of it. It advises and does not direct, holds no duty to the company, and carries no vote. A family that wants a body to decide has to constitute a board of directors instead, with the duties that follow.
- Where the confusion lives
- An advisory board asked to approve is being asked for something it cannot give, and a council asked to ratify a decision already taken is being briefed. Both produce a minute that records agreement and no record of a choice, which is the shape of governance without the substance.
How to tell a council that decides from one that is briefed.
A council that decides owns a list of questions nobody else may answer. Ask for that list. If it does not exist in writing, the council is a forum, whatever the charter calls it.
A council that decides produces outcomes that bind. Look for a decision the council took that the principal did not want and complied with anyway. If there has never been one, the question has not yet been tested.
A council that decides meets on a rhythm and keeps a record. A body that convenes when the founder calls it is an audience, and a body whose minutes record attendance and not reasoning has left nothing a successor can read.
None of this is an argument against a family council. It is the difference between constituting one and announcing one.
Formal governance is unevenly distributed, and the family's half is the thin one.
Citi Private Bank asked 338 family offices in 2024 how decisions are actually governed, and reported the answer as an uneven distribution within the family enterprise.
More than two thirds of families had a formal governance system in place for the investment function. Less than half had one for the other affairs of the family office and for the family itself. Philanthropic decision making was the thinnest of all, formalised by only a third.
That distribution is the reason a family council is usually created, and it is also the reason so many of them disappoint. The half of the enterprise with the least formal governance is the half where disagreement actually originates, and a body created there inherits no precedent, no threshold and no written authority to work from.
A council given the family's questions in writing is a governing body. A council given a room is a meeting.
Three questions that settle it in an afternoon.
Name one decision in the last two years that the family council took, and produce the record of it with the reasoning and the names of those who agreed. If the answer is a discussion rather than a decision, the body advises.
Ask two owners separately what the council may settle without reference to anyone else. If the two answers differ, the authority was never allocated, and the first contested question will be the one that discovers it.
Ask what happens when the council and the board disagree. A family that has written that down has a governance architecture. A family that has not will find out during the disagreement, which is the worst moment to be deciding how decisions are made.
All three are answerable from your own records. They are the ground the Governance Maturity Curve places an enterprise on, and the decision rights matrix is where the answers are written down.
Questions this raises.
Do we need all three bodies?
No. The question is which decisions are being taken badly or not at all, and which body would settle them. A single family holding one operating company and no external capital may need a board and a council and no investment committee. Constituting a body before there is a question for it produces a meeting in search of a purpose.
Can the family council overrule the board?
Not on the board's own subject. Directors hold duties to the company that a council cannot discharge and cannot override. What a council can do is act as the owner: appoint directors, set what the owners expect of the enterprise, and decide the questions that belong to the family. That is a stronger position than an override, and it is the one owners actually hold.
Our family is small. Is a council proportionate?
A council is a way of allocating authority over family questions, and the work is writing down which questions those are. Four owners and one page is proportionate. What is not proportionate is a constitution, a charter, a committee structure and a calendar for a family that has never disagreed about anything yet.
How do we tell whether ours is working?
Produce the last decision it took, with the reasoning and the names of those who agreed, and check that two owners give the same account of what it may settle. A council that passes both is governing. A council that passes neither is being briefed, and the remedy is a written list of questions that are its to answer.