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Family conversations—via text, email, Skype or phone?

When it’s time to herd your kids into the car, do you (a) knock on their bedroom doors and tell them to come downstairs, (b) stand at the bottom of the stairs and yell, or (c) send them a text message? A feature in the Wall Street Journal last month examined a household practice that is not all that new, and most likely growing -- families who communicate with each other by texting from room to room.

Many families find smartphone communication to be the most efficient way of sending routine reminders. But the Journal report cautioned that some topics are best handled face-to-face. For example, the article noted, parents who receive sassy messages from their children should put down the electronic devices and discuss the inappropriate backtalk in person. The report also warned that a message intended to stay within the family can cause embarrassment if forwarded to classmates.

The Journal article focused on nuclear families -- parents with their preteen or teen children, all living in the same household. But the advice is just as relevant to large business families spread throughout the globe. What is the best way to send your message so that it’s received in the spirit you intended? Is your communication platform secure? What topics must be handled face-to-face, or at least ear-to-ear?

We will be addressing this topic at our Transitions West 2015 conference, which is being held November 4-6 in Newport Beach, Calif. A session entitled “Effective Cross-Generational Communication Strategies” will focus on bridging individual family members’ different communication styles and preferences.

The past few decades have brought great new variety in the ways that family members can share their feelings, ask questions -- and, yes, hurt each other. It may take some effort to make sure that technology is used exclusively to facilitate good communication, and not to intensify miscommunication.

The hot baby boomer trend: Selling the family business

Because the baby boomer generational cohort is so large, everything they have done throughout their lives has become a trend, and the world has had no choice but to pay attention. In the past, these trends have included listening to rock music and having a midlife crisis. Today, as the boomers reach their 60s, they are starting a new fad: retiring. And in many cases, “retiring” means “selling the family business.”

I recently interviewed Barbara Roberts, entrepreneur-in-residence at Columbia Business School and co-author of “The Owner’s Journey,” a white paper issued jointly by Columbia and U.S. Trust that examines business owners’ exit-planning activities. Roberts told me the impetus for her report was that “so many baby boom businesses were coming up for some kind of transfer or sale, and no one had really studied this phenomenon.”

The boomers who opt to sell their companies have been faring well. “Just as corporate mergers and acquisitions are booming, the market for family-owned businesses has been sizzling,” a recent Wall Street Journal article noted. “For more than a year, sellers have enjoyed the upper hand in negotiating price and other terms, bankers who specialize in such deals said.”

Citing research by Pitchbook, a company that provides data for private equity and venture capital markets, the Journal report said the number of companies that sold for $25 million to $100 million increased from 592 in the first quarter of 2012 to 782 in the second quarter of 2015. (This figure includes family-owned as well as non-family-owned businesses.)

The tide may be shifting, however. The Journal article said private equity firms have started to offer lower multiples of earnings, and selling prices could drop even further if interest rates rise. The article said advisers are telling their clients to consider selling before the market turns.

If those business owners haven’t already started their exit planning, they might be less than fully satisfied with the result. Roberts said her research subjects “told me that the process took much longer than they had ever envisioned, was much more complicated [and] had much more twists and turns. Some of them told me that they wished that they had had financial people come in earlier, on a consulting basis, to help them identify the two or three things they could do that could have added value even further.”

The difference between your business and Amazon

In a lengthy, widely quoted article last month, the New York Times described the stressful working conditions endured by white-collar employees at Amazon. The newspaper interviewed more than 100 current and former “Amazonians” who described a pressure-filled environment where colleagues are expected to rat on each other, supervisors frequently castigate their team members, and everyone is assumed to be always on call.

Former Amazon employee Jason Merkoski told the Times, “The joke in the office was that when it came to work/life balance, work came first, life came second and trying to find the balance came last.”

The article told of a Dickensian atmosphere that included “marathon conference calls on Easter Sunday and Thanksgiving, criticism from bosses for spotty Internet access on vacation, and hours spent working at home most nights or weekends.”

Taking care of a critically ill family member -- or being critically ill oneself -- is not considered a valid excuse for missing work at Amazon, according to the Times report. The article told of one employee who received a negative performance review after returning from cancer treatment and another who was sent on a business trip the day after undergoing surgery following a miscarriage.

And each year, according to the Times, Amazon engages in “cullings” of the staff -- rituals in which managers rank their subordinates; those at the bottom of the list are targeted for dismissal. The report noted that this “rank and yank” strategy was once famously practiced by companies like General Electric but has since fallen out of favor.

