Chapter 5

Family Governance in Practice:

Lessons Learned from a 100-Year-Old
Entrepreneurial Family Firm*
Ilse Matsera, Rachel Heeringab and Jan Willem van der
Vloot van Vlietc,d
a
Independent Educator and Advisor for Business Families, Amstelveen, The Netherlands
b
NNZ, Groningen, The Netherlands
c
Saxion University of Applied Sciences, Enschede, The Netherlands
d
Hasselt University, Hasselt, Belgium

Abstract
Family governance is a topic of substantial practical relevance that merits
much more attention in family business research (Gersick & Feliu, 2014;
Suess, 2014). The purpose of this book chapter is to use the framework
of a fair process to gain a better understanding of how family governance
practices can help an entrepreneurial family firm flourish. Central to the
analysis is the case of a 100-year-old entrepreneurial family firm that will
serve as a best practice. Interviews with key members of the family and the
business were held, and secondary data were gathered and analyzed. The
chapter starts with a theoretical outline of the family as strategic resource
and the family governance as a mechanism to manage this strategic resource.

*The case in this chapter has been developed in 2017. Five years later the NNZ is
celebrating its 100 year anniversary. This is also an important milestone for the family
Boot as a business family. A valuable family governance practice is one of the pillars
of this achievement.

Family Firms and Family Constitution, 81–100

Copyright © 2024 by Ilse Matser, Rachel Heeringa and Jan Willem van der Vloot van
Vliet. Published under exclusive licence by Emerald Publishing Limited. This work is
published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may
reproduce, distribute, translate and create derivative works of this book (for both commercial
and non-commercial purposes), subject to full attribution to the original publication and
authors. The full terms of this licence may be seen at http://creativecommons.org/licences/
by/4.0/legalcode
doi:10.1108/978-1-83797-200-520231005
82 Ilse Matser et al.

The principles of fair process are introduced as an underlying framework

for the well-functioning of family governance practices. This is followed
by the introduction of the case and the discussion of the key findings. This
chapter ends with some concluding remarks.

Keywords: Family governance; family constitution; framework of fair

process; family as strategic resource; single-case study; Netherlands

5.1. Family Governance: Some Theoretical Perspectives

5.1.1. The Family as a Strategic Resource
The notion of Tagiuri and Davis (1996) that family firms have unique resources
which can create positive and negative outcomes for the firm has been referred
to as the “familiness” of the firm (Sirmon & Hitt, 2003). Habbershon and
Williams (1999) describe familiness as the unique bundle of resources created by
the interaction of family and business that can stimulate competitive advantage.
The Resource-Based Theory (RBT) can be used as a theoretical foundation for
understanding the distinctive attributes of a family firm.

The Resource-Based View (RBV) is one of the most influential theoretical

frameworks in the field of strategic management (Barney et al., 2001; New-
bert, 2007). Wernerfelt (1984) introduced the notion that firms can be ana-
lyzed by focusing on the resources of the firm rather than on its products.
A resource is defined by Wernerfelt as “anything which could be thought
of as a strength or weakness of a firm.” The key objective of the RBT is to
establish a causal relationship between resources and a long-term competi-
tive advantage. Barney (1991) argued that resources should have four char-
acteristics to establish a competitive advantage. They should be: valuable;
rare; difficult to imitate; and non-substitutable. These resources are labeled
“strategic resources.” Examples include reputation, patents, and unique
knowledge (Barney, 1991; Crook et al., 2008). Barney based the RBT on
two assumptions: resources are both heterogeneously distributed among
firms and imperfectly mobile. These assumptions allow for differences in
firm resource endowments to exist and persist over time.

The RBT has proven its value as an appropriate theoretical framework in the
field of family business research (Chrisman et al., 2003). With this framework, the
competitive advantage of a firm can be discussed by referring to the underlying
resources, specific strategies, and skills instead of regarding the family effect as
one specific advantage that is held by all family firms. Habbershon and Williams
(1999) stipulate that this focus on underlying resources, specific strategies, and
skills is the appropriate level of analysis to assess family firm advantage. Various
 Family Governance in Practice 83

scholars discuss the possible sources of competitive advantage (Carney, 2005;

Eddleston et al., 2008; Habbershon & Williams, 1999; Miller, Le Breton-Miller &
Miller, 2006; Miller et al., 2008; Sirmon & Hitt, 2003).
Sirmon and Hitt (2003) discuss five possible family firm-specific resources with
the following positive outcomes: human capital, social capital, patient financial
capital, survivability capital, and the governance structure. In this chapter, we
are specifically interested in the last category: the governance structure. However,
it is also important to understand that the total effect of family on the business
is a combination of the various categories and that these resources interact and
have the potential to create synergy. For example, social capital works as a lever-
age for attracting human capital (Arregle et al., 2007; De Massis et al., 2018).
The opposite is also true; for instance, a lack of trust between the family mem-
bers will have a negative impact on the willingness to provide the business patient
financial capital.

