The founder owns the company, manages its operations, makes most of its decisions, and personally knows its customers, suppliers, and employees. Children, siblings, or other relatives may also work directly alongside the founder.
At this stage, the need for formal governance may appear limited because ownership, management, and decision-making remain within a very small circle.
As the company grows, however, difficult questions begin to emerge:
- Who has the authority to make each decision?
- Is every family member entitled to work in the company?
- How should the salary of a son, daughter, brother, or sister working in the business be determined?
- Who will become General Manager after the founder?
- Should executive leadership pass through inheritance or be based on competence?
- How should profits be distributed?
- What happens if one shareholder wants to sell their interest?
- How should disagreements among family members be managed?
- What happens when the second and third generations enter ownership?
At this point, corporate governance becomes a practical necessity rather than an abstract management concept.
The objective is not to complicate the company or transfer control away from the family. It is to:
Translate the relationship between ownership, management, and the family into clear rules that protect the business, decision-making, and relationships among stakeholders.
No governance system can guarantee that a company will survive for future generations. It can, however, reduce many of the risks associated with disputes, overlapping authority, and weak accountability while strengthening the company’s capacity to continue on an institutional basis.
What Is Corporate Governance?
Corporate governance is the framework that determines:
- Who has the authority to make decisions?
- Who provides oversight?
- Who executes the decisions?
- How is accountability enforced?
- How are conflicting interests managed?
- What information should reach the owners, Board of Directors, Board of Managers, or executive management?
Governance is not merely a collection of regulations.
It is a system that may include:
- Organizational structure
- Decision rights and authorities
- The Board of Directors or Board of Managers, depending on the company’s legal form
- Committees, where appropriate
- Policies
- Disclosure
- Oversight and internal control
- Risk management
- Conflicts of interest
- The allocation of responsibilities between ownership and management
This approach is consistent with IAC’s corporate governance services, which focus on designing governance structures, committees, and authorities; developing policies; aligning procedures with applicable legislation; and establishing clear decision-making and escalation pathways.
Why Is Governance Particularly Sensitive in a Family Business?
In a family business, the same individual may wear several different hats at the same time.
A person may be:
- The founder’s son or daughter
- A shareholder
- A board member
- An executive manager
- The sibling of another shareholder
Combining these roles is not necessarily a problem.
The problem begins when the individual does not know:
From which role am I making this decision?
The International Finance Corporation (IFC) explains that one of the distinctive challenges facing family businesses is the overlap among family, ownership, and management roles. As the business expands and new generations become involved, the need for a clear family and corporate governance structure increases.
Consider a simple example.
A family member works as Procurement Manager while also owning shares in the company.
If management is dissatisfied with that person’s performance, should the matter be discussed with them as:
- An employee?
- A shareholder?
- A member of the family?
When the rules are unclear, an employment-performance issue can become a family dispute.
Governance separates roles without separating the family.
The Difference Between Owning and Managing the Company
One of the most important transitions for a family business is recognizing that:
Ownership does not automatically confer the right to manage.
A person may own 20% of a company, but this does not necessarily qualify that person to manage Human Resources, Operations, or Finance.
An owner’s rights arise from ownership and the company’s legal form.
An executive position should be based on:
- Relevant expertise
- Competence
- Responsibility
- Authority
- Performance indicators
This distinction becomes increasingly important in the second and third generations because the number of owners may grow while the number of leadership positions remains limited.
If a company attempts to give every owner an executive role, it may end up with a structure designed to accommodate family members rather than serve the company’s strategy.
Are There Legal Corporate Governance Requirements in Jordan?
Yes, but there is no single governance model that applies identically to every family business.
The principal legal framework governing companies in Jordan is Companies Law No. 22 of 1997 and its amendments. The Companies Control Department also lists Amending Law No. 20 of 2023 among the current legislation.
Requirements differ according to the company’s legal form.
For example, the Companies Law requires public shareholding companies to comply with applicable corporate governance instructions. It also regulates the relationship between the Board of Directors, executive management, and the company’s relevant internal regulations.
The Companies Control Department currently lists the Corporate Governance Instructions for Shareholding Companies for 2024, while the Jordan Securities Commission publishes separate governance instructions applicable to listed shareholding companies.
A family business may, however, be registered as:
- A limited liability company
- A private shareholding company
- A public shareholding company
- Another permitted legal form
Governance rules applicable to a listed public shareholding company should therefore not be presented as an automatic legal obligation for every family business.
