1. Family Constitution Practices: what can we learn from the STEP cases
Family Constitution Practices: what can we learn from the STEP cases? Ilse Matser

2. agenda Introduction Theoretical framework: Justice Theory
Family governance as instrument to achieve fair process
Best practice: Case of NNZ
Discussion in groups
Wrap up – next steps

3. Justice theory I
Organizational justice is a subjective and descriptive concept that captures what individuals believe to be right (Cropanzano et al., 2007; Lerner, 1980).
Perceived justice is positively related to various aspects such as greater trust and commitment, more helpful citizenship behavior and diminished conflict (Cropanzano et al., 2007; Cropanzano et al., 2001)
Distinction between: distributive justice (Adams, 1965) and procedural justice (Leventhal, 1980; Thibault & Walker, 1975)
Distributive justice (Adams, 1965; Olsen & Osborn, 2006) rules
Equity : individuals assess their own input (e.g. education, intelligence and effort) to one’s outcome and compare that ratio with that of a comparable other person.
Equality: rewards or benefits should be divided equally among the participants regardless of their individual contributions
Human-needs based: focus is on the needs of the individual whom it concerns and where personal motives like altruistic arguments or self-interest arguments play a role

4. Justice theory II
the importance of process to the literature of justice (Thibault and Walker, 1975; Leventhal et.al, 1980).
six criteria for fair process (Leventhal, 1980), procedures should be
(a) applied consistently
(b) be free from bias
(c) ensure accurate information
(d) have some correction mechanisms
(e) conform to ethical standards
(f) ensure that all opinions of the actors involved are taken into account
Colquitt et al. (2001) revealed the strong interaction effect between the two constructs

5. Justice theory & the business family
Van der Heyden et al. (2005): ownership, family and business, each of these subsystems has a different principle as a main guidance to establish what a fair distribution of outcomes or allocation is:
need-based rules inside the family sphere,
meritocracies among managers in the business sphere
equality among shareholders in the ownership sphere
Family, managers and shareholders will judge the fairness of particular outcomes with different criteria
Family members are at the same time manager, employee and shareholder, they can feel torn between the different rules
Therefore: focus on fair process

6. Family governance - fair process
Relational governance (Mustakallio et al., 2002; Uhlaner et al., 2007) During the life cycle of the family firm, the relationships between family members change which could imply that a more formal governance system becomes necessary (Steier, 2001; Sundaramurthy, 2008) The family constitution is embedded in the broader family governance package and it relates to the business governance installed The process of forging a family agreement is just as or even more important than the content of the document itself, the process builds family problem- solving and decision-making skills (Botero et al., 2015; Montermerlo and Ward, 2011) Samara and Arenas (2017) draw the attention towards practicing fairness towards employees in the workplace of the family business

8. Key facts Since 1922 200 employees International company
Family Boot: 3th generation: 3 brothers and a sister & 4th generation: 8 cousins
Ownership and management is separated (2 brothers work in the business, one is the CEO)
Governance: board of directors, supervisory board and STAK board (comparable to a family council) S

9. The family constitution of family Boot
Since 1993 – transistion from the 2th to 3th generation
Purpose: the family wants to be clear how to act in situations where different interests come together/overlap
Chapters: family goals & values; governance structure; family members working for the NNZ; succession process; ownership and control (voting rights; role of the supervisory board); communication practices
Every year the constitution is being discussed in the annual family meeting. As a family member you’re allowed to join this meeting and the shareholder meeting when you turn 18.

10. data STEP framework 6 Interviews Transcriptions Additional information
Position in the business
family 1
CEO
Family 3th gen 2
Chief Commercial officer
Non-family 3
Chair person supervisory board 4
Chair person STAK board 5
sales
Family 4th gen 6
Not involved

11. Analysis using the fair process criteria of Ven der Heyden et al. 2005
Clarification: clarity of information, process and expectations
Communication and voice
Consistency across people, over time and with agreed values and norms
Changeability of decisions, process, goals and principles
Commitment to fairness

12. discussion Start with one example - explain briefly the situation
Apply the criteria of Van der Heyden
Clarification: clarity of information, process and expectations
Communication and voice
Consistency across people, over time and with agreed values and norms
Changeability of decisions, process, goals and principles
Commitment to fairness
Overall assessment of this example – what could other families learn from this?
Same process for another example

13. Wrap up
Findings so far?
Special issue in JFBM on responsible ownership
Contibution to a new book