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Making the right choices, which satisfy the family's interests, can be a daunting task for one individual, especially where there are siblings, children and a spouse who have a vested interest in making sure that the right decision is made.

Ms. Pendergast not only recommends setting up a system of governance for the family business but also said that such firms should consider the possibility of bringing in outside advisors to help with decision-making.

Ms. Pendergast made her observations during an education session for managing general agents titled "Family Business Governance," presented here during the recent annual meeting of the American Association of Managing General Agents.

Debate over these issues usually crops up during times when dramatic changes are taking place in the business, said Ms. Pendergast. These can be times of transition in ownership from one generation to the next. Or, instead, it may be that the business has hit some sort of entrepreneurial wall where the principal owners feel they need help with their direction. Or things may simply have come to a point where the owners feel there is a need for outside help.

At this juncture, it is time for the head of the business to move away from being the single decision-maker and rely on a system that involves family members who have an interest in the agency.

"You can choose to do nothing, but you need some way to make decisions. And a lot of times, especially when there are fewer people involved in making decisions, they put off [forming a system of governance] when they should act," Ms. Pendergast observed.

The first action any owner should take is to call a family meeting specifically to discuss business issues. Waiting until there are holidays or special occasions can just sidetrack those discussions. Also, the talks should leave out personal issues not related to the business, she said.

"Call the family meeting," she said, noting that this should be a regular affair, not something done when there is a crisis. "It could be formal or informal, but it needs to happen."

Sometimes, no matter how good the intentions of the meeting, there are no easy ways of resolving issues or coming to a consensus. At this point, she advised that the family should consider creating a board of governance. The board would review business issues and, depending on its responsibilities, order or advise on what needs to be done.

A board of directors would, as in the business world, order changes, while a board of advisors would merely offer advice on issues.

In either case, she recommended that such a board should consist of at least two outsiders who are not related to the family either through friendship or business. They should also be people all the family members feel they can trust.

In choosing the prospective board members, she recommended that the prospects meet with all the family members individually to achieve a general comfort level. However, she admitted, there may be people within the family who are simply not ready for such a move.

"If they do not want to hear what others want to say, then you are not going to have an effective board," she noted. "The family has to get to the point where they say, There are people out there who have ideas that we could use.'"

For the younger generation, older family members must decide when to bring the younger members in to educate them about the business, how finances work, and how the business is to be run in the future. This is something that should be done to commit them to the business and to keep them involved in its future.

"A crisis is not the time to get this done," said Ms. Pendergast. "It should be done when you have the luxury to think ahead about the business, looking five years off into the future."

Reproduced from National Underwriter Edition, May 28, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.