5.1.2. Bivalent Characteristics

There is a commonly accepted understanding that familiness is not always a posi-
tive characteristic. Sharma (2008) coins the terminology “distinctive familiness”
and “constrictive familiness.” “Distinctive familiness” refers to the situation when
family commitment and involvement are a source of benefit for the family busi-
ness. “Constrictive familiness” refers to situations in which, overall, the family
attributes have become a negative factor for the business. To explain this, Tagiuri
and Davis (1996) emphasize that family firms have several unique attributes and
that each of these attributes can be a potential source of benefits as well as a
source of disadvantages. Because of their latent positive and negative potential,
the characteristics are labeled as bivalent attributes. These bivalent attributes are
the immediate consequences of the overlap of family, business, and ownership
characteristics. Tagiuri and Davis identify seven bivalent attributes: simultane-
ous roles; lifelong common history; emotional involvement and ambivalence; pri-
vate language; mutual awareness and privacy; a shared identity; the meaning of
the family company. In relation to the attribute of private language, Jaffe (1990)
describes this as family members often having a special shorthand language; they
share information quickly and therefore get things done efficiently. However, this
doesn’t imply that families know how to communicate about sensitive issues.
Flören (2004) mentions the notion that within families, taboo subjects exist ever
so often, also in connection to the business. Topics that are rather left unspoken to
avoid conflicts to surface can disrupt the family harmony. However, issues that are
not confronted can develop into a conflict that eventually can make it impossible
to do business together.
Another “classic” example is the role of the founder. He or she has played a
crucial role in building a successful firm but if the business founder neglects to
train or create sufficient favorable conditions for a new generation to come into
play, the whole business may age together with its founder (Jaffe, 1990). This neg-
ative effect can be even worse when the successor is reluctant to let go and when
the business culture is not innovative (“this is the way we do things around here”).
In general, the RBT emphasizes that the availability of appropriate resources is a
84 Ilse Matser et al.

necessary but insufficient condition to achieve long-term competitive advantage.

The key is the management of resources in such a way that it leads to capabilities
that make it possible to achieve a competitive advantage (Sirmon & Hitt, 2003).
So, what does this mean within the family firm context?

5.1.3. Management of Strategic Resources

Tagiuri and Davis (1996) suggest that the success of the business will depend on
how effective the bivalent characteristics are managed. The success of effective
management of these attributes would result in a positive outcome for the busi-
ness dimension as well as the family and ownership dimension. The idea that
long-term prosperity of the family business system requires positive outcomes
in both the business dimension and the family dimension is widely acknowl-
edged (e.g., Litz, 2008; Sharma, 2004; Ward, 1997). Sharma argues that recog-
nition of the intertwinement of family and business leads to the definition of
high-performing family firms as organizations that take into account financial
and non-financial goals to achieve the expectations of various stakeholders of
the family, business, and owner group. The expression “warm hearts and deep
pockets” stands for those family business systems that have achieved high lev-
els of emotional and financial capital. Sharma proposes that for short-term
family firms can overcome low levels in one of the two dimensions. But for
long-term sustainability family firm systems need to achieve positive scores in
both dimensions.
Another element that is important for the realization of longevity is entrepre-
neurship. To achieve continued growth and continuity, business families must
pass on the entrepreneurial mindsets and capabilities that enable them to create
new streams of wealth across many generations – not just pass on a business
from one generation to the next. This practice is referred to as transgenerational
entrepreneurship. The family’s entrepreneurial orientation (Nordqvist & Zell-
weger, 2010) denotes the extent to which the overall managerial practices can
be viewed as entrepreneurial and reflects the risk-taking, innovativeness, pro-
activeness, competitive aggressiveness, and level of autonomy within a family
firm (see Lumpkin & Dess, 1996; Zellweger et al., 2012). Such entrepreneurial
management practices have been shown to improve firm performance (Rauch
et al., 2009), especially in rapidly changing and hostile environments (Covin &
Slevin, 1989).
The viewpoints discussed in this section articulate the fact that family business
scholars widely acknowledge the idea that family firms have distinctive charac-
teristics that stem from the interaction of the three subsystems: family, business,
and ownership. These characteristics are bivalent: reflecting their latent positive
and negative potential. Furthermore, when these characteristics have a positive
effect (distinctive familiness) they can be regarded as a strategic resource leading
to competitive advantage. Also, the notion that there is a need to manage these
resources in such a way that it results in a positive balance, both for the family sys-
tem and business system and will lead to transgenerational potential, is accepted
by family business scholars.
 Family Governance in Practice 85

