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Describe the Role of Each Governance Structure & Suggest Whether It Is Suitable or Not

Essay by   •  September 25, 2018  •  Case Study  •  3,290 Words (14 Pages)  •  919 Views

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Task: To prescribe what's best for the business case.

Structure

Introduction

Institutionalization - what governance structure? (BOD, Family council , executive committee) Aris, Gabi, Cherry

Describe the role of each governance structure & suggest whether it is suitable or not

Include reasons + examples from Metalmex

Management succession plan (yuri, Caroline)

3. Ownership succession plan (Rod, Rag)

Discuss how to implement this in the case studies (e.g. who will be the next successor etc. - currently in Montse looks promising)

Conclusion

Metalmex Case - Prescription

Given the level of development of the Metalmex family business and the number of family members involved, it is essential to establish appropriate structures and policies to ensure the longevity of the firm. The purpose of the proposed structures and policies is not not to implant costly and/or complicated solutions, but to develop an appropriate relationship between the business and families that is tailored to the family complexity and business complexity specific to Metalmex. Developing a relationship structure between the family and the business by introducing elements to channel can reduce its structural risk. With this concept in mind, we present below some solutions to the five main dimensions of analysis.

Institutionalization

When the company and the family grow beyond a certain size, it becomes necessary to regulate these relationships by creating properly spaces for decision-making and by establishing rules. In the MetalMex company, there are no indicators of institutions - such as board of director, family council or executive committee - that can accomplish these objectives, and since there are 10 family members in the business with a relatively high complexity, it becomes very important to separate the spaces and the relationships.

In order to keep the family together, with shared values and order, and to have a more fluid relationship between the desire of the family and the hopes for the business, the creation of a Family Council is crucial. As discussed before, the MetalMex Group has four different families in charge and the family meetings occur only when Jordi, one of the founders, is in Mexico, there is no specific date set up. The Family Council, among other things, has main functions that would be very helpful to the MetalMex family. The first one is to exert authority, which includes establishing criteria to determine who should take what responsibility in the company and what pay they should receive. This would help the group to establish criterias about the entrance of the family members in the business, what they should do and what salary they should receive, since as for now, any family member who wants to join the company can, and their salary, even though they try to equal out the market value, depends on the family size.

The other main function of the Family Council is to fix limits for the family intervention in the affairs of the business thought a family constitution. The advantage of a family constitution is that it ensures transparency and the families would know what to do when problems arise. In the Metalmex group, having this instrument could be helpful to solve any conflicts they might come to have related to the Jordi's family. Also, still regarding Jordi's family, it's values don't coincide with the values of the rest of the group, the priorities are different - for example, the company is the main source of income to Jordi - , the family council enables to socialize the family, meaning it helps to convey the value and risk-taking ability which could be helpful to put an end in this divergence.

In conclusion, like the board of directors - which is the next topic in this report -, the family council discuss policy and planning issues but for the family in the business. As it and the family grows, it becomes more complex, therefore the family council can help the family find the best solutions to the conflicts it has to face. It will bring the families together and align their expectations, which is very necessary since some families have different intentions for the business (like Jordis). This way, family members can be governed by rules and know their rights and duties in a clear and conspicuous way.

Besides, the company does not have any board of directors currently, while the strategic decisions are mainly made Enric and Miquel without any formal meetings needed. However, setting up of a Board of Directors for the family firm is actually essential for better governance of the company as a whole. There are several specific functions that would help improving the company’s structure. Apart from supporting the strategic decision making process carried out by the senior management, the Board of Directors can also serve as an entity monitoring the senior management. This is to ensure the executive power, together with the financial situation and performance of the MetalMex Group is under supervision. It this way, Enric would no longer be the only critical person depended by the group for all the strategic and financial decisions.

Another function of the Board of Directors is to develop and maintain the group’s resource and capabilities. Right now, Enric is the one being in charge of the group’s funding policy. With the establishment of the Board of Directors, there could be a better planning and acquisition and protection of its resources. Also, having a Board of Directors could help the MetalMex Group to guarantee its

Another instrument the MetalMelx group should develop is the Executive Committee, which is a collective management body,The company, in an informal way, has some of this structure

One aspect that is very important for the group’s top management is to give careful

consideration to the opinions and suggestions that come from the managers of the various

companies that comprise it. They are given free rein; they help each other and can consult top

management whenever they feel the need to do so. Top management is there to provide

support and help when really necessary. At no time is there any attempt to impose decisions on

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