Frederico, Manolo and Pedro are brothers. Frederico is 72, Manolo is 70 and Pedro is 69. In 1971, the three brothers founded FMP, now one of the largest household products companies in Latin America. The brothers still run the company. Frederico serves as CEO, and Manolo and Pedro serve as Co-Chairmen of the Board of Directors.
Frederico has four children, who themselves have 13 children. Manolo has 5 children, who themselves have 11 children. Pedro has 2 children. Three of Frederico’s children work in the family business: Ana, 46; Rafael, 44; and José, 39. Three of Manolo’s children also work in the family business too: Roberto, 45; Silvia, 41; and Alfonso, 40. Although not the oldest of the second generation working in the business, Silvia is the only one with an MBA, which she received from Harvard Business School. Pedro’s two children do not work in the family business.
As the grandchildren of the family graduate from university, roughly half of them want to enter the family business and the remaining grandchildren want to pursue other careers.
Because of their unusual spirit of cooperation, Frederico, Manolo and Pedro always ran the business in a rather informal way, but they understand that that type of informality will simply not work in a family business that is expanding into the third generation. They realise that they are going to have to put in place a far more formal governance structure. They ask you for advice.
Write them a memorandum concerning the likely problems they should be aware of, and, further, offer guidance concerning an appropriate governance structure for the company.
The question belongs to Management and it discusses about introducing formal governance structure in family business. An example of a family business run by 3 brothers has been given. The business is now entering into third generation and hence a need for introducing corporate governance has been felt by the owners of the business.
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