Most business families that lose the business do not lose it to a competitor. They lose it to each other. A dispute between siblings over who runs the company, a cousin who wants to sell, an in-law who feels shut out, or a successor chosen in silence, to name a few examples. These are the events that break up family enterprises, often by the third generation.
Every business culture has a saying for it: shirtsleeves to shirtsleeves in three generations in the English-speaking world, from stables to stars to stables in Italy, wealth does not survive three generations in China. The sayings blame the third generation. The record points elsewhere. Few of these break-ups are about strategy or about the heirs. They are about expectations that were never written down.
The family constitution exists to write them down. It is rarely a legally binding document, and it will not stop a family from disagreeing. Yet it is the most consequential document a business family produces. It settles, in advance and in calm, the questions that cannot be settled in the heat of a succession, a divorce or a liquidity event. Who counts as family. Who may own shares and who may work in the business. How dividends are set, how a member leaves, and how a dispute is handled before it reaches a court.
Most families know this. Far fewer act on it. Fewer than one business family in three has a written constitution of any kind, and fewer than one in five has an agreed way to resolve a dispute. Among the families that do have a constitution, many keep a document that was drafted by the company’s lawyer, signed at the founder’s request and filed away. It is opened again only when the family is already in trouble, which is the one moment it cannot help.
This article sets out what a family constitution is and what it is not, why business families write one, and what it does for the family’s dynamics and its longevity. At its centre are the fourteen elements that a best-in-class constitution covers, drawn from extensive advisory work with business families across Asia, Europe, the Middle East and the Americas. The fourteen elements are also available as a printable checklist (PDF).
It closes with the process by which a constitution is written, which matters more than the document itself, and with the ways in which constitutions fail.
Much of the confusion around family constitutions begins with the name. Four points settle what the document is, what it is not, and what gives it its force.
A statement of principles, agreed by the family, on how it owns and governs what it holds together: The family constitution goes by several names. In the United Kingdom and much of Asia it is often called a family charter. In Spain and Latin America it is the protocolo familiar, the family protocol, and in Germany the Familienverfassung.
The names describe the same instrument. It is a written agreement, in plain language, that records the family’s purpose and values and defines who belongs. It establishes the bodies through which the family speaks and decides, and it sets out what stewardship of the enterprise asks of each generation. On that foundation it lays down the family’s policies on ownership, employment, money, succession, education and conflict.
It is not a shareholders’ agreement: This is the distinction families most often blur, and advisors most often fail to draw. A shareholders’ agreement is a contract among the owners of a company. It is enforceable in court and it governs rights: who votes, how shares are transferred, who has first refusal when a shareholder sells, and what happens on death. Trust deeds, the company’s articles and family members’ wills belong to the same category of binding documents.
The constitution sits above them. It holds the principles from which those rules are derived, and the reasoning behind them. The rule that shares may pass only to descendants lives in the shareholders’ agreement. The explanation of why the family wants it that way, and what it expects of the people who hold those shares, lives in the constitution.
It binds in conscience rather than in law, and that is its strength: Parts of a constitution can be made enforceable by carrying specific provisions into the legal documents, and a well-run process always does this. However, the document as a whole is deliberately kept outside the law. That is what allows it to say things a contract cannot. It can say that the family expects its members to carry its name with dignity in public, that it wants the next generation to earn its place, and that it regards the stewardship of the business as an obligation rather than an entitlement.
Lawyers who draft them advise that a constitution, while not binding, is legally significant. A court may read it to establish what the family intended when it drafted its trust deeds and agreements. Spain went a step further in 2007, when a royal decree allowed family protocols to be published in the commercial registry, which gave them public standing without turning them into contracts.
Three layers in one document: Every good constitution has a philosophy, a set of policies and a legal interface. The philosophy records its purpose, who the family is and why it chooses to stay together. The policies translate that philosophy into positions on the matters that recur: ownership, governance, money, employment, succession, education, welfare and conflict. The legal interface states how the constitution relates to the binding documents, who signs it, how it is amended and how it is upheld within the family.
With only the middle layer (policies), a constitution reads as a rulebook and is resented. With only the first (philosophy), it reads as a mission statement and is ignored. The fourteen elements set out below cover all three.
Few families write a constitution because a book told them to. They typically write one because something has happened, or is about to happen, and the reasons fall into a recognisable pattern, as do the figures on how many families have one.
The triggers are predictable: Families seldom write a constitution in a period of calm, although that is when they should. The impulse comes from a small number of recognisable moments:
Each of these moments asks a question the family has never answered aloud. The constitution answers it, and the answer is agreed before the moment arrives rather than during it.
