Is it convenient for a Mexican Family Business to have a Board of Directors?

Equipo Tracer

Girl at the head of the board of directors

In Mexico family businesses there are different personalities. Different ways of how problems are processed. Different relationships between its members. Historical traumas that become difficult to face problems. The one who owes money. Knots that seem impossible to get rid of.

Sounds familiar? Do you find yourself in that situation that makes you lose sleep at night? Have you been mistrusting your brother-in-law's gaze for months?

We recommend getting down to work, facing problems with openness and intelligence and solve them.

Speaking means understanding. We recommend getting down to work, facing problems with openness and intelligence, and solving problems.

Family members should sit down professionally to discuss and clarify agreements. Precisely in family businesses this is commonly done by implementing rules that in the jargon of family businesses are called Family Protocol. This Protocol periodically establishes collegiate bodies for decision-making, such as the Board of Directors.

Regarding the existence of a Board of Directors in family businesses, it is important to start by clarifying, why do you want a Board of Directors? Here are some situations for which its existence can be useful:

  1. What to do when the father of the family, the founder, is missing? The existence of the Board of Directors could be of importance in defining a succession plan for important positions, particularly in general management. It is a decision that must be made quickly, and in our opinion, the decision must go through prioritizing the objective merits of possible candidates.
  2. Where is the company going? The definition of the strategic direction of the company is extremely important. Define which additional markets should be explored, how to find new clients, what strategy to follow to continue growing. A professional methodology to process, discuss and decide these types of fundamental issues must be established through the Board of Directors.
  3. Is support necessary to professionalize the company? Maybe they are first or third generation. In any generation a company must tend to its professionalization. Important stages for the company to be professional. The council is collegiate and helps.
  4. Foster trust among shareholders; Have order between family and company; Let there be surveillance. The Council is also a tool to monitor results and ensure that things are being done well.
  5. Strengthen accountability. It may be natural, but not being responsible no longer works. The father of the family is no longer at the head, the one who took everything without asking, in his place there are the brothers and other relatives. Professionalizing the budget preparation and reviewing its exercise is imperative for the proper functioning of the company.
  6. Strengthen the professional image of the company. Banking or credit institutions pay attention to the seriousness of having a Board of Directors.

Also, the Board of Directors may interfere in determining codes of conduct in the family business. Processing disagreements based on rules, such as avoiding fights in public, outside the family environment, for example, are rules that serve as support so that work between family members may be more productive and harmonious.

In family businesses you are working in two ways. On one hand, there is the professional action linked to the company and on the other, these are relatives where the blood ties have dynamics and positions, which could be distant or unaware of each one's actions towards the company.

That’s why it is important to work in general on the Family Protocol. Its content is similar to a shareholders agreement, with specific clauses or chapters, where the core points of the company are established, such as positions, administrative bodies, how to access the positions, how the sale of shares works, how dividends work and its temporality, extraordinary situations, loans to shareholders, among others.

There is a lot to talk about. I hope you have been interested. Here we put a text that we work on at Tracer México about "identifying common objectives in family businesses helps you avoid conflicts".

We recommend looking for us on WhatsApp to move forward and start helping you define your Family Protocol.

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