Given all the hardships allegedly endured by Amazonians quoted in the Times, it’s no wonder the salary analysis firm PayScale found in a 2013 study that the median employee tenure at Amazon is just one year, the shortest among Fortune 500 companies.

If you’re a family business owner, you might well be congratulating yourself on your more humane approach to human resource management. Family companies are known for treating their employees “like family,” for encouraging teamwork, and for recognizing that there are times when family must come first, especially when a loved one’s health is involved. And family firms are also known for inspiring employee loyalty; many boast of having staff members who have been with the company for decades, and even multigenerational employee families.

But despite the litany of complaints about Amazon’s personnel policies and practices as described in the Times, there are two areas where family businesses might consider emulating the giant online seller:

1. Amazon reveres innovation and encourages employees to develop new and better ways of doing things. Too many family companies, by contrast, don’t start thinking about innovation until their markets are being threatened.

2. If the Times’ report is accurate, Amazon is much too quick to cut employees loose, and Amazonians’ jobs are put in jeopardy for the wrong reasons (e.g., because they are enduring a family crisis). But the use of metrics to assess staff performance is a good idea, especially if the statistics are discussed with employees in an effort to encourage them to improve. Are you keeping Joe around because he excels at his job, or because his father worked for your father? Is Sally in a management position because she deserves to be there, or because she’s your cousin?

Hire wisely, train your people well, treat associates fairly and with compassion, and give them the resources they need to succeed. If you do, you’ll have a team full of strong contributors rather than, shall we say, drones.

The dangers of ‘cultural fit’

Last month Knowledge@Wharton, an online newsletter from the University of Pennsylvania’s Wharton School, published an article with a provocative title: “Is Cultural Fit a Qualification for Hiring or a Disguise for Bias?”

“The biggest problem is that while we invoke cultural fit as a reason to hire someone, it is far more common to use it to not hire someone,” Katherine Klein, a professor of management at Wharton, told the publication.

Culture, of course, tends to be put front and center in family companies. Business families and their employees talk about the “family feeling” in the workplace. And family ownership groups -- often on the recommendation of their advisers -- develop a set of family values as a way of uniting family shareholders and creating a framework for making business decisions.

For many families, “culture” involves their faith. It is common to incorporate a statement of religious principles into family values statements. While some families develop separate sets of values for the business and for the family, others proudly weave religious ideals into their business values. The danger of doing this is that it can lead to excluding talented employees who don’t share the owners’ faith.

The Knowledge@Wharton article asserts that while cultural fit has “a legitimate role in the workplace,” it shouldn’t “eclipse the importance of diversity.” The article cited a study by Katherine W. Phillips, Katie A. Liljenquist and Margaret A Neale, published in Personality and Social Psychology Bulletin, that found heterogeneous groups process information more carefully than homogeneous groups do.

Wharton management professor Sigal Barsade offered this suggestion: “The only way that culture in the workplace is effective is if there are sets of values that help the company achieve its strategy.” Hiring managers might seek out, for example, candidates who are results-oriented, innovative, ethical, customer-focused or team players. But in practice, the Knowledge@Wharton article lamented, “discussions around cultural fit can also involve certain euphemisms for what amounts to justifying prejudice or, at least, bias.”

The late family business adviser Léon Danco, a revered pioneer in the field, addressed this issue way back in the Summer 1996 issue of Family Business Magazine with another provocatively titled article, “Religious Extremism Can Hurt the Bottom Line.”

Danco cautioned in his 1996 article: “Some may be able to get away with hiring only ‘their kind’ -- companies do it despite antidiscrimination statutes -- but often at the price of cutting off the company from valuable talent or resources. Same goes for limiting a company’s choice of directors to members of a single faith; you may feel most comfortable with people who share your religious beliefs, but will they bring to the table the diversity of viewpoint, the strategic perspective, and specific business skills you need?”

What these management experts are suggesting is this: It’s important for the business to support the family’s values -- but it’s also important for the family to support good business values.

Recognizing your impact on your community

Last month, after engaging Goldman Sachs to help them assess the issue, the Wanek family announced that they had decided against selling their business, Ashley Furniture. A Wall Street Journal report on their decision illustrates the impact that a family business can have on the community. In the Waneks’ case, that impact is huge.

As the Journal reported, Ashley Furniture has its headquarters in Arcadia, Wis., which has a population of just 3,000. Ashley is “by far the biggest employer” in Arcadia, the article noted. (The company also has plants and distribution centers in other Mississippi, Pennsylvania, North Carolina and California, in addition to importing furniture from Asia.)

So connected is the town to the Waneks and their business that a statue of the company founder and chairman, Ron Wanek, stands Arcadia National Park, the Journal noted. Ron Wanek’s son, Todd, is Ashley Furniture’s CEO.