The figures show how much is left to chance: Only about half of business families have a shareholders’ agreement. Around four in ten have a dividend policy, fewer than three in ten have a family employment policy, and well under half have written down their values and purpose. Most business families, in other words, run on unwritten understandings. Those understandings hold for exactly as long as the people who share them are alive, present and on speaking terms.
What a constitution cannot do: It does not prevent conflict, and it is not an insurance policy for the business. Some families write one in order to keep the family out of the company, with rules designed to protect management from the owners. They tend to get the opposite of what they wanted: a next generation that feels regulated rather than invited, and that loses interest in anything except the dividend. A constitution works when its first purpose is the continuity of the family, to carry on the legacy, heritage and values. The business is protected as a consequence.
The case for a constitution is usually made in terms of what it prevents, but the stronger case is what it builds. A constitution changes how a business family behaves in four ways, and the family’s longevity follows from them.
It replaces assumptions with expectations: The damage in business families is rarely done by the decision itself. It is done by the surprise. The son who learns at thirty-five that he will not succeed his father. The daughter who discovers at the reading of the will that her brothers hold the voting shares. The cousin who finds out from a lawyer that she cannot sell.
A constitution removes the surprise. A member who knows at eighteen that the family requires three years of outside experience and an MBA from a leading business school before anyone joins the business does not experience those rules at twenty-eight as a rejection. He experiences them as the expected path.
It takes the person out of the decision: When the constitution states that family employees are assessed by non-family superiors against published criteria, the cousin who is passed over for promotion is answered by a policy rather than by an uncle. The same holds for money. Where dividends follow a formula tied to earnings, the branch that wanted more cash this year argues with a number, not with a sibling.
This is what advisors mean when they say that a constitution de-personalises. It moves the hardest conversations out of private settings and into a forum that was designed for them, and it gives the people who must deliver unwelcome answers something to stand on.
It gives every member a voice and a place: A constitution worth the name is written by the family, debated in a family assembly, administered by an elected family council and amended by a vote. Members who have argued over a policy and lost still own the outcome, because they were in the room. That ownership is what turns unity from a sentiment into a practice. The 3 Pillars of Success in Family Business makes the same argument: family unity, harmony and cohesion are not inherited. Instead, they are built, and they need an instrument.
Longevity follows: The business families that reach the fourth and fifth generation are not the ones with the fewest disputes. They are the ones with a way through them. Lee Kum Kee, the Hong Kong-based sauce maker founded in Guangdong in 1888, came close to splitting in the late 1990s. The family council and constitution that followed carried it into a fifth generation, an outcome that family business scholars describe as rare.
The mechanism is not mysterious. A family with a constitution has already decided how it decides, so a crisis finds it with a process rather than a vacuum. Stewardship, the subject of The Stewardship Imperative, is the attitude. The constitution is where the attitude is written down and made to outlast the people who first held it.
The paradox at the heart of it: A constitution written to protect the business from the family fails, because it alienates the owners the business depends on. A constitution written to serve the family protects the business, because owners who feel served accept the discipline the business needs. The families that get this right put their own continuity first on the page, and the business second. The business is better off for it.
A best-in-class constitution is not a list of policies. It is an argument, and it has an order. The order follows the questions a family meets as it grows, from the first generation that holds everything in one pair of hands to the fourth and beyond that holds it among forty cousins on three continents:
The order is deliberate. A family that begins with employment rules or dividend formulas, as many do because those are the issues that hurt, writes policies without a foundation. Beginning instead with who the family is and why it stays together, the policies follow, and they are easier to agree because everyone knows what they are for. For owner families, the implication is practical because the order of the conversations matters as much as their content.
Most family constitutions cover five or six of the elements below, usually the ones that answer the problem the family had when it wrote the document: employment, dividends, perhaps succession. A best-in-class constitution is different in four respects. It covers all fourteen, so that no question the family will meet is left to improvisation. The family wrote it, rather than receiving it from an advisor. It carries all three layers, philosophy, policies and legal interface, so that the rules can be traced to the reasons behind them. And it is reviewed on a fixed cycle, so that it stays the family’s own as the family changes.
Each element below is described in three parts: the point of it, the design choices the family has to make, and the mistake families most often make with it. The elements and their sub-elements are listed in full at the end of this section, and in the printable checklist (PDF).
Element 1 – Family history, purpose, joint family values and future plans: The constitution opens with the story. The origin story, what the founder set out to do, and the moments that defined the enterprise and the family. The typical stories are the near bankruptcy, the brother who left, the decision to expand abroad, and many others. This is not sentiment. A family that knows its own story has a shared reference for every later argument, and the next generation inherits a narrative rather than a balance sheet without soul.
From the story follows the statement of purpose. It answers the single question a constitution must answer before any other: why does this family choose to remain together as owners, when it could divide the assets and go its separate ways. If the answer is weak, no policy will hold. If it is strong, most policies write themselves and safeguard continuity.