5.1.4. Family Governance

Family governance is defined as “the voluntary mechanisms established by the
business family with the primary aim of governing and strengthening relations
between the business and the family, as well as between the members of the busi-
ness family itself ” (Suess, 2014, p. 139). Family governance fits with the concept
of relational governance as opposite of contractual governance mechanisms like
formal contracts and monitoring systems (Jensen & Meckling, 1976). Relational
governance refers to informal social controls, based on mutual trust, a shared
vision, and commitment to the firm by owners and management, and embedded
in social relationships among owners and management (Mustakallio et al., 2002;
Uhlaner et al., 2007). For family-owned companies, Mustakallio et al. (2002)
talks about family institutions – including informal get-togethers, formal family
meetings, family councils, and family plans – all with the purpose to represent
and integrate the needs and interests of the owner-family members and to link the
family with the company. A more in-depth understanding is necessary, especially
to understand what family governance instruments are applicable for which type
of family business (Suess, 2014).
An interesting aspect of relational governance is the balancing act between sus-
taining trust between individuals and incorporating a certain level of “check and
balances” to make sure that everyone involved understands and follows the rules
of the game. Where Sirmon and Hitt (2003) argue that the mutually shared objec-
tives, trust, and family bonds make it possible to reduce more formal governance
costs it is also acknowledged that this is not something that holds for all family
firms. During the life cycle of the family firm, especially when a firm changes from
a founder-led firm to a sibling partnership or cousin consortium, the relationships
between family members change which could imply that a more formal govern-
ance system becomes necessary (Steier, 2001; Sundaramurthy, 2008). Steier (2001)
talks about the evolving role of trust where the crux is to change the processes and
systems in such a way that it fits with the new stage of the family business with the
ultimate goal to sustain the level of trust (Sundaramurthy, 2008). It’s a continuous
process, like a circle: in a later phase in the life cycle of the business, the owning
family may need some forms of formal governance mechanisms to return to the
same level of trust that was between the founders at the time of the establishment
of the firm. However, Sundaramurthy (2008) acknowledges that too much focus
on formal governance instruments can also be destructive for the level of trust.
Another purpose of installing checks and balances via family governance is
the creation of an “insurance policy” against the deviant behavior of family mem-
bers. It can be seen as a security mechanism to prevent negative behavior and/or
conflicts. An example of such deviant behavior is known as the “Fredo effect,”
after the middle Corleone son from Puzo’s The Godfather novel and films. Con-
ditions unique to the family firm may lead some family members to develop a
heightened sense of entitlement and weaker bonds to the firm. This could result
in a family member’s incompetence, opportunistic behaviors, and/or ethically
dubious actions that can impede the business’s success potentially resulting in a
scandal that could lead to the firms’ demise (Kidwell et al., 2012).
86 Ilse Matser et al.

In this book, the topic is the family constitution. However, it is important to

acknowledge that this code of conduct should not be seen as a standalone gov-
ernance instrument, but that the constitution is embedded in the broader family
governance package and that it relates to the business governance installed. A
family constitution is a normative agreement including fundamental principles
and guidelines according to which the family organizes its relationship with the
business (Berent-Braun & Uhlaner, 2012). Family constitutions are also known
as family agreement, family charter, family code of conduct, family statement,
or family protocol (Suess, 2014). While the adoption of family constitutions has
received an increasing amount of attention in recent years, it is not a modern
phenomenon per se: Montemerlo and Ward (2011) name some examples of fami-
lies’ agreements that dates back centuries ago. However, now there seems some
momentum: empirical findings suggest that a formal family agreement is nowa-
days quite common in large family businesses, for example, 50% of the attendees
of a family business training program at IMD Business School have a family
agreement in place (Montemerlo & Ward, 2011). In small- and medium-sized
families, it is much less well known.
Every family is different, and so agreements can only be custom-made. The
content of the family agreement also depends on the phase in which the fam-
ily business finds itself, the size of the family, the number of active and passive
shareholders, the culture of the family and the business, the degree of harmony
within the family, and so forth. 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;
Montemerlo & Ward, 2011). Individual family members need to see the value
of working with a family constitution and this appreciation can be developed
throughout the process of writing a family constitution and via the discussion of
the content during family meetings.

Family Constitution Practices in Dutch Family SMEs

In 2012, a survey was held amongst Dutch family business owners to gain
more insights on the practice of family constitutions. An online question-
naire was sent to contacts of a center for family businesses and a family
business consulting group. 252 questionnaires were returned (13% response
rate), which led to 222 useful respondents. From this group of family busi-
nesses, 14% have a family constitution in place and 15% are considering
developing an agreement in the near future. There were some significant
differences between family businesses with a family constitution or with
the intention to develop a family constitution and businesses with no con-
stitution to work with. Businesses in the first group were more often multi-
generational, larger in size, there was co-leadership and co-ownership,
and the businesses have relatively high growth perspectives. There was no
 Family Governance in Practice 87

significant difference in the business focus on economic goals but there was
a higher focus on family-centered non-economic goals (Chrisman et al.,
2012). The respondents mentioned as most important motives for forg-
ing an agreement: keeping family harmony; making agreements on how
to work together as a family; organizing the upcoming succession process;
arranging an effective governance structure and solving conflicts within the
family. Respondents were also asked to reflect on how satisfied they are
with the agreement. Overall, they are satisfied and the reason that ranked
the highest was that it helps to clarify the relationship between the family
and the business. The results show a positive correlation between the satis-
faction and the number of times the family agreement is used and there is
the relation between motives and satisfaction.