The applicable legal reference must be determined according to the company’s legal form, sector, and actual regulatory status.
An Important Update on Family-Business Governance in Jordan
This area is currently developing.
In July 2026, Jordan’s Companies Control Department announced that it had held a consultative session to discuss a draft Family Business Governance Regulation and Family Business Governance Guide, with the participation of relevant institutions and specialists.
The Department also participated in specialized family-business governance activities during 2025, reflecting growing institutional interest in this subject.
As of the date of this article, however, the project described by the official source should be treated as a draft under discussion, not as a final regulation already in force.
Jordanian family businesses should therefore distinguish among:
- Current legally binding requirements
- Voluntary good-governance practices
- Any new regulation or guidance that may be issued and formally enter into force in the future
What Is the Difference Between Corporate Governance and Family Governance?
This distinction is fundamental.
Corporate Governance
Corporate governance addresses:
- The Board of Directors or Board of Managers
- Executive management
- Decision rights and authorities
- Risk management
- Policies
- Oversight and internal control
- Financial governance
- Accountability
- Performance
- Compliance
Family Governance
Family governance addresses:
- The relationship between family members and the company
- Rules governing family employment
- Ownership succession and transfer
- Dividend-distribution principles
- Entry of the next generation
- Exit of an owner
- Leadership succession
- Dispute resolution
- The family’s shared long-term vision for the business
The IFC explains that, as new generations become involved, family businesses may need a clear family-governance structure incorporating tools such as:
- A family constitution
- A family employment policy
- Succession arrangements
- Intergenerational transition mechanisms
A mature family business needs both dimensions.
A company may have an effective Board of Directors, yet a family dispute concerning the founder’s successor can still paralyze the business.
Conversely, family relationships may be excellent while the company lacks clear financial policies, authorities, controls, and accountability mechanisms.
Step One: Diagnose the Current Situation Before Creating Committees
Governance should not begin with the statement:
“We need a board, two committees, and a family constitution.”
Begin by asking:
- Where does the problem actually exist?
- Who makes decisions today?
- Which decisions does the founder retain?
- Which decisions can managers make?
- Which decisions require owner approval?
- Where do disputes arise?
- Are they related to ownership?
- Management?
- Financial resources?
- Family members employed by the company?
- Absence of a leadership-transition plan?
This approach is directly aligned with IAC’s methodology:
Objective diagnosis → tailored design → phased implementation → internal capability building → impact measurement
A governance model suitable for a company owned and managed by two siblings may not be appropriate for a company whose ownership has expanded to 20 individuals across three family branches.
Step Two: Separate the Three Circles
A useful way to understand a family business is to distinguish among three circles:
- Family
- Ownership
- Management
An individual may belong to one, two, or all three circles.
A Family Member Who Neither Owns nor Works in the Company
The individual has a family relationship but is neither an owner nor an executive employee.
An Owner Who Does Not Work in the Company
The individual has ownership rights but does not hold an executive position.
A Family Member Who Works in the Company but Does Not Yet Own Shares
The individual should be assessed as an employee according to the requirements of the role.
An Owner Who Also Serves as a Manager
The individual’s rights as an owner must be separated from their performance assessment as a manager.
This simple distinction eliminates a significant amount of ambiguity.
Step Three: Establish a Clear Delegation of Authority
In some family businesses, everyone understands that:
“The father makes the final decision.”
This arrangement may work while the company is small.
As the business expands, however, the founder can become a bottleneck.
Every:
- Purchase request
- Recruitment decision
- Discount
- Contract
- Investment
- Leave request
may reach one person.
Governance redesigns this pathway.
A Delegation of Authority can define:
- What the Board decides
- What the General Manager decides
- What the Finance Manager decides
- What the Sales Manager may approve
- Financial expenditure limits
- When a decision must be escalated
- Which matters should remain reserved for the owners or the Board
IAC’s governance services use Decision Rights and Escalation Paths, while its organizational development programs may also include RACI matrices and the definition of responsibilities and authorities.
Step Four: Establish a Board That Actually Functions
A family company may have a Board of Directors or Board of Managers for legal purposes, while its meetings operate in practice as an extension of the family gathering.
Effective governance makes the board a forum for institutional decision-making.
Its agenda may include:
- Strategy
- Financial performance
- Risk
- Investment
- Executive leadership
- Oversight and internal control
- Major projects
- Leadership succession
The IFC explains that board structure becomes increasingly important as the family business grows and becomes more complex. Its development may progress from an advisory board to a more formal governing board, with independent members considered when appropriate for the company.