When Ron and Todd Wanek announced -- at a meeting held at the local high school -- that their family would be holding on to Ashley Furniture, a standing ovation erupted, the Journal article said.

Even if your company is based in a metropolis like Chicago rather than a small town like Arcadia, there are people who rely on your business for their livelihoods -- not only your employees, but also those who work for your suppliers. The good news is that these people are rooting for you to keep your business in your family.

The downside is that community members will notice any signs that you might be looking to sell or that a generational transition might go awry. Your children’s ill-advised Facebook posts or other misbehavior, your public arguments with your spouse or a reduction in your contributions to local charities could be seen as red flags.

In a bigger hometown, your family won’t stand out as much. But every business family should be aware of the positive as well as the negative aspects of their community ties. The bottom line is that communities want -- and need -- their family businesses to succeed.

Defining ‘family business’: Did Credit Suisse get it wrong?

A recent study by Credit Suisse Group AG, cited by the financial news site 24/7 Wall St., found that family-controlled public companies outperform non-family companies on several metrics. According to the “Credit Suisse Global Family” analysis, as reported by 24/7 Wall St., family businesses have a 4.3% higher return on equity than the benchmark, and a cash flow return on investment that is more than 9% higher. (The “Credit Suisse Global Family” index is limited to companies with a market cap that exceeds $1 billion.)

This news is nice to hear, especially since it confirms earlier studies. For example, Morgan Stanley reported in 2005 that family businesses listed on the S&P 500 outperformed the index in 2000-04 by 4.4% over one year, 19.6% over three years and 109.7% over five years. And a 2003 study by researchers Ron Anderson and David Reeb found that return on assets for companies still controlled by the founding family was 6.65% higher on average than for non-family businesses.

All well and good. But when I examined the companies in the latest Credit Suisse study, something seemed amiss.

The 24/7 Wall St. article identified the top 10 U.S. companies from the Credit Suisse Global Family list. The first company is no big surprise: Wal-Mart. Descendants of founder Sam Walton have a stake of about 50% in the retail giant, and the late founder’s grandson-in-law Greg Penner just succeeded his father-in-law, Rob Walton, as the company chairman. Though it’s publicly traded, Wal-Mart certainly qualifies as a family firm.

But farther down the list, things get murkier. Oracle? Google? Facebook? Kinder Morgan? Nike? Does anyone other than Credit Suisse consider those to be family companies?

What makes a company a family business? No one knows for sure. As researchers Melissa Shanker and Joseph Astrachan wrote in Family Business Magazine’s Spring 1996 issue, “When pressed, even experts in the field have trouble articulating a precise definition.”

When Shanker and Astrachan set out to measure the impact of family businesses on the U.S. economy in the 1990s, they didn’t settle on one definition -- they used three alternatives. To quote from our article:

• In the broadest and most inclusive definition, family has an influence over strategy and major policies, and has at least stated the intention of keeping the business in the family. Family members may own significant portions of stock and sit on the board, but none necessarily work in the business.

• The middle group is defined by the same criteria, plus one other: The founder, or descendants of the founder, still run the company on a daily basis.

• The tightest definition includes only firms in which multiple generations participate; family members are involved in daily operations, and more than one of them has significant management responsibilities.

Dan Rottenberg, my predecessor, came up with his own definition in 2000:

• A single family controls the company’s ownership.

• Members of the controlling family are currently active in top management.

• The family has been involved in the company for at least two generations -- or seems likely to be.

• The company must pass an indefinable “feel test”: Does it feel like a family business?

In compiling its “Global Family” list, Credit Suisse used a simple criterion: Companies on the list have a family shareholding of at least 20% of shares outstanding. But while Larry Ellison (Oracle), Larry Page and Sergey Brin (Google), Mark Zuckerberg (Facebook), Richard Kinder (Kinder Morgan) and Phil Knight (Nike) own large stakes in the companies they founded, their companies feel more like sole proprietorships (or, in the case of Google, a two-person partnership) than family businesses. In my view, they don’t fit any of Shanker and Astrachan’s definitions, nor do they fit Rottenberg’s.

If the U.S. government required companies to register as family businesses (as businesses must register as C or S corporations or LLCs, or file for IPOs), researchers would have an easier job of identifying which ones qualify as family firms and which ones don’t. But given business families’ desire for privacy and dislike of government regulation, that seems unlikely to happen in the U.S. anytime soon.

One thing is clear, no matter which definition of “family business” you prefer: There is plenty of room for debate on the issue.