Each generation has to answer the question afresh. In 1992 the elders of the Mulliez family, the owners of Auchan, Decathlon and Leroy Merlin, looked at the size of what the family now held and considered selling, or dividing the assets branch by branch. About fifteen members of the younger generation objected. They were given a year and a budget to answer three questions, why stay together, for whom and to go where, and five minutes at the next general meeting to make their case. They made it, and were applauded by the people who had doubted them. The purpose survived because it was asked again, not because it had been written down once.
The values come next, and here the design choice matters. Values written as words on a wall, integrity, respect, excellence, are forgotten within a year. Values written as observable behaviours last. Lee Kum Kee anchors its constitution and its business in a four-character principle, Si Li Ji Ren, which the family renders in English as considering others’ interests. The family uses it as a test for decisions rather than as a slogan.
The element closes with three further items:
The common mistake is to leave the definition of family vague out of kindness. Vagueness here is where the first dispute of the next generation begins.
Element 2 – Ownership strategy: Ownership is the one thing a business family holds in common whatever else divides it. It is also the element where a constitution and the legal documents meet most directly. The constitution records the family’s ownership philosophy, concentration or dispersion. Does the family want ownership concentrated in those who work in the business, or spread evenly across the branches? Does it regard family ownership as perpetual, or as a choice to be reviewed by each generation? Just two of many questions the family must agree on.
The constitution then records the structure chosen to hold the shares, whether a holding company, a trust, a foundation or a set of share classes, and the reasoning. Next come the principles of the internal share market:
Finally, it states the family’s position on external capital, minority partners and an eventual listing.
The structure decides what the next generation inherits. For example, the Ortega family holds its 50.01 percent of Inditex through Pontegadea, the holding company and family office set up in 2001 that the Zara article describes in detail. Since 2015 the founder’s heirs inherit shares in Pontegadea rather than shares in Inditex that could be sold one by one. Control of the company stays whole across a generation. A holding structure protects control, but it does not by itself create alignment among the owners, and that is the work the constitution does.
The Mulliez family of northern France, the owning family behind Auchan, Decathlon and many other businesses, shows the other half of the design. In October 1955, after the deaths of the founding couple, the family met in Ostend and chose to stay together as one group of owners. The eleven children of the founder had been advised to divide the business among themselves. They decided instead, in a phrase the family still uses, to do better collectively than to succeed individually. The principle they adopted, tous dans tout, everyone in everything, means that each member holds shares across all of the family’s companies rather than in the one their parent founded.
Ownership is pooled in the Association Familiale Mulliez and the shares are not listed. Only descendants of the founding couple may hold them, and they may not be sold to outsiders. An internal share market opens once a year, in July, for cousins who wish to buy or sell. A buyback fund absorbs the larger transactions, and the family’s elected management board holds a veto over sales. Descendants may join the association from the age of twenty, after a three-day course in how the group works, and spouses are admitted by approval. By early 2024 the family counted 1,572 living descendants, about half of them shareholders. No shareholders’ agreement produces that outcome on its own. It takes a philosophy, written down and renewed.
The element also covers what happens to ownership on marriage, divorce, death and incapacity. For example, the Mulliez family admits spouses as shareholders and asks them, on divorce, to hand their shares back, a rule that is understood before the wedding rather than argued over after it. Many families postpone this conversation because it is uncomfortable. In jurisdictions where matrimonial courts take a robust view of family wealth, the postponement is expensive.
A best-in-class constitution states the family’s expectation that members will enter marital agreements and keep wills and estate plans aligned with the constitution, and it says so before anyone is engaged. Where families go wrong in this element is to let the lawyers write it first. The legal documents should implement the family’s ownership philosophy, not substitute for it.
Element 3 – Allocation of power and responsibility: Business families often confuse four roles that must be kept apart: the family, the owners, the board and management. Family members have a say in family matters. Owners decide the matters that are reserved to shareholders: the sale of the business, a change of control, the appointment of the board. The board governs the company. Management runs it. The constitution draws these lines and states which decisions are taken at which level, and by what majority. The delegation principle follows, meaning what the family decides for itself and what it hands to the board, together with the lines of accountability: who reports to whom, on what and how often.
It helps to describe the family’s involvement through three roles rather than two:
One person may hold two of these roles at once, and a family member may move between them over a lifetime. Each carries its own duties, and a constitution that names them gives the family a vocabulary for conversations about pathways and responsibilities that would otherwise be about personalities.