5.2. Fair Process Between Family Members

and in the Business
Family governance can be viewed as a mechanism to ensure justice (Botero et al.,
2015). Interestingly, the application of justice in a family business is typically
more complex than in a nonfamily firm. Van der Heyden et al. (2005) explain
in their seminal article how a fair process can help to achieve justice in family
businesses. Van der Heyden et al. (2005) focus on procedural justice instead of
distributive justice. Distributive justice in the family business is “messy and com-
plicated” (Lansberg, 1989). The root cause of this lies in the application of the
three principles of distributive justice, namely need, equity and equality (Ayres,
1996) in the family business system. Each of the three family business subsystems
has a different principle as a main guidance: need-based inside families, meritoc-
racies among managers, and equality among shareholders (Van der Heyden et al.,
2005). The consequence is that family, managers, and shareholders will judge the
fairness of particular outcomes with very different criteria and inherently, it is
near impossible that the different stakeholders will come to an agreement on a
fully fair distributional outcome, therefore the focus on procedural justice. This
focus can also be explained by the power of the concept. Procedural justice origi-
nated from legal settings (Thibaut & Walker, 1975) and from there it has been
applied to various social settings and cultures (Lind & Tylor, 1988) where its rel-
evance widely has been proved. Especially the work done by Kim and Mauborgne
(1991, 1997) who used the concept in their study of the strategic decision-making
in transnational corporations inspired Van der Heyden and colleagues for build-
ing the dual characterization of fair process for family businesses.
The dual characterization highlights the different steps in the decision-
making and implementation process and five conditions under which this process
should take place. The five steps in the process are: (1) Engaging & Framing,
(2) Exploring & Eliminating, (3) Deciding & Explaining, (4) Implementing &
Executing, (5) Evaluating & Learning. The steps are a combination of generic
steps of a decision-making process (Russo & Schoemaker, 2002), combined with
88 Ilse Matser et al.

key observations from the fair process literature (engaging, explanation, and
expectations) (Kim & Mauborgne, 1997) and the addition by the authors of the
“execution” step. Van der Heyden et al. (2005) added execution to extend the
framework from decision-making to the actual implementation and execution.
Especially in the context of fairness is it important that “people ought to do what
they say, and also ought to say what they do.” Engaging is coupled to framing,
together form the first step in the process. The authors argue that it is key that
the people whom it concerned all feel involved in an active way right from the
beginning. This is needed to frame the decision properly and commit people to
the resolution of the issue and/or the implementation of the outcome. When the
decision is taken it is important that the decision is explained properly, this is also
an opportunity to validate the decision. In addition, at this stage, the expectations
need to be set with regard to an effective execution and implementation. Next to
the steps in the process, Van der Heyden and colleagues formulate five conditions
in which the steps should be executed to achieve fairness: (1) communication and
voice; (2) clarity of information, process, and expectations; (3) consistency across
people, over time, and with agreed values and norms; (4) changeability of deci-
sions, process, goals, and principles, and (5) commitment to fairness. “Consist-
ency” and “changeability” are characteristics that at a first glance seem to be
conflicting but that are actually not the case. Changeability acknowledges the
family’s need to alter previous agreements to make sure that agreements reflect
current family values and interests, as well as changing business needs. The pos-
sibility to review past decisions reflects the requirement of correctability (Lev-
enthal, 1980) but this doesn’t intervene with the need of consistency in the
application of agreements once they are installed. As a final characteristic, the
authors highlight the need for the family’s deep commitment to fairness and to
realize that fairness is not a “mechanical” instrument. If it’s treated as a utilitar-
ian exercise, then the risk is that the benefits of a fair process rapidly are replaced
with cynicism and resentment (Van der Heyden et al., 2005). The most preferable
situation is when the commitment to fairness is embedded in the core values of
the family. One remark of Van der Heyden and colleagues which we want to echo
here is the realization that fair process is not an absolute but a relative concept. In
practice, its full essence can only be aimed at and never fully attained. There-
fore, it is important to view the fair process as a continuous learning process and
appreciate the incremental value of every small step that is accomplished.
Above, we described the process of fairness in the family business from the view-
point of the family. The owning family is a key stakeholder in the family business
but not the only one. Samara and Arenas (2017) draw attention toward practicing
fairness in the workplace of the family business, namely the employees, another
important stakeholder group. Human resource management in a family business
has an extra layer of complication because of the different sets of knowledge, skills,
capabilities, and sources of motivations between family and non-family employ-
ees (e.g., Dawson, 2012). For example, non-family employees come from a larger
pool of talent and therefore may have more outside experience and better training
than family employees although this latter group may bring to the workplace deep
tacit knowledge and a high motivation stemming from a strong alignment with
 Family Governance in Practice 89

the business goals. This complexity makes distributive justice hard to accomplish
and that’s why also here the focus on procedural justice is a valuable instrument to
increase job satisfaction of all employees and will help to preserve the business rep-
utation, not in the least as a good place to work (Samara & Arenas, 2017). So, the
framework suggested by Van der Heyden et al. (2005) for building a fair process in
the family business is not only helpful for family governance decision-making and
implementation but is also valuable from the viewpoint toward the fair treatment of
non-family employees. Moreover, these are not fully separate processes, some of the
decisions will have an impact on the fair process climate created within the family
but also toward the non-family employees.
In the next section, we will use Van der Heyden’s characterization as a frame-
work for the analysis of the case.

