In the economy of the Republic of Serbia, there is a very significant percentage of companies established in the form of a limited liability company, in which the primary generation of founders (father or mother independently or father and mother jointly) manages the business, with the intention that after their retirement or death, their heirs will take over company and continue with an equally successful business.
However, the founders, although very successful business people, often cannot foresee all the consequences of their biological or voluntary disappearance from work. During their presence, business and family relationships, supported by their authority, function well. However, things often change drastically after the company’s founder leaves the stage. The reason for something like this lies in the fact that the authority of the founder is strong enough to stand in the way of differences in the successor’s work habits, visions regarding the future of the successor’s company, as well as visions regarding making everyday business decisions of the successor.
Without a supreme authority, which would resolve such completely normal conflicts in the views of the heirs, it is very easy to block the work and decision-making of the company, the division of the company or even the collapse of the business.
A good solution to this problem is certainly a careful and well-planned transfer of management of compsny from generation to generation. Within the Code of Corporate Governance compiled by the Chamber of Commerce of the Republic of Serbia, one can find the most important principles of quality transfer of company management from generation to generation, while in this text we will refer to only some, in our opinion, the most important of them.
The first principle, the founding generation must have a management succession plan, within which a plan for taking over management in emergency situations should be arranged. Within this plan, it is necessary to decide whether it is best for the company to leave the management to independent professionals, or whether it is best for a member or family members to continue with the management – in terms of which decision, it is again necessary to define the criteria on the basis of which the choice will be made among competing to family members. Also, it is of particular importance that the management contract of the selected family member, who takes over the management, is in accordance with market conditions in all respects, so that the selected family member is not favored on the basis of family affiliation. Of course, regardless of the above, the family member who manages the company, as well as the other family members, can exercise their ownership rights on an equal basis based on the ownership rights of shares in the company.
The second principle, the transfer of knowledge and responsibility, is a process that takes a long time and needs to be carefully planned, in connection with which the founders need to make decisions in time and set formal assumptions in order to prepare the successors to take over the roles assigned to them.
The third principle, it is necessary to adopt a policy for the employment of family members, within the framework of which policy it is necessary to regulate on which jobs in the company and under what conditions family members can be employed, and to regulate the policy and criteria for rewarding family members (especially those who are actively involved in the work company, in relation to those who do not actively participate in the company’s work).
Fourth principle, it is necessary to establish a family assembly, as a place where decisions can be made in a formal manner that concern both family and business at the same time. In the first generation, it can be informal meetings of family members, but in each subsequent step the congregation as a formal category has much greater authority. In relation to the assembly, the most important thing is to define which decisions fall under the authority of this assembly and how they are fulfilled and executed. All these rules can be of an informal nature, but definitely their formalization within the act called “Family Protocol” brings a certain degree of certainty that such rules are in place and respected. The family protocol can foresee consequences for non-observance of the established rules and procedures, thus providing a legal sanction as a means of coercion, which gives much-needed authority to every norm (including those adopted by family members).