Should Every Family Member Sit on the Board?
No.
The board is not a mechanism for satisfying every branch of the family.
Selection should be based on:
- The nature of the business
- The board’s competency requirements
- Relevant experience
- The degree of independence required
- The company’s legal form
External expertise may be beneficial where the company needs an independent perspective or experience that is not available within the family.
Step Five: Establish a Clear Family Employment Policy
This is one of the most sensitive areas in a family business.
The correct question is not:
Should family members be allowed to work in the company?
It is:
Under which rules may they work in the company?
A family employment policy may define:
- Required qualifications
- Prior professional experience
- Application procedures
- Who makes the appointment decision
- Salary and benefits
- Performance-evaluation mechanisms
- Promotion requirements
- Disciplinary procedures
- Conditions under which employment may be terminated
The IFC expressly identifies a Family Employment Policy as an important part of family-business governance as the family expands and new generations become involved.
A sound principle is:
Family membership creates a relationship with the family; it does not automatically create an entitlement to a job.
Step Six: Separate Salary from Dividends
When a family member works in the company and also owns shares, there are two different potential sources of income:
Salary
Compensation for performing a job and carrying organizational responsibility.
Dividends
Returns arising from ownership when the company decides to distribute profits in accordance with the approved legal and financial framework.
Combining these two sources can create disputes.
Why does a family member working in the company receive more money than a sibling who does not work there?
The answer should be clear:
- One component represents employment compensation.
- Another component arises from ownership rights.
This transparency becomes particularly important when some members of the next generation enter the business while others pursue careers elsewhere.
Step Seven: Regulate Conflicts of Interest
Related-party relationships may occur frequently in family businesses.
Examples include:
- Purchasing from a company owned by a family member
- Leasing property from one of the shareholders
- Hiring a relative
- Awarding a contract to someone connected to a manager
Governance does not necessarily prohibit every transaction involving a related party.
It requires the company to:
- Disclose the relationship
- Evaluate the transaction objectively
- Determine who must abstain from discussion, voting, or decision-making
- Ensure that personal interests do not override the company’s interests
Jordanian governance instructions for listed companies regulate related-party transactions within the companies subject to those instructions, demonstrating the importance of this matter in formal governance frameworks.
A policy for a non-listed family business must be designed according to its legal form and the requirements that genuinely apply to it.
Step Eight: Develop a Dividend Policy
One of the most common sources of friction among family owners is the question:
Should profits be distributed or reinvested?
Family members working in the company may prioritize expansion.
Non-working owners may depend on dividends as a source of income.
If the decision changes every year according to personal preference or influence, conflict can arise.
A governance framework can establish a decision-making policy that considers:
- Liquidity
- Investment requirements
- Debt
- Growth plans
- Working-capital needs
- The company’s actual capacity to distribute profits
This does not necessarily mean adopting a fixed percentage forever.
It means establishing a known policy for how the decision will be made.
Step Nine: Begin Succession Planning Before It Becomes Urgent
One of the worst times to discuss succession is after the founder suddenly becomes ill or unavailable.
Succession planning does not mean removing the founder from the company.
It means answering important questions early:
- Who could lead the company?
- Which competencies are required?
- Should the candidate come from within or outside the family?
- How will the candidate be prepared?
- Who will make the selection?
- What role will the founder hold after the transition?
- What happens if no family member is qualified?
The IFC devotes significant attention to succession planning, both for senior management and for the intergenerational transfer of ownership.
The governing principle is:
Inheritance of ownership does not require inheritance of the Chief Executive position.
Step Ten: Establish a Framework for Ownership Transfer
As the company moves into the second and third generations, ownership may become divided among an increasing number of heirs.
Within the limits permitted by applicable law, the company’s legal form, and its constitutional documents, it may need to address questions such as:
- Can an ownership interest be sold to someone outside the family?
- Do family members have priority rights?
- How will the ownership interest be valued?
- What happens when an owner wishes to exit?
- How will ownership transfer following death be addressed?
These matters require specialized legal review when any binding arrangement is drafted. The available mechanisms differ according to the company’s legal form, the Companies Law, and the company’s constitutional documents.
The current principal legislative framework remains Companies Law No. 22 of 1997 and its amendments.
Step Eleven: Establish a Family Council When Appropriate
Not every small family business needs a Family Council.
As the family expands and the number of owners increases, however, a Family Council may become useful.
Its function is not to manage the company’s daily operations.