5.3. Family Governance in Practice: Introducing NNZ

5.3.1. Data Collection
The case study of NNZ, a family business located in the northern part of the Neth-
erlands, owned and run by the family Boot since 1922, aims to qualitatively explore
the factors that contribute to the trans-generational potential of a family firm and
the role of family governance to achieve this. In order to collect rich, high-quality
primary and secondary data, the following methodological approach was devel-
oped and executed. First, a literature review of the core theoretical concepts was
conducted. Then, in order to gather the necessary in-depth primary data, inter-
views were undertaken with key actors who held strategically relevant positions
(Table 5.1). In addition to the CEO, three people in strategic positions, all non-
family, were interviewed. Also, the CEO’s niece, a member of the 4th generation,
who works in the family business as a sales manager, and the CEO’s brother, who
is a co-owner but doesn’t have an active role in the business, were interviewed. The
interviews lasted around 90 minutes each. The main goal of the interviews was to
collect sufficient data about the family and the company to allow for the develop-
ment of the case. The interview questions were predominantly process-oriented,
and interviewees were asked to provide examples to clarify abstract answers. The
transcripts of the interviews were independently analyzed by the authors.

The Company
NNZ is a multinational company located in Groningen, owned and run by the
Boot family since 1922. The business is creating packaging solutions for their cli-
ents in the agro food and industrial market (www.nnz.com). In 1922, NNZ started
trading jute bags from “Pakhuis Libau” in Groningen, the start of a family busi-
ness with international ambitions. Today, NNZ has grown into an organization
with more than 200 employees, serving clients from offices in Austria, BeNeLux,
Canada, Denmark, Germany, Italy, Poland, Latvia, Lithuania, Estonia, South
Africa, UK, and USA. In close cooperation with partners in 40 other countries,
NNZ provides packaging solutions to a worldwide customer base.
90 Ilse Matser et al.

Table 5.1. Interviewees.

Position in the Business Family

1 CEO Family 3rd gen
2 Chief Commercial officer Non-family
3 Chair person supervisory board Non-family
4 Chair person STAK board Non-family
5 Sales manager Family 4th gen
6 Not involved in the business Family 3rd gen

5.3.2. The Family Boot

1st generation: Rien Boot started NNZ in 1922. The Boot family originally came
from the Gouda-region, the Western part of the Netherlands. Rien had experi-
ence with Jute and used a grant from the government to start a trading company
in Jute-packaging based in Groningen: the Noord Nederlandse Zakkenhandel
(NNZ). Rien married Anna Pieffers and they had four children: Leendert, Fem-
migje, Marinus, and Wim (Fig. 5.1).
2nd generation: Leendert worked for NNZ. Femmigje stayed at home to help
her parents in the household. Marinus tragically died in the Second World War:
he was a member of the Dutch resistance and was put to work in a prisoner camp
in Germany. Wim didn’t start working in NNZ, but went to work in Malaysia to
work for another company. There, he met his wife Will who was born and raised
in the former Dutch colony “Nederlands-Indië.” Rien finally asked Wim to come
back and work for NNZ. Femmigje always stayed single and Leendert and his
wife didn’t have children. Wim and Will had four children: Anja (1956), Marco
(1957), Len (1959), and Fred (1965).
3rd generation: Len and Marco work for NNZ: Len is the current CEO and
Marco is the president of NNZ Inc, the USA branch of the company. Anja has a
career in the healthcare sector and Fred started his own business: he is a producer
and one of his productions, the musical Soldier of Orange, is a huge success in
the Netherlands.
4th generation: all four siblings have two children, so there are eight cousins
that form the 4th generation. The oldest, Rachel, was born in 1978, the youngest,
Jip, in 2003. Roos (1980) is the first member of the fourth generation who works
for NNZ. She started as an account manager for the industrial market for the
BeNeLux in January 2016. Since August 2017, she is the Manager of Sales for the
BeNeLux in the industrial market.

