The Good Shareholder and the Committee for the Preparation of the Future
Among John Davis' many contributions to family capitalism is the invention of the family council: the place where all matters pertaining to the family and not the business are managed and dealt with. The insight came from observing participants in the Harvard Business School's OMP Owner Manager Program; entrepreneurs would attend with the goal of training themselves to be better managers and after a few years would return asking for help in giving structure to the family and ownership component of their business. The family council met a real need of entrepreneurial families and spread so successfully that today, at least in Italy, it is formed even when it is not needed.
Davis, who has meanwhile moved from HBS to MIT, has recently proposed a very useful new corporate governance tool: the Future Readiness Committee.
What should the committee do for the future? (1) Anticipate, (2) analyse and (3) prepare for the future. This type of activity is done by boards of directors for companies and by family offices and family councils for families; the Future Committee looks further ahead, i.e. 5 to 20+ years, and with greater breadth, i.e. it does not start from what is in the present situation but from the foreseen future.
In this context, it must (1) anticipate possible evolutions of the competitive environment, e.g. new consumers, new needs, technology, investment intensity, access to raw materials or suppliers, geopolitics and new competitors; of the company, e.g. changes in entrepreneurial processes, in the way of producing, in the way of reaching and serving markets, presence or search for new talents, dynamics in the company culture, impacts on purpose; of the family, e.g. level of unity/conflict, geographical dispersion, new generations after the current next gen. level of unity/conflict, geographic dispersion, new generations after the current next gen. (2) Analysing which of these possible evolutions to focus on, distinguishing the signs of definitive changes from the noise generated by the relentless march of creative destruction; understanding how these evolutions will affect the family, the business, the heritage; how they may converge to have not only direct impacts but also composite impacts due to the effect of several forces occurring simultaneously and coming together or indirect derivative impacts. (3) Prepare family, assets and business for the most probable futures by acting directly on the long-term vision or by planting the first seeds to have trees ready and robust to the possible coming true of glimpsed scenarios. Family capitalism is made of continuous adaptation to the competitive environment as an antidote against creative destruction, whenever this adaptation must start more than five years in advance the decision must be in the Committee for the Future.
What is its place in the control structure (governance)? The long-term adaptation of the activities of the entrepreneurial family is one of the characteristics of responsible shareholders. In more complex entrepreneurial families there is a place where the most knowledgeable and/or relevant representatives meet, it may be the board of the holding company or a shareholders' council, in which case the Future Committee is a committee of this council. In cases where the main asset is the company or family office, the Future Committee is a committee of the board of the main asset. In this 'place' of the control system, one has the advantage of having an overview on the inside and the outside and can have a necessary and sophisticated connection between long-term vision, i.e. 5-20+, of the owners and short-medium term planning, i.e. 1-5, of the managers.
