Family Business

The role of a family constitution


5 min




Listen to the Taylors, a 3rd generation winemaking business family operating Taylor Wines based in Clare Valley, Australia, describe the benefits they gained from writing a family constitution that clarifies key family governance rules and relationships with the business.
(Taylor Wines are known as Wakefield Wines in the northern hemisphere due to trademark restrictions)



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Mitchell Taylor
The family constitution really talks about the family values, what we are about as a business, talks about family succession, also talks about family rules, about when the next generation should come into the family business, how they should do it. Also talks about areas of engagement, you know, what family members must do, what are some of the behavioral parts that we want them to do.

Clinton Taylor
It is our legacy, the company. More than likely, if people put their hand up, WE will you know, go to the next generation, that is certainly the intent.

Roger Reidy
The older generation was very worried about, “Well what if one of us is no longer here, which would be an awful thing, and nothing is resolved? Where does that leave us?” We now have an entire mechanism ... View More in place whereby succession from one generation to the other is understood. We have a constitution in place that says how all of this now works. With the absence of something like that, no succession plan in place, you can be in a heck of a mess.

Mitchell Taylor
We have written it in detail in our family constitution, if a new generation wants to enter the family business, they must have five years outside experience. They must make sure that they have developed their career so that they have a skill that is good for the family business. We want to be able to look at the pool of family members and make sure that we get the right skills in place and also select the right family members that have a need within the business.

Roger Reidy
Some families for example have a very strong view that being a family member means that there is a job entitlement for you always. The Taylors’ constitution does not say that. It talks about jobs being awarded on merit. So all family members know that any job they apply for throughout their career working in the business is like anybody else, that they have to be able to win that on their own merits, have the necessary experience and so forth. If others around them, non-family members, see that process as not being fair and equitable that can be a real problem for the ongoing health of the business.

Mitchell Taylor
With the evolution of the family constitution, we have developed a shareholder’s agreement. So that the family members want the family business to remain within the family, and this shareholder’s agreement is a legal document that really talks about making sure that if any family member wants to sell some of their shareholding that they make sure that it is available and offered to other family members so that they have the first right of option on some of that equity.

Roger Reidy
My advice would be put some form of mechanism in place to make sure that the family members know what is going on in the business. There are no secrets; there is nothing hidden, nothing mysterious. It is up to the board of directors to run any company; they have the legal accountability to do so. But the family has a very important part to play in communicating its needs as a family unit, to what they want the company to do, and if you do not have a mechanism in place, then that will fail.
So at the end of the day, it is our bible if you like, about how the family operates, and how it relates to the business.

Clinton Taylor
If there are issues, you know where to go, there is a constitution, there is a written document.