Family constitution is all about family commitment

By Prof. Enrique Soriano

Let me share the heartaches of three family members belonging to three different families. They all went through the process of crafting their family constitution with so much hope and optimism, only to fail miserably before reaching their destination meant to enlighten the family with a sense of shared purpose and alignment of values.

Family A 

“We signed our Family Constitution more than 5 years ago, but nothing happened! Whatever policies we all agreed to implement never happened. For example, as a family we all agreed to follow our existing company policy related to vacation leaves (sudden and unannounced leaves were becoming a major source of irritants among us siblings) but some of my siblings continue to violate this policy. This is against our rules but what can I do, our parents ignored it. We are expected to set up a family council to enforce what we agreed upon but again nothing happened. The founder was simply too busy or was just being evasive. Our consultant never advised us that a council was crucial in enforcing the rules. I just learned about it after hearing your talk.”

Family B

“Prof, we signed our family constitution in a five-star resort hotel in Bali, took selfies on our last day and then it was business as usual the following day. Our second-generation leader, my uncle, did not bother to enforce the rules and our consultant never told us what to do so we were left on our own to DIY the implementation. Of course, we were all lost and didn’t know what to do! Personally, I consider the entire process a complete waste of time!”

Family C

“Two of my cousins and their spouses continue to supply materials to the family business. This was raised during the sessions as it was a clear case of conflict of interest (COI). After we signed and agreed that policies related to COI be set in place, there was no more initiative to even discuss it. I raised it to one of our big bosses (uncle/co-owner), but he brushed it aside and even rationalized that my cousins needed to have additional income as they have many offspring. What??? His argument does not make sense as this COI was a violation of what we agreed in the family constitution! How do you expect us cousins to follow the agreements?”

Defective Constitutions are Everywhere!

There are many defective family constitutions, but what is the cause? Do we blame the stakeholders, or is it the fault of the consultant? Can the reluctance of family members, especially the founder/leader, to go through the process of implementing the rules be the root cause? Or is it the fear of other members to have their entitlements curtailed? Can we put the blame on the members’ fixation on making more money to the point that they have no more time to focus on the more critical aspects related to business conduct, survival, and longevity? Is it a combination of the lack of experience of the consultant and the lack of emotional commitment of the founder/leader/parent/owner? Or can it be attributed to the non-confrontational nature of many Asian families, thereby preventing them from addressing the difficult and sensitive issues pervasive among family-owning businesses?

Flawed family constitutions are a dime a dozen in Asia. They are usually completed and signed agreements but never implemented. As years pass, the agreement becomes irrelevant and for the most part, when the document is not enforced and enhanced, it utterly becomes a useless piece of paper.

Time changes everything

Any of the triggering events like the death of the leader, children getting married, the introduction of an illegitimate offspring, the separation, annulment, divorce, or re-marriage of parent-founders, the nuisance caused by a black sheep member, psychological incapacity, in-law issues, business reversal, etc. can pose major risks and will certainly create a huge impact in the way family members react and behave during crisis situations.