Wates, the British construction group that element 5 returns to, drew these lines at the turn of the century, and under pressure. The third generation, three brothers and two cousins, found that the cousins’ children did not want to join the business. The company bought out the two cousins from its own resources, which left five shareholders, all descendants of one brother, and the family moved from running the business to owning it. In 2000 it appointed its first chief executive from outside the family, and in 2004 an outsider as chairman and chief executive.
The family then wrote a charter that set out its own role. Once a year the family agrees a five-year statement of what it expects from the business, which the board uses as its framework. Four times a year the family meets the executives to review progress. The owners set the mandate, the board governs within it, and the lines of accountability run in both directions. The head of the family at the time described the result as the clearest idea the family had ever had of its values and of how to achieve them.
The element closes with the rights and duties of owners. The rights are a voice, a vote and information. The duties accompany them, including the duty to be informed before voting. A constitution that lists rights without duties produces owners who behave like investors. Owners who have duties behave like stewards.
Element 4 – Family committees and communication platforms: The family needs bodies of its own, distinct from the company’s. The family assembly is the whole family, or all adult members, meeting at least once a year to hear from the business, to elect and to ratify. The family council is the smaller, elected body that does the work between assemblies. It represents the family to the board, oversees the constitution’s policies, and runs the programmes on education, philanthropy and family unity, harmony and cohesion. Task committees take on specific mandates, such as next-generation education, philanthropy or the periodic review of the constitution itself.
For each body the constitution sets the membership, mandate, frequency, election method and term limits. The cadence and channels of communication belong here too: what the family is told, by whom, when and in what form, with protocols for confidentiality and for communication outside the family.
Lee Kum Kee established its family council in 2002, after the family’s near rupture in the late 1990s. It wrote its first constitution in 2003, following a long series of off-site meetings among the third and fourth generations. A display at one of the group’s headquarters recorded that the council had met 65 times over the following sixteen years. The family has since separated a Family Council, which deals with the family as a family, from an Owners Council, which deals with the family as shareholders. The distinction is one of the most useful design choices available to a large family.
The Mulliez family shows what election and term limits look like at scale. The association is run by a management board of seven, elected by the family every four years. When its president stepped down in 2014 at the end of his second term, eleven candidates stood for the seven seats, and the new president was a member who had married into the family. Few business families hold contested elections for their own governing bodies. The ones that do find that a mandate won in a vote carries more authority than one inherited.
Where owners and family members are no longer the same group, because some branches have sold down or because trusts hold the shares, an owners’ council or shareholders’ committee gives the people who carry the ownership decisions a forum of their own. The mistake to avoid in this element is to create bodies without mandates. A family council that may discuss everything and decide nothing withers within three years.
Element 5 – Key corporate governance principles: The constitution does not run the company, but it records what the family expects of the body that does. It states the intended composition of the board, with the balance between family, independent and executive directors and the criteria by which they are selected. The board’s mandate, its committees and the cycle on which it evaluates itself are set here, as is the question of whether the roles of chair and chief executive may be combined, and how each is selected.
The constitution also fixes the information rights and transparency standards the owners expect, and the interface rules between the board and the family’s own forums, so that neither bypasses the other. A board that is lobbied by individual family members, or a family council that gives instructions to management, breaks the architecture of element 3.
Wates, founded in 1897 by Edward Wates and his brothers and now in its fourth generation of family ownership, shows what the element looks like in practice, and how the move to ownership described in element 3 came full circle. The family that handed the chair to an outsider in 2004 had a family chairman again within a decade. Tim Wates succeeded Sir James Wates in 2023 after the latter’s ten years in the chair. Beside him sit a deputy chairman who serves as senior independent director, and independent non-executives who chair the audit and remuneration committees. Sir James Wates also chaired the group that drafted the United Kingdom’s governance principles for large private companies in 2018, and those principles bear the family’s name. His argument for applying them to his own company is the one that matters for this element: a family board explaining itself to its own shareholders may seem pointless, but the discipline is the point.
The heirs of Giorgio Armani took the same route in 2025, when a new eight-member board combined family members with outside directors drawn from the wider luxury industry.
The weakness to avoid here is the family board with no outsiders. More than a third of family businesses have boards made up solely of family members. Such a board cannot do the one thing a board exists to do, which is to tell the owners what they do not want to hear.
Element 6 – Liquidity strategy and compensation: Money is where the unwritten understandings fail first. The constitution states the family’s dividend philosophy, the balance it wants between reinvestment and distribution, and the formula behind it. The dividend becomes a policy rather than an annual negotiation. The constitution sets the priorities for capital allocation across the operating business, the family office and philanthropy, and it provides liquidity windows and mechanisms for members who wish to reduce their holdings, because a family that offers no legitimate exit will eventually face an illegitimate one.
