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Evolutionary Governance - Practical Case Part 1


Marco Villas Boas – Senior Partner at DMS PARTNERS


In corporate governance, we know that there are no miracles and that governance cannot be “implemented” overnight.


There is ample evidence showing that governance tends to start small and evolve, under the guidance of those who hold power in the company: the owner, shareholder, shareholder, partner, or the board, which represents these strategic command figures.


Thus, the path has to do with the will at the top, with the origin and with several other characteristics of the organization.


In the case of a family business, founded twenty years ago by the patriarch and today managed by a member of the second generation, what has the path been like?


The founding patriarch wielded power in family, business (management) and corporate (controlling) circles. This was the case throughout the organization's first eighteen years of life.


Two years ago, and due to strong appeals from his wife, the leader announced “his departure from management” (his words), without ever signaling a succession process, and without ever having implemented practices, processes and structures that could give dynamism and speed to the decision-making process and to the company itself.


Some paths were then outlined.


- It began with the redefinition of the role of this founding patriarch in the family environment. Stimulation was needed so that he, remaining patriarch and head of the family, could recognize his new dimension and space: husband, father, advisor (we don't talk about advisor because that falls within the scope of business power and not family power), and free for new developments or new leisure options. Or that together.


- In parallel, succession in management, something that should have started a long time ago, but had not been considered: succession internally within the family (are there potential successors adequately prepared, or is this a mere conjecture or hereditary desire?), or directly via the market?


- Still in parallel, the decision on whether or not to carry out a form of patrimonial succession: does the founding patriarch remain as controlling shareholder? Or is there a transfer to heirs? Or does the capital even open up to new partners, potentially diluting the position of power, until today in the hands of that person or family?


- Almost simultaneously, it was necessary to discuss and organize the power structure of the company in its new moment: would there be any form of advice? Would it be consultative, without formalizing legal responsibilities, or already a board of directors? Was there maturity for this second option?


Up to this point, deliberations on the path forward were basically in the hands of the holder of power at the time, from whom the values, beliefs, desires and needs that are the enablers of evolutionary governance derive.


We will see in the next post some movements adopted in this case to promote evolution.


Count on the advice of DMS’ team of Corporate Governance experts Partners.

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