17 June 2008

Family office news: The family mission statement


Families often devote enormous resources to making sure their legacy carries on over many generations. They set up trusts, foundations and other instruments to ensure their wealth is put to good use. They draft complex wills. But too often subsequent generations may find it hard to follow the logic behind these arrangements, and in the worst cases, open warfare can break out in the form of expensive and traumatic litigation.

Robertson v. Princeton, discussed in this issue, is a case in point. The Robertson heirs have one understanding of the intentions of the original donors who set up a foundation to further training for public service at Princeton’s Woodrow Wilson School of Public and International Affairs. Princeton University has another. Perhaps if the Robertsons had taken the time to create a statement of their values and beliefs, beyond the general intention of supporting education for government service, it might have helped to mitigate the dispute.

When families begin to think about their legacies, they often take their shared values for granted. They assume those values will be embraced by subsequent generations. But time and again that assumption has led to disappointment as the heirs to substantial fortunes have strayed from the intentions of their predecessor or the fortunes themselves have been undermined.

An increasing number of family office professionals have begun to advise families to draw up a family mission statement, both to clarify a family’s values in the present and to guide decisions in the future. Such a document fulfills much the same function as a national
constitution, laying out basic principles and providing a structure for decision making. Like a constitution, it can be amended, but only with the participation and consent of the whole family. And like a constitution, it can also become a reference point for educating younger generations about their role in the family and its guiding principles.

Family mission statements typically contain:

  • A statement of basic guiding principles A description of members’ duties to the family, and the family’s duties to its members • The family’s philosophy about how to use its wealth
  • A mechanism for making decisions and for resolving disputes
  • An agenda for educating younger members about their role in the family

The process of developing the mission statement is often a nourishing experience for the family, allowing for fruitful discussion and appreciation of its traditions.

Our Family Office team can help a family to frame a mission statement in the context of formation, restructuring or review of an entire family office operation.

Elements of a family mission statement

  • Who are we? Members of the family.
  • What are our goals? Preserve our legacy, ensure the health and happiness of our members, contribute to the health and happiness of our community, ensure our values are passed on to future generations.
  • What are our guiding principles, fundamental values and beliefs? This can include elements of a family’s religious tradition, founders’ guiding principles, excerpts from respected texts or authors’ writings.
  • How do we deal with each other? Mutual respect, civility, every member gets a chance to be heard, family privacy and reputation to be protected, a fair and orderly method for resolving disputes.
  • What is the relationship between the family, the family office and the family business? Separation of functions, criteria for members to work in the family business; performance, dismissal and retirement policies.
  • What is the governance structure? How will decisions be made and where are the lines of responsibility and accountability?