In larger families the constitution sits at the top of a four-level structure: the family, the family office, the holding company and the operating companies. Detailed capital allocation belongs to the holding company and the family office, which decide where the money is invested and on what terms. What the constitution stipulates is what the family seeks from its capital as a whole: its purpose, the balance of risk and reward, the values that govern how it is deployed, the size of the capital pool and its overall direction. The lower levels then work within that mandate.
The principles of family member compensation in ownership, board and executive roles belong here as well, each of which is paid for a different thing. So does the treatment of shared assets, the holiday house, the art, the aircraft, and who bears their cost. The element closes with the policy on financing family members and their ventures: whether there is a family bank, on what terms loans and guarantees are given, and how new ventures by family members are treated.
Pontegadea illustrates the first half of the element at scale. The dividends from Inditex have been reinvested for more than two decades, largely in property bought without debt. That gives the Ortega family an asset base outside the company and a clear answer to the question of where the money goes.
The Mulliez family illustrates the second half. It created an investment fund in 2002, called Creadev, to back ventures by family members and outsiders, and found that family entrepreneurs stayed away because they did not want to cede control. It then added a simpler founders’ club alongside the fund, which has attracted more than forty family entrepreneurs. The lesson is in the design: a family bank that behaves like a private equity fund will not be used by the people it was built for.
The mistake in this element is to treat dividends as welfare, paying out to meet a branch’s living costs. That is what element 12 is for, and confusing the two corrupts both.
Element 7 – Business rules of engagement: The family employment policy is the most contested page in most constitutions, and the one most often cited as the reason to write one. It sets the entry criteria: the qualifications, the years of external experience and the minimum age required before a family member may join. A recruitment and evaluation process that is independent of the family line follows, so that a family candidate is assessed by the same people and against the same criteria as an outsider. Compensation is fixed at market rates, decided outside the family, so that pay is settled objectively.
The exit and removal rules, including for underperformance, belong here, because a family that cannot remove a family member cannot credibly promote one. So do the conduct expectations for family members in and around the business: conflicts of interest, related-party dealings between the company and family members’ own interests, and the use of the family name.
Lee Kum Kee’s rules are among the clearest on record. Only descendants may own shares. The group does not employ in-laws. Members of the younger generations who want a role in the business are expected to work outside it first, usually for at least three years. None of these rules are universal, and a family can reasonably choose the opposite on each. What matters is that they are written, known from childhood, and applied without exception, because the first exception ends the policy.
In the language of element 3, this is the element that governs the operator role. It should say plainly that a family member who operates is an employee first. The unwritten exception for the founder’s own children is the failure to guard against. The rest of the family sees it, and remembers it.
Element 8 – Career development policies for family employees: Most family employees will not reach the top. A constitution that assumes otherwise tends to set the family up for a generation of disappointment. This element provides career paths for family members in the business that do not presume a route to the chief executive’s office, with performance management by non-family superiors against transparent criteria, which protects the family member as much as the company.
Rules on lateral moves, external secondments and re-entry let a family member leave to build a career elsewhere and return with standing rather than as a favour. The treatment of family employees who plateau, which every family faces and few plan for, is settled here. Non-family talent is protected through visible fairness in promotion, because the best non-family executives will not stay in a company where the top is reserved.
Silence is the risk. Where the constitution says nothing about the family member who has stalled at the level of regional manager, the matter is left to the chief executive, who is usually his cousin.
Element 9 – Succession process: The single most useful sentence in a family constitution is the one that separates three successions that families habitually treat as one:
They have different timelines, different decision-makers and different criteria. A family that merges them ends up choosing a chief executive on the grounds of who holds the most shares.
The constitution sets out, for each of the three, the process, the timeline and who decides. Retirement ages or tenure limits for family members in executive and board roles are fixed here, which spares the family the conversation that no one wants to have with a seventy-eight-year-old chairman. Emergency succession and interim arrangements are provided for, because the unplanned departure is the one that breaks families. The role of the outgoing generation after the handover is defined too, and it is the part most often left blank and most often the source of the next conflict.
Some families go further and constrain the choice itself. In the Mulliez family, fathers are advised not to choose their sons to succeed them, on the family’s own reasoning that a son either resents the father’s work or admires it too much to change it. Each company is run instead by a pair, a general manager recruited from outside and a non-executive chairman who is usually a cousin, and some 150 family members hold seats on around 200 boards.
The owner, steward and operator roles do their best work here. A founder who steps down as operator can remain a steward on the board or the council, and an owner for life. A constitution that says so turns a retirement into a transition rather than a withdrawal. Strategy and Succession in Family Business sets out how the strategic and the personal sides of succession are brought together. The constitution to avoid is the one that describes a process and names no decision-maker. A process without an owner is a hope.
