{"id":2199,"date":"2026-11-11T08:04:19","date_gmt":"2026-11-11T07:04:19","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=2199"},"modified":"2026-11-06T13:13:17","modified_gmt":"2026-11-06T12:13:17","slug":"family-council-limits-mistakes","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2026\/family-council-limits-mistakes\/","title":{"rendered":"The family council (II): limits, composition and common mistakes"},"content":{"rendered":"

Author: <\/strong>Jon Mart\u00ednez Echez\u00e1rraga<\/h2>\n

Visiting professor at IESE Business School and a professor at ESE Business School, Universidad de los Andes in Chile, where he also leads the Center for Business Families.<\/em><\/h3>\n
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As we saw in the previous article<\/a>, the family council plays a pivotal role<\/strong> in corporate governance<\/strong> by keeping\u00a0family matters from interfering in business decisions.<\/p>\n

While the spotlight there was on the \u201cshoulds,\u201d this piece will focus on the \u201cshould-nots<\/strong>.\u201d<\/p>\n

Ownership and business decisions are<\/strong> beyond its scope<\/strong>: The former fall under the purview of the shareholders\u2019 meeting, while the latter rest with the board of directors or leadership team.<\/p>\n

This distinction is more than a formality: It keeps the family council from becoming a parallel body<\/strong> vying for decisions that are not its to make.<\/p>\n

Family, ownership and business: Three distinct bodies<\/span><\/strong><\/h2>\n

Many business families confuse the family council with the shareholders\u2019 meeting<\/strong>. The confusion is common in small, first-generation owner families, where the same people wear multiple hats.<\/p>\n

If the two bodies were one and the same, the family council would rank above the board of directors in the company hierarchy.\u00a0Not only would this structure be a design flaw<\/strong>, it could even run counter to corporate law<\/strong>, which in many jurisdictions treats the shareholders\u2019 meeting as the supreme governing body.<\/p>\n

It is worth remembering the \u201cthree hats\u201d that each circle wears<\/strong>: The family council looks after the family, the shareholders\u2019 meeting oversees ownership and the board of directors handles business and strategic decisions. Conflating these bodies complicates the family governance system.<\/p>\n

Also worth noting is that the family council may include parents as well as children who are not necessarily partners or shareholders<\/strong>, further underscoring the need to delineate these spheres.<\/p>\n

What does the family council do?<\/strong><\/span><\/h2>\n

Some of the family council\u2019s most common responsibilities are to:<\/p>\n