5.3.3. The Ownership Structure

Today, NNZ is owned by the four members of the 3rd generation: Anja, Marco,
Len, and Fred. Their shares are certified via StAK Libau. StAK is an abbreviation
 Family Governance in Practice
91
Fig. 5.1. The Family Tree of the Boot Family.
92 Ilse Matser et al.

of Stichting administratiekantoor1 and is an independent foundation that has

been set up to acquire shares in NNZ B.V. and, in exchange, to issue depositary
receipts. With this, the voting rights have been separated from the economic rights
of the ownership. The governance structure of NNZ consists of the board of
directors, a supervisory board, and the StAK board. The board of directors is
responsible for corporate policy, makes long-term strategy plans and executes
them. The supervisory board monitors the board of directors and has to approve
certain decisions. In practice, it acts primarily as a sparring partner for the board
of directors.
Finally, the StAK executes the legal ownership. This is the place where impor-
tant decisions such as the long-term strategy as well as important investments
suggested by the board of directors and supported by the supervisory board are
needed to be approved. The owners have the right to appoint the members of the
supervisory board and the board of directors.

NNZ – Ownership and Control – An Overview

The foundation, StAK Libau
In the Netherlands, it is common to work with a two-tier governance sys-
tem: a board of directors and a supervisory board. This is also the case
with the NNZ. The legal ownership of the NNZ B.V. is held by StAK
Libau. The general objective of this foundation is the administration and
holding of the shares of NNZ, and exercising the voting right and other
rights associated with those shares. The foundation has issued certificates
to Anja, Marco, Len, and Fred Boot. Both offspring who work in the busi-
ness and offspring who do not work in the business have acquired shares.
It is the family’s wish to continue with this principle for the next genera-
tion as well. The family constitution describes that certificates can only
be transferred to current shareholders, the business and offspring of the
current shareholders.
In the constitution, it is explained that concerning the dividend the aim is
to invest the major part of the net profit back into the business. In addition,
a dividend policy is established and approved in the shareholders meeting.
The StAK Libau board consists of three “types” of board members
(A, B, and C). They currently consist of the following: A (one representa-
tive of the board of directors), B (one representative of the family), & C (three

1
For Dutch family firms, it is quite common to use the legal construct of stichting
administratiekantoor. The possibility it offers to split the economic rights and the
voting rights is appreciated by family shareholders. Especially in complex ownership
situation, it makes it easier to organize that family shareholders speak in one voice
with the business.
 Family Governance in Practice 93

independent advisors). A and B both have three votes and each individual
type C StAK board member has one vote. Currently, Len has a dual posi-
tion, he is the CEO and is also StAK board member B. The family mem-
bers rotate every three years. The independent advisors are appointed for
three years and can be re-appointed for a second term.

Rights of certificate holders

Under the articles of association, the certificate holders have only been
granted the statutory rights, i.e.: to attend the shareholders’ meeting and
address the meeting, to see the official financial statements, to challenge
any unreasonable treatment, and the right of investigation.
The statutory right to vote lies with StAK, board member B represents
the certificate holders in the board. Moreover, the StAK board needs to
consult all certificate holders about important decisions before a share-
holders’ meeting takes place.
Ultimately, the board of StAK can decide on the full or partial conver-
sion of certificates back into shares. This decision has to be taken by unani-
mous vote in a plenary board meeting, with no board positions vacant.

The Supervisory Board

The certificate holders appoint the supervisory board. In general terms, it
is the task of this board to supervise the board of directors with the ulti-
mate goal to assure the continuity of the business. The supervisory board
is expected to have a monitoring role in terms of managerial, strategic, and
financial matters, and to give unsolicited advice to the board of directors, in
particular in financial matters. In terms of management, the board is expected
to join the deliberation process and view the business from a different per-
spective. Finally, it has a role as conflict mediator, also in the unlooked-for
event of conflicts between the board of directors and shareholders. All three
members of the supervisory board are not members of the family.

Input by family members

All family members are warmly invited to present ideas and plans about
the development of the family business to the board of directors and/or the
board of StAK, on the basis of the idea that both family and business will
benefit from such active input.

5.3.4. The Family Constitution

In 1993, the pre-days of Wim Boot’s retirement, Wim started to develop a family
constitution, with the help of advisors from an accounting firm. In several ses-
sions facilitated by these advisors Wim and his four children, who would become
94 Ilse Matser et al.