Element 10 – Leadership development plans: Families that are serious about succession prepare the candidates years before the decision, and they write down how. The constitution states the competencies required for family leadership roles at each level, so that the family’s expectations are known and the next generation can measure itself against them. Individual development plans come with external assessment, because a family cannot be objective about its own children and should not pretend to be.
Exposure pathways open from here: rotations through the business, observer seats on the board, roles in other companies. Mentoring and sponsorship come from senior family and non-family leaders. A readiness review takes place before appointment, not after, which is the discipline that distinguishes a development plan from a foregone conclusion.
Lee Kum Kee’s fifth generation, a group of fourteen cousins, has been prepared through secondments, innovation trips, annual owners’ meetings and attendance at board meetings. External consultants review the selection criteria and assess development needs. The mistake is to develop only the presumed successor. The family that invests in one candidate has made the decision before the process, and everyone knows it.
Element 11 – Next generation talent development (academy): Three of the fourteen elements deal with developing people, where most constitutions have one, and each serves a different group. Element 8 serves the family members who work in the business. Element 10 serves the few who may one day lead it. Element 11 serves the rest of the next generation: the owners who will never work in the company, and whose decisions as shareholders will nevertheless decide its future. In a fourth-generation family they are the majority.
The constitution provides an ownership education curriculum by age band. It runs from financial literacy for teenagers, through governance for those in their twenties, to the industry itself for those approaching a seat on the council. The programme takes the form of an annual academy, with internships and project work in the business, and it engages the non-employed next generation as informed owners, which is the point of the whole exercise. The funding and governance of the academy are settled here, along with a principle that families find hard to state but need to: participation is an obligation of ownership, not an option.
Even the best-prepared families have to work at this. Around 2013, Lee Kum Kee’s fifth generation had drifted: few took up the internships or mentoring on offer, some asked to be taken off the company’s mailing list, and the family retreats had been suspended two years earlier for lack of interest. The family’s answer was to make the business the classroom, through the board-trainee programme and innovation trips described in element 10, and the retreats were revived. Engagement is designed, not assumed.
The Mulliez family runs large visioning exercises roughly every seven years, with hundreds of members across the generations. It makes a point of including the cousins on the edges of the family, who, in the family’s own experience, bring some of the best ideas. The academy that is a holiday is the failure to avoid. If the next generation learns nothing it could not learn from a brochure, it will rightly stop coming.
Element 12 – Family welfare strategy and supporting vehicles: Business families support their members, and the question is only whether they do so by policy or by favour. The constitution sets the scope of support, which may cover education, health, housing, emergencies and dependants. It sets the boundaries, above all the rule that welfare is not paid through dividends, so that the owners’ economics and the family’s care for its members stay separate.
The vehicles are named here, whether the family office, trusts, a foundation or a benevolent fund, together with eligibility, who approves, and confidentiality, because a family member in difficulty must be able to ask without the whole family knowing. The element also houses the family’s philanthropy and social impact strategy and its governance, which for many families is the activity that keeps the non-employed generation most engaged. The role of the family office in all of this, as the administrative home for welfare, philanthropy and shared assets, is described in What is The Purpose And Value of a Family Office.
Generosity without rules is the trap. The branch that received help in a crisis and the branch that did not will compare notes a generation later.
Element 13 – Conflict resolution: No constitution prevents conflict. The families that claim theirs has are usually the ones in which conflict has gone underground. What the constitution does is set the path. It begins with early-warning and informal resolution norms: the expectation that a grievance is raised with the person concerned, or with the council, before it is raised anywhere else. The escalation path runs from the family council to mediation to arbitration. Litigation is the last resort, and ideally foreclosed by the family’s own commitment not to sue one another.
The constitution defines the role of trusted independent advisors or an ombudsman, a person outside the family whom any member may approach. It records the behavioural commitments the family makes during a dispute: no public dissent, no briefing of journalists, no withholding of dividends as leverage. The consequences of a breach are stated as well, with sanctions that are proportionate, decided by the family council, and subject to a right of appeal. A constitution with no consequences is advice. One with consequences and no appeal becomes an instrument of control for whoever holds the council.
The Mulliez family convenes an arbitration committee when a dispute between two cousins cannot be settled by discussion, and it holds to a rule that family matters are never aired in public. The same discipline showed in March 2020, when the pandemic closed every store the family owned. The head of the family briefed the cousins by video conference every Friday, and when he announced that dividends would be suspended, nobody objected. A family that has practised disagreement in private can take bad news together.
That fewer than one business family in five has a conflict-resolution mechanism explains a great deal about why so many family disputes end in court. The mistake is to write this element last, when the family is tired. It should be written while the family still likes each other.
