Family governance: Who has the final word?
- Marion Heil
- 21. Juli
- 7 Min. Lesezeit
A business contact told me recently about a family business that had, on paper, a textbook governance setup. A foundation board, an advisory board, a family shareholder council that met twice a year over a long lunch. When a major strategic question landed on the table, everyone in the room assumed the advisory board would have the final word. But it didn't. Someone finally sat down and read the foundation deed properly, and it turned out ultimate authority sat with the foundation board alone. The advisory board had spent years giving its opinion on things it technically had no power over. Nobody had done anything wrong. It just had never mattered enough to check.
That's how it often goes with governance in family businesses and foundations. It works fine right up until the day it actually has to hold weight, and on that day, a lot of families find out their own structure is far less clear to them than they assumed.
Three bodies, often confused
Most Austrian and German family enterprises of any real size now run some combination of three governance bodies: the foundation board (Stiftungsvorstand), the advisory or supervisory board (Beirat), and the family shareholder council (Familiengesellschafterrat). Each has a distinct legal role. In practice the lines blur all the time, and not always by accident. Worth walking through each one properly, because the differences matter.
The foundation board (or Stiftungsvorstand) sits closest to the money. Where a family holds its assets through a private foundation, the Stiftungsvorstand is the body with actual legal authority over what happens to those assets, appointed under and bound by the foundation deed. Its members carry personal liability for their decisions, which is a heavier obligation than most people realise when they take the seat. And the deed itself, the document that actually defines what the board can and can't do, is often something only the family's lawyer has read closely. Everyone else works from memory or assumption.
The advisory board (or Beirat) is usually what people mean when they say "governance" in the more familiar boardroom sense. Its job, in principle, is to be a strategic sparring partner for management and a sounding board for the family on the direction of the business. But its actual power varies enormously from one company to the next, because unlike a foundation board, it isn't defined by law. Some advisory boards have real oversight authority written into the articles of association, including the right to approve major decisions or appoint management. Others exist purely to advise, with no formal teeth at all. The label is the same either way, which means two family businesses can both say "we have a Beirat" and mean two completely different things.
The family shareholder council is the odd one out, because it doesn't govern the company or the foundation at all. It represents the family in its capacity as owner, a forum for the family to align on its own interests, values, and expectations before those views reach the advisory board or the foundation board. Done well, it's where family disagreements get worked through in private, so they don't spill into the boardroom. Done poorly, or left undefined, it becomes an unofficial fourth decision-making body that nobody elected to have that power, especially once one person sits on the council, the advisory board, and the foundation board at the same time, which is not uncommon.
A family business builds its own architecture from scratch, usually once, early on, under time pressure, and then rarely looks at it again.
Most family busineses aren’t legally required to have the kind of formal governance a corporation must have, and that's exactly why the confusion sticks around. A stock corporation has to have a supervisory board with defined powers by law. A family business builds its own architecture from scratch, usually once, early on, under time pressure, and then rarely looks at it again.
An interesting number
PwC and the INTES academy for family businesses have tracked this since 2002, and one line in their data stands out. In their first survey, 44 percent of German family businesses had a voluntary advisory board. In the latest edition, it's 83 percent. In roughly two decades, the advisory board went from unusual to close to standard practice.
What's more telling is what sits underneath that number. 62 percent of the family businesses surveyed said they plan to refresh their advisory board's composition within the next three years. Not because the board failed at anything, but more because its members were chosen for an earlier phase of the company, often for financial or strategic expertise, and the questions that matter now, digital transformation, sustainability rules, geopolitical exposure, simply weren't in the room when the board was assembled. Fewer than a quarter of the companies said they had anything close to a professional process for choosing board members in the first place.
Put the two together and you get a fairly accurate picture of where many family-owned companies stand today. The governance body is there. Its authority is rarely questioned in day-to-day business. But it was put together once, informally, around whoever the family trusted at the time, and nobody has deliberately revisited it since.
Not the same question as succession, but close enough to matter
It's tempting to fold all of this into the succession conversation and move on, but it's a separate problem. A family can have a well-prepared succession plan for the operating business and still have a foundation board, advisory board, and shareholder council that were never designed to work together, populated at different times for different reasons, with nobody having stress-tested their actual authority since the deed was signed.
Succession answers who runs the company next. Governance architecture answers who has the power to decide, advise, and hold the company accountable while that happens.
Succession answers who runs the company next. Governance architecture answers who has the power to decide, advise, and hold the company accountable while that happens, and afterwards. Both matter, and they're not the same question. But they intersect at exactly one moment, and it's worth naming that moment directly, because it's easy to miss.
When a new leader takes over, they usually inherit the existing board along with everything else, and almost nobody thinks to question that. Succession planning is already a lot to manage: preparing the successor, communicating the change, keeping the business steady through the transition. Reopening the board's composition on top of all that feels like inviting a second, unrelated conflict into an already delicate moment, so it doesn't happen. The board simply carries over.
The trouble is that the board a new leader inherits was often chosen for a different company at a different time. A year or two into the new leadership, it becomes clear that several members were never really evaluating the business on its own terms. They were doing what they'd always done, for someone who isn't in the room anymore.
The question isn't whether to keep or replace someone, but whether the role they're playing still matches what they're actually equipped to do now.
None of this means treating it as a clean sweep. A board member who has served for fifteen years often carries relationships and institutional memory that took decades to build, and losing all of that on the same day the company loses its long-standing leader is its own kind of risk. The more useful question isn't whether to keep or replace someone, but whether the role they're playing still matches what they're actually equipped to do now. Someone who was an excellent advisor for a stable, established business may not be the right person to guide the company through a digital transformation or an international expansion, not because they've lost anything, but because the job changed underneath them. Sometimes the honest answer is a different kind of seat entirely, a senior advisory role without a vote, rather than a forced binary between full membership and nothing.
What does the business need now?
None of this calls for an overhaul, at succession or at any other point. It calls for an honest read, every so often, of what authority each body holds against the deed, the articles of association, and the advisory board's own charter, followed by an equally honest look at whether the people sitting in each seat still match what the family and the business need now. For most families, that second part is the harder one. It means asking whether someone who has served loyally for fifteen years still brings what the business needs for the next fifteen, and having that conversation before a crisis, or a change at the top, forces it.
That's usually the moment it happens, mid-dispute, everyone at the table quietly certain their own reading of the structure is the correct one. The families who avoid it aren't the ones with better lawyers or cleverer deeds. They're the ones who made a habit of checking every few years, before anyone actually needed the answer.
ABOUT THE AUTHOR
Marion Heil is founder and managing partner of Board+CEO Advisors, a Vienna-based executive search and board advisory boutique. She advises listed companies, family businesses and investors on C-suite, leaders and supervisory board appointments across DACH and CEE.
A note on the legal detail
I work as an executive search consultant with owners, investors, and boards, and this is where I keep running into the question this piece is built around: not whether a family has a foundation board, advisory board, or shareholder council, but whether anyone has recently checked what each one can actually do, and whether the people sitting in those seats still fit. That's the practical angle I write from here, not a legal one. I'm not a lawyer, and Austrian and German foundation and company law differ from each other in ways that matter for any specific structure, so treat the thoughts here as a starting point for a conversation with your own lawyer, not the final word on your setup.