It addresses matters located at the intersection of family and ownership, such as:
- Educating the next generation
- Managing the family’s relationship with the company
- Family employment policy
- Long-term family vision
- Succession
- Shared values
- Communication among family branches
- Family-related dispute-management mechanisms
The IFC discusses family-governance structures of this kind as a business develops from the founder stage to sibling partnership and then to broader generations and family branches.
Step Twelve: Develop a Family Constitution
A Family Constitution is not a substitute for the Memorandum of Association, Articles of Association, shareholders’ agreement, or another legally binding instrument.
It is a governance document that explains the principles governing the relationship between the family and the business.
It may address:
- The family’s vision for the company
- Family values
- Conditions for family employment
- The method for selecting family representatives
- Succession principles
- Communication
- Principles for dividend decisions
- Dispute resolution
- Education of the next generation
The IFC presents the Family Constitution as one of the practical tools used in family-business governance.
Any provision intended to create a binding legal effect—particularly concerning ownership, voting, transfer of shares or interests, or inheritance—requires legal drafting aligned with Jordanian legislation and the company’s constitutional documents.
Step Thirteen: Establish an Information and Reporting System
Disputes sometimes arise because information is not distributed equally.
A family member working in the company may know almost everything about its operations, while a sibling who owns shares but does not work there may receive no information until profits are distributed.
Effective governance defines:
- Which reports are provided to the Board
- Which information is provided to owners
- How frequently reports are issued
- The appropriate level of detail
- Which information is confidential
- Who is entitled to access it
Reports may include:
- Financial performance
- Operational indicators
- Liquidity
- Major projects
- Principal risks
- Debt
- Performance against the approved plan
Transparency does not mean providing every piece of information to every person.
It means determining access rights according to role.
Step Fourteen: Translate Governance into Performance Indicators
It is not enough for the company to say:
“We have improved governance.”
It should ask:
- Have decisions become faster?
- Has dependence on one decision-maker decreased?
- Are authorities understood?
- Do board meetings produce decisions with clear follow-up actions?
- Are delayed actions identified?
- Are conflicts of interest disclosed?
- Is there a clear process for evaluating executives?
- Has succession planning begun?
- Are reports issued on time?
IAC connects governance with performance, accountability, and decision pathways—not merely with policy drafting.
A Practical Governance Model for a Family Business
The governance system can be considered across four layers:
Ownership Layer
This layer addresses:
- Owners’ rights
- Owners’ meetings
- Access to information
- Dividend decisions
- Ownership-transfer matters
Corporate Governance Layer
This layer includes:
- The Board of Directors or Board of Managers, depending on the legal form
- Committees, where appropriate
- Decision rights
- Risk management
- Oversight and internal control
Executive Management Layer
This layer includes:
- The General Manager
- Finance
- Operations
- Sales
- Human Resources
- Daily execution
Family Governance Layer
This layer may include:
- A Family Council, where needed
- The Family Constitution
- Family employment policy
- Next-generation development
- Family dispute-management mechanisms
Each layer performs a different function.
Problems arise when one layer attempts to perform the function of another.
Common Family-Business Governance Mistakes
Treating the Founder as the Entire System
The founder’s experience is highly valuable, but the company must be able to make decisions and continue operating in the founder’s absence.
Distributing Positions According to Kinship
Executive roles should be assigned according to competence and responsibility.
Postponing Succession Discussions
This makes transition more sensitive when it eventually becomes unavoidable.
Confusing Ownership with Salary
A non-working owner is not an employee. A family employee should have a job description and compensation linked to the role.
Maintaining a Ceremonial Board
The board merely approves decisions already made elsewhere and does not genuinely examine strategy, risk, or performance.
Failing to Establish a Conflict-of-Interest Policy
Company transactions then become mixed with the personal interests of family members.
Writing Policies That Are Never Applied
Governance does not succeed because of the number of documents. It succeeds through clear decision rights, implementation, and follow-up.
Does Governance Mean the Family Loses Control?
No.
Governance does not transform the company into an entity detached from its owners.
It enables owners to exercise their rights in an organized manner.
The distinction is between:
Personal control over every decision
and:
Institutional control exercised through clearly defined roles, authorities, oversight, and accountability
For example, the founder may remain an owner and Board Chair while delegating daily operations to professional management within clearly defined limits.
Does a Family Business Need an External General Manager?
Not necessarily.
The family may include highly competent individuals.
The correct question is not:
Family member or non-family member?
It is:
Who has the competencies required for the role?