Element 14 – Amendment and review of the constitution: A constitution that cannot change will be broken, and a constitution that changes too easily will not be respected. The element sets the review cycle, typically every three to five years and always at a generational transition, with sunset provisions on the policies most likely to date. It fixes the majority required for amendment and the process, so that a change is deliberate and visible.
The relationship to the legally binding documents is stated here, naming the shareholders’ agreement, the articles, the trust deeds, wills and marital agreements. Where the two conflict, the legal document governs and the constitution is amended. The custodian of the document is named, usually the family council. The element also records who signs: all adult members, or all shareholders, with the age at which the next generation signs and whether spouses sign. The route for a shareholder who declines to sign is set as well, which in a well-designed constitution is a fair exit rather than a standoff.
The constitution with no date for its own review is the one that fails. Setting a date keeps the document alive. Without one, the family reads it again only when something has gone wrong.
Taken together, the implication of the fourteen elements for owner families is that a constitution is a system rather than a set of rules. Each element answers a question the family will meet, and each depends on the others. Ownership without a dividend policy invites conflict. A succession process without leadership development produces an unprepared successor. Conflict resolution without consequences settles nothing. The families that get the most from their constitution are the ones that treat the fourteen as one design.
For a family drafting its first constitution, or reviewing one it already has, the fourteen elements and their sub-elements are listed below. They are also available as a printable checklist (PDF).
1. Family history, purpose, joint family values and future plans
2. Ownership strategy
3. Allocation of power and responsibility
4. Family committees and communication platforms
5. Key corporate governance principles
6. Liquidity strategy and compensation
7. Business rules of engagement
8. Career development policies for family employees
9. Succession process
10. Leadership development plans
11. Next generation talent development (academy)
12. Family welfare strategy and supporting vehicles
13. Conflict resolution
14. Amendment and review of the constitution
The fourteen elements describe the content of a family constitution. How a family arrives at that content decides whether the document will ever be used, and eight principles govern that process.
The process is the product: A family can obtain a competent constitution from a law firm in three months. It will cover most of the fourteen elements, it will be well drafted, and it will not work, because the family did not write it. The value of a constitution lies less in its clauses than in the twelve to eighteen months of conversation that produced them. In those months the family learns to discuss money, power and succession in a room together without anyone leaving it. Psychological safety is at the centre of such a process.
A family that has done that once can do it again when the constitution is tested. A family that was handed a document cannot.
Who initiates and who leads are different questions: The impulse usually comes from the founder or the senior generation, and that is natural in most business families. Leadership of the process should pass quickly to a small group that represents the family rather than the business. It should include members from more than one generation and more than one branch, people working in the business and outside it, owners and those not yet owners. The business leader supports the process and resists the urge to run it.
Advisors can facilitate, structure and draft, but they do not decide. A family that lets them decide will not recognise itself in the result. Many families benefit from a facilitator trained in family dynamics rather than in law. The lawyers come in once the principles are settled, to carry them into the binding documents.
Agree how to decide before deciding anything: The first decision a family makes in the process is the decision rule: what is decided by unanimity, by a qualified majority, by a simple majority, and who votes. Families often default to unanimity because it feels fair, and discover that it hands a veto to the least committed member. A workable pattern is unanimity or near-unanimity on the philosophy, a qualified majority on policies, and a supermajority on anything that touches the shareholders’ agreement. Whatever the rule, the recommendation is to set it at the start, when no one knows which side of a future vote they will be on.
Values first, rules last: The sequence follows the arc. The family begins with its history, legacy and heritage, and its reasons for staying together, because those conversations are the easiest and the most unifying. They create the shared language in which the hard ones are held. Ownership and decision rights follow. Money, employment and succession come after that, when the family has a foundation to argue from. Conflict and amendment are addressed last, with the benefit of everything learned on the way.
A family that starts with the employment policy, because a particular cousin is the problem, writes a rule about a person. Starting with purpose produces a policy about a principle, and the person is dealt with by it.
Bring the next generation and the spouses into the room: The constitution will govern people who are not yet adults and people who married into the family. The next generation should take part in the drafting as soon as they are of an age to sit in a family assembly. Spouses should at least be consulted, because a constitution that treats in-laws as a risk to be managed is read by them in exactly that way. The families that handle this well give the next generation a specific mandate in the process, such as the education element. They find that the young members, with less to lose, often ask the questions the senior generation has avoided for twenty years.
Ratify, sign, and carry it into law: The finished constitution is ratified by the family assembly under the agreed decision rule and signed by every adult member, at a ceremony if the family is so inclined. The act of signing is what turns a document into a commitment. The provisions that need legal force, on share transfers, pre-emption, valuation and the composition of the board, are then carried into the shareholders’ agreement, the articles and the trust deeds. Family members bring their wills and marital agreements into line.
