FAMILY COMPLIANCE

The objective of implementing a corporate governance and a compliance model is to generate self-control framework that help a company to prevent the issues created by power centralization and to exercise the ‘check and balance’ as one of the most effective management practices. The question is, how is the concept of self-control and decision making delegation possible in a family business, especially in a first generation one where the founder is all-mighty?

In compliance, the key is always to go beyond the legal requirements (DL 1352). Making Compliance part of the culture of the organization, allows a family business to strengthen its family values foundation and by doing so, make a favorable differentiating factor versus distant multinational companies that usually have better  commercial and financial management models. The values put into practice provide a competitive advantage to win over consumers, suppliers and other ‘stakeholders’. Famous cases: SC Johnson in the US, Carvajal in Colombia or, the Lindley family in Peru back in the days of Inca Kola, Lindley

The establishment of a compliance committee in the board of directors where cases of conflict of interest and ethics are reviewed (in addition to those of fraud/crime prevention) provides a commitment notice to all the organization. The composition of the committee should include both family members and independents. The founder and family members must be convinced of the value it creates. Without that ‘buy in’ the process will merely be a legal. In Peru, the presence of independent board members is 35%, lower than the regional and global average (SE 1592). In family businesses it is usually even smaller. There exists an opportunity for improvement.