the new owners of NNZ, discussed family and business values and all kinds of
topics relating to how the family wants to own and manage the company. These
discussions were the input for a document that became the blueprint for the coop-
eration between NNZ and the Boot family. The core motto is: NNZ is a business
with a family. The wellbeing of the company and its people come first.
The document, labeled the family constitution, has several chapters. Starting
with an introduction to express the purpose of the document: the family, in line
with their core motto, wants to be clear on how to act in situations where different
interests come together: family interests, the company’s interests, and individual
interests. After this statement, several paragraphs describe various aspects relevant
for a strong cooperation between the family and the business. Paragraphs describe
in detail: the family goals and family values; the policy regarding family members
working for NNZ; leadership and succession; ownership, control, and the transfer
of ownership; the role of the supervisory board; communication practices. The last
paragraph describes that every year the constitution will be discussed in the annual
family meeting and describes the policy of how individual family members can
make suggestions for changes in the document. During the years, some adjustments
of the document have been made. For example, in the first draft of the document, a
family member was obliged to have working experience in the packaging industry.
Nowadays, this is changed to the broader term of “relevant working experience.”
The career planning of Roos is a good example of how the constitution plays
an active role in prescribing how to act in specific situations. When in 2011 Roos
had already some years of working experience, she had a talk with her uncle
Len (as CEO) to express her interest in joining the family business. Together they
thought of the next career step Roos had to take in order to get the necessary
experience. She already had sales-experience, but lacked the experience of work-
ing in a large company. She applied for a sales job at Friesland Campina and in a
summer vacation she did a short internship at the R&D department of NNZ in
order to become more acquainted with the NNZ. Three years later NNZ needed
a new salesperson and Roos applied for the job. Being equally good as others, her
family membership got her the job. In 2017, she was promoted to a management
position. She had to formally apply for this position as well.
When the case was written, the family could reflect on more than two decades of
experience with the constitution. It is also the time that some of the younger cousins
are turning 18 and are welcomed to the shareholders’ meeting and the family meeting.

5.4. Findings
The findings in the interviews are organized with help of the conditions of a fair
process as identified by Van der Heyden et al. (2005).

5.4.1. Clarification: Clarity of Information, Process and Expectations

Wim Boot had the vision that it was important to discuss guidelines up front and in
addition write them down. When in 1993 he wanted to write a family constitution
this was a very uncommon practice, it probably has been one of the first examples
 Family Governance in Practice 95

in the Netherlands. Now with more than 20 years of experience all stakeholders
agree that the governance structure functions well, and that the constitution plays a
significant and active role in this. It is not a document that lays untouched in some
drawer but the document is shared with employees, discussed during family meet-
ings and shareholder meetings and when needed checked and used. In its years of
application, the document has been adjusted on some specific points.
There is a willingness to professionalize the governance structure, and working
with the document has helped to fine-tune the overall governance practice. With
the positive outcome that at NNZ there is not a significant difference between
the formal and informal organization processes. The chairpersons of the StAK
board and supervisory board have both experience with comparable roles in other
family businesses. They emphasize that the governance structure of NNZ can
be seen as a best practice. A key element in this success is that all actors in the
governance arena respect each other’s role. This not only counts for the formal
decision-making processes but also has a lot to do with informing the different
parties. For instance, there is informal contact between the chair of the StAK and
the chair of the supervisory board.

5.4.2. Communication and Voice

The core motto of the owning family is that NNZ is a business with a family. This
motto influences many aspects of the business. All family members, also the ones
who don’t work in the company, are well known by the employees. The commer-
cial director expressed that the family supports the business

we have very good contact with them, they really give the impres-
sion that they believe in the company, they support us and at the
same time they give the freedom to take decisions which we think
are necessary. Moreover, they support everything NNZ does as
a team.

The family is very open in communicating the governance structure. The fam-
ily constitution is for example translated in English and in every NNZ office
around the world a copy can be found. Non-family coworkers are welcome to
read the document to gain a better understanding of what exactly is meant with
“a business with a family.”
The family has decided that turning 18 is the time for the first invitation to
attend the shareholders meeting. The idea is that attending the annual sharehold-
ers’ meeting and family meeting will help to increase the awareness of what it
means to become a shareholder and, in this way, serves as a learning process for
their potential future role. The family meeting is followed by a family weekend,
here all spouses and younger children join in, and this get-together helps to main-
tain strong relationships between the siblings and to strengthen the connection
between the cousins of the 4th generation and the extended family members. Also,
for the young members of the 5th generation, it is a great opportunity to feel wel-
come and to get to know their extended family.
96 Ilse Matser et al.

5.4.3. Consistency Across People, Over Time and with

Agreed Values and Norms
A good example of consistency between family members has to do with the hir-
ing policy: when in 2018 in addition to Roos another member of the fourth gen-
eration expressed his interest of a career in the family business, Len treated his
cousin exactly the same as he did with his niece. Len had an interview and during
the interview the policy as stated in the family constitution was explained and dis-
cussed. Len expressed that in principle his nephew is welcome but that in addition
to his current level of education and experience he needs a couple of more years
of experience in a corporate environment.
The family members are all very aware of the importance of “walking the
talk.” With the company growing and professionalization being an important
focus, the aim is that all coworkers, especially those who work at the head office
in Groningen, have to have higher education. This also counts for family mem-
bers. Moreover, only when a family member is equally good as others, the family
membership can finally help to get the job. As a family member working at NNZ
there are high expectations and probably even an extra critical eye. This all has to
do with the belief that it is crucial to get the best possible people for the business.
When Wim wanted to retire, everyone one including Len, agreed that Len didn’t
have the experience yet to become the new CEO. Therefore, for a couple of years
an outsider stepped in to lead the company and also to act as coach for Len to
prepare him for the position. This was a clear signal that the business comes first.
Incidentally, the family doesn’t follow the rules of the constitution. An exam-
ple is an investment in another company done by the oldest brother. In the family
constitution, there is a paragraph that explains that this is forbidden. The rea-
son behind the rule is that investments in other companies could lead to a lack
of focus on the family business. The family members discussed this and decided
together that this was not the case here so that there is no need to strictly follow
the rules of the constitution.