The constitution refers to those documents and they refer to it. Spain’s commercial registry, which has accepted family protocols for publication since 2007, offers one model of how a constitution can be given public standing without becoming a contract.
Set the first review date before the ink is dry: The constitution is signed with its own review already scheduled, three to five years out, or at the next generational transition if that comes first. A review in the first cycle will find policies that were written for a situation that never arose, and gaps that no one foresaw. That is the point. The family that meets to revise its constitution is practising the skill that the constitution exists to protect. For the senior generation, the implication is to lead the process and then let go of the pen. For the next generation, it is to take the pen when it is offered.
Regional variation is real, and the fourteen elements hold across it: In Spain and Latin America the protocolo familiar tradition is among the most developed anywhere, with marital agreements as standard instruments and a legal framework for publication. In the Middle East, constitutions often restrict ownership to the bloodline, align the transfer of shares with Sharia inheritance rules, with the document itself reviewed for Sharia compliance, and place a shareholders’ council between the family council and the board. In Singapore and Hong Kong, the growth of family offices has made family governance a professional discipline. Constitutions there increasingly sit alongside the family office’s own investment policy and address the family’s wealth as a whole rather than the operating business alone. In each tradition, the content of the policies differs. The elements that need a policy do not.
Constitutions fail in recognisable ways, and most of the failures can be seen at the drafting stage, long before the document is tested. Six of them recur often enough to deserve a name.
It was written for the leader, by the lawyer: In many families the most common failure is a constitution commissioned by the founder, drafted by the company’s counsel and presented to the family for signature. It is signed, because the founder asked, and it is resented, because the family was not consulted. Its policies protect the business from the family, which is what the founder feared. The next generation reads it as a verdict on their trustworthiness. Within a decade it is either ignored or the subject of a dispute of its own.
It was copied: Templates are freely available, and a family that adopts one obtains a document that answers questions it never asked. The policies do not fit the family’s ownership structure, its culture or its stage. Nobody can explain why a given rule exists, because nobody chose it. A constitution that fits a family is recognisably that family’s own. A reader who knows the family should be able to identify it from the preamble.
It has rules and no principles: Constitutions written as rulebooks fail on the first case the rules did not anticipate, and there is always one. A constitution built on a stated philosophy gives the family a basis for deciding the unanticipated case. Rules alone give it a basis for an argument about what the rules meant.
It has no consequences, or no appeal: A constitution that states what members must do, and says nothing about what happens when they do not, is a statement of hope. When a member breaches it, the family discovers that it has no response short of litigation, which is the outcome the constitution was written to avoid. The opposite failure is the constitution with sanctions and no right of appeal, which serves whoever controls the council rather than the family.
It was never reviewed: A constitution written for a family of six in one country will not serve a family of thirty in four. The policies date, the signatories die and the next generation has never read it. The document that was meant to hold the family together becomes a relic of the generation that wrote it. The failure here is not in the drafting but in the absence of a date.
It overprotected the business: The constitution that treats the family as a hazard, with tight restrictions on employment, information and voice, tends to produce owners who behave accordingly: distant, uninformed and interested in the dividend. The business loses the engaged ownership that is a family company’s only lasting advantage over its listed competitors. The family loses the business, in spirit first and then in fact.
A family constitution is the one document a business family writes for itself rather than for its bankers, its regulators or its customers. It is not binding, and it should not be. It is the family’s own account of who it is, what it owns, how it decides and how money flows. It records how its members may engage with the business, how its leadership renews and how it intends to hold together after the people who wrote it are gone. The fourteen elements set out here are the questions that account must answer. Any family can answer them in its own way. No family that wants to last can leave them unanswered.
The timing is the hard part. The right moment to write a constitution is the moment when it seems least necessary: when the founder is in good health, the siblings are on good terms and the next generation is still at school. A family that writes its constitution then does so in calm, with every member able to think about the family rather than about a particular decision. The family that waits for the trigger writes it in a crisis, about a person, and gets a worse document and a challenging process.
For a business family that has not yet begun, the implication is simple and uncomfortable: begin now. The printable checklist (PDF) of the fourteen elements is the place to start. For a family with a constitution it has not opened in five years, the implication is the same. The document is not the achievement. The family that keeps writing it is.
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About the author: Martin Roll – Global Family Business & Family Office Expert
Download the checklist: The Family Constitution – The Fourteen Elements, printable checklist (PDF)
New book (2027): Family Business Strategy – Leading Future Paths With Impact
New book (2027): Family Office Strategy – Creating a Multi-Generation Legacy
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Read about family business strategy: Fit for Generations: The Essentials of Successful Family Business Strategy
Read about succession: Strategy And Succession in Family Business – Charting The Future
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