The IFC emphasizes the need for family businesses to assess family and non-family executives objectively and to establish a clear succession plan for the Chief Executive and senior management.
How Can You Tell That Your Company Needs More Mature Governance?
The need becomes more evident when:
- Every important decision depends on one person.
- There is no clear separation between company funds and owners’ personal funds.
- Family members work without job descriptions or performance evaluations.
- Disputes arise concerning profit distribution.
- There is no agreement on who will lead after the founder.
- Family members disagree about recruitment and promotion.
- Owners do not receive appropriate and equitable financial and management information according to their rights.
- Transactions involving family members occur without a conflict-of-interest policy.
- The company continues expanding while being managed in the same way as when it was small.
These are not necessarily signs that the company has failed.
They indicate that the company may have become larger and more complex than its current governance model.
What Is IAC’s Role in Family-Business Governance?
Ideal Additions Consulting & Training (IAC) provides corporate governance and policy-development services that may include:
- Designing governance frameworks
- Establishing governance structures, committees, and authorities
- Developing policies and their approval criteria
- Aligning procedures with applicable legislation
- Governing operational and decision-making processes
- Designing escalation pathways
- Establishing a governance system capable of implementation, review, and audit
IAC’s services may also include organizational restructuring, role clarification, Target Operating Model development, and RACI matrices. These areas are directly relevant to family businesses seeking to separate ownership from execution and clarify authority.
The engagement follows the sequence:
Diagnose the current situation → design an appropriate governance framework → implement in phases → build the capability of family members and management → measure implementation impact
The objective is not to take a generic Family Constitution template and insert family members’ names.
It is to build a governance system appropriate to:
- The company’s legal form
- Its stage of growth
- The number of owners
- The generation currently involved
- The management structure
- The actual challenges facing the organization
Frequently Asked Questions
Is There a Legally Binding Regulation Governing All Family Businesses in Jordan?
As of 17 August 2026, the verified official source indicates that the Companies Control Department discussed a draft Family Business Governance Regulation and guidance document in July 2026.
The draft should therefore not currently be described as a generally applicable regulation already in force for every family business.
Does Jordanian Companies Law Apply to Family Businesses?
A family business is not necessarily a separate legal form. It may be registered as a limited liability company, private shareholding company, public shareholding company, or another form.
Companies Law No. 22 of 1997 and its amendments remains the principal framework for companies registered under its provisions, with requirements varying according to company type.
Does Every Family Business Need a Family Council?
No.
The need depends on the size of the family, number of owners, involvement of multiple generations, and level of complexity.
A Family Council may be unnecessary for a very small company but increasingly useful as ownership expands across several generations and family branches. This is consistent with the IFC’s framework for the evolution of family-business governance.
Is a Family Constitution Legally Binding?
Not necessarily by itself.
It may function as an internal governance document. Provisions intended to be legally enforceable must be aligned with the Companies Law, constitutional documents, contracts, and other applicable legislation and should undergo specialized legal review.
Should a Son or Daughter Inherit the General Manager Position?
Professional governance does not require an executive position to pass automatically with ownership.
The company should define the role’s requirements, required competencies, and succession process in advance. The IFC emphasizes the importance of planning for senior-management succession in family businesses.
What Is the First Step in Applying Governance?
Begin by diagnosing existing ownership arrangements, roles, and decision-making pathways before drafting policies.
Identify where family relationships overlap with management, where decisions become delayed, and where accountability is unclear. The governance structure, authorities, and policies can then be designed around the organization’s actual needs.
Conclusion
Governance in a family business is not intended to remove its family character.
It is intended to protect both the company and the family from unclear roles and decision-making arrangements.
Implementation begins by separating four questions:
Who owns? Who governs and oversees? Who manages? How does the family organize its relationship with the company?
The governance system can then be developed progressively:
Diagnose the current state → separate ownership from management → define authorities → activate the Board → establish a family employment policy → control conflicts of interest → regulate information and dividend decisions → develop a succession plan → organize ownership transfer → establish family-governance mechanisms where needed → measure and improve implementation
The objective is not to guarantee that the company will survive forever. No governance system can provide such a guarantee.
Effective governance can, however, make decision-making less dependent on individuals, responsibilities clearer, leadership transition more organized, and family disagreements less capable of disrupting the business.
To request an initial family-business governance diagnostic session, contact IAC to assess your ownership and management structure, decision-making pathways, and authorities and to design a practical governance framework and policies appropriate to your organization.