5.4.4. Changeability of Decisions, Process, Goals, and Principles

As the fourth generation finished school and started their careers, subjects like
“working for NNZ” were opened. In the first drafts of the constitution, a fam-
ily member was obliged to have working experience in the packaging industry.
Nowadays, this is changed into relevant working experience. In addition to these
explicit changes there are also changes that have to do with more general changes
in society. For example, Roos explained that for her mother it was not expected
that she would have a career in the family business, now this has changed, gender
is not an issue anymore. The ownership structure will in the next decade change
from a sibling partnership into a cousin consortium. Although this is not a current
topic on the agenda, everyone is aware of it and understands that it could mean
that additional discussions need to take place in the near future. For instance,
with eight potential candidates for leadership positions in the firm, is there a need
to discuss the importance of making sure that there is a balance between family
 Family Governance in Practice 97

and non-family members in the board? Another topic mentioned is the increased
possibility that one of the shareholders will want to sell his or her shares. How
can we make arrangements so that the business and the family is ready if some-
thing like this would happen?

5.4.5. Commitment to Fairness

Throughout the interviews, it became clear that the values of the Boot family
have an impact on the business culture and that the governance practice is built
on these values as well. So, there is a good match between the family, the busi-
ness and the governance structure. The family members working in the busi-
ness feel a strong moral responsibility. The family values (leading by example,
openness, taking care of each other, and honesty) are translated to internal firm
values. The strong social relationships between the family members are reflected
in the business culture, NNZ wants to be a wonderful place to work, coworkers
of NNZ are more important than customers: when people are happy at their
work, they will help customers better. To give one example for this practice,
every workstation has an empty chair, this is to stimulate that colleagues sit
down with each other to discuss things together instead of sending emails. The
great sense of morality and belief in openness and honesty is also seen by the
non-family board members. They feel at home in this family business and are
stimulated to improve the current practices. Overall, this has led to a strong
commitment to a fair process.
The interview with Fred revealed how the family values and governance prac-
tices influence not only NNZ but also Fred’s own company. Fred explained how
his leadership style of “management by democracy” was influenced by what he
learned from his father, the importance of harmony: decision-making takes longer
which sometimes is tough, but once the decision is made there is commitment
because of the decision is made by consensus. The governance practices of NNZ
have been helpful in his role as owner-manager working with external sharehold-
ers. The familiarity with the shareholder meetings and the role and tasks of the
board of supervisors have helped a lot to gain confidence to fulfill the formal roles
that came with the private equity investment.

5.5. Discussion and Conclusions

The case of NNZ is an example of how an entrepreneurial business can flourish
with help from a family and vice versa how the business is helpful in maintain-
ing strong relationships in the family, not only between siblings but also between
cousins living in different parts of the world. The family governance practices are
an important building block for maintaining this strong and synergetic relation-
ship between the family and the business. The family governance practices in this
case are an example of how an understanding of and deep commitment to the
principles of fair process can be transformed into a solid practice. A practice that
is beneficial for the individual family members but also helps in securing that the
business has the owners and management it deserves.
98 Ilse Matser et al.

The analysis of this successful case reflected the conditions discussed by Van
der Heyden et al. (2005). In this example, all conditions were met with a key role
for the family values as a strong foundation for the implementation of the con-
cept of fair process. Furthermore, the case makes it clear that the various condi-
tions interact with each other and are not always easy to separate. It is maybe
better to see them as different aspects of a multi-layered concept.
In addition to the importance of fair process within the family this case
revealed the value of the governance practices for the other stakeholders to per-
form well in their role. The interviews showed how important the formal govern-
ance practices and the commitment to fair process is helpful for the functioning
of the non-family board members, the supervisory board, and the non-family
members of the StAK board.
More than 20 years of practice with the family constitution and the additional
governance practices have evolved into an institute of fair process for this family
and the business. It is an important ingredient for creating and realizing transgen-
erational entrepreneurship potential. The family ownership and family leadership
are a strategic resource for this business. Moreover, the governance practices are
an example of appropriable resource, it has become a framework for the govern-
ance of other entrepreneurial practices of individual family members as well.
This chapter is based on a single case; therefore, it would be helpful to analyze
more cases, especially also non-successful cases. To gain a more in-depth under-
standing of the mechanisms underneath the processes it would be welcome to
investigate incidents where the family governance system has to play an active
role to maintain a synergetic relationship between the family and the business.
Another line of research that is promising is the impact family governance has
on the functioning of different stakeholder groups. For instance, more knowledge
about the relationship between sound family governance practice and attracting
and keeping highly qualified non-family employees is something academics and
practitioners would welcome both (Gersick & Feliu, 2014).

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