Bringing gender diversity to your board

Last month our sister publication Directors & Boards hosted a webinar entitled “Women on Boards: Teeing Up Talent for Your Board’s Future.” The program presented recent research studies linking gender diversity in the boardroom to improved financial performance, better decision making and an enhanced corporate image, among other advantages.

The webinar focused primarily on public company boards, but much of the discussion was also relevant to privately held family companies. Nancy E. Sheppard, founder and CEO of Women2Boards -- a referral service for women director candidates -- provided evidence demonstrating how the presence of female board members can help a company. Among the studies Sheppard cited were the following:

• A 2013 report from Credit Suisse on gender diversity and corporate performance, based on the performance of 2,360 companies globally, found that “companies with one or more women on the board have delivered higher average returns on equity, lower gearing, better average growth and higher price/book value multiples over the course of the last six years.”

• Aaron A. Dhir of York University’s Osgoode Hall Law School found that gender diversity on boards results in enhanced dialogue; better decision making, especially around the value of dissent; more effective risk mitigation and crisis management; higher-quality monitoring of and guidance to management; positive changes to the boardroom environment and culture; and more orderly and systematic board work.

• A 2015 analysis by MSCI Inc. found companies that invest in gender diversity at high levels are less likely to fall prey to fraud, corruption and governance-related controversies.

Family businesses have been making slow progress in this area. A report in the March/April 2015 issue of Family Business Magazine focusing on women directors noted, “Over the past three decades, an increasing number of business families have recognized that granting leadership opportunities to qualified women makes good business sense. But in most family companies with women directors, the women who serve on the board are members of the family that controls the company. Women independent directors are still a rarity.”

In our article, Susan Stautberg, CEO, co-founder and co-chair of WomenCorporateDirectors (a global membership organization for female directors), said, “Boards can’t afford to have directors who all think alike. They need men and women who will bring the best ideas to the table and offer the broad thinking companies need to deal with the challenges they face.”

In addition to Sheppard of Women2Boards, speakers who participated in Directors & Boards’ webinar were Jim Kristie, D&B’s editor; Jeffry Powell, executive vice president of Diligent Board Member Services; and Gabrielle Greene-Sulzberger, who is a director at Whole Foods and Stage Stores and a general partner in the private equity fund Rustic Canyon/Fontis Partners (and the wife of Arthur Sulzberger Jr., publisher and chairman of the family-controlled, publicly traded New York Times). A replay of the webinar is available, free of charge, here.

What ‘Consumer Reports’ missed in its ‘Made in America’ exposé

In its current issue (dated July 2015), Consumer Reports explains that the “Made in America” label often gets misused, and the standards for permissible use of the label are confusing. The article listed a number of U.S. companies whose products are not 100% made in America with all-American components.

The Consumer Reports article noted that nearly 80% of U.S. consumers say they would rather buy an American-made products than an important one, and 60% say they would be willing to pay 10% more for an item made in America.

We at Family Business Magazine thought Consumer Reports missed something: an appreciation of U.S. family businesses whose products are 100% made in America by American workers.

I wrote a letter to the editor of Consumer Reports, which you can read below.

A coalition of family business education programs across the country -- spearheaded by Ira Bryck, director of the UMass Amherst Family Business Center -- has developed a website,, to highlight family companies committed to making their products in the USA.

Here’s what I wrote to Consumer Reports:

To the Editor:

I read with interest your July 2015 article “Made in America.” You provided a public service by explaining that the Federal Trade Commission’s standards for acceptable use of the “Made in the USA” label are confusing, and that some manufacturers misuse the label.

Your article helpfully included a list of American companies whose products contain components made outside the country or assembled overseas.

At the same time, it is important to note that there are American family businesses that are committed to making their products here in the USA and employing American workers.

Family businesses face the same competitive issues as other companies, which is why many family firms have opted to use overseas labor or materials. However, one can indeed find family businesses whose products are truly “Made in America.” Here is a sampling:

• Just Born Candy, makers of Peeps, Mike and Ike and other brands:

• The Wiffle Ball Inc., producing equipment for the classic backyard game since 1953:

• K’nex, makers of the popular building toy:

• Thorlo Inc., sock makers:

• Annin Flagmakers, American flags made in America:


Barbara Spector

Editor-in-Chief & Associate Publisher

Family Business Magazine


Podcast discusses ‘Daughters in Charge’

I recently participated in the “Daughters in Charge” podcast, hosted by family business consultant Amy Katz, Ph.D.

Amy and I discussed trends related to women in family businesses. Among other topics, we talked about the various roles available to family business daughters, even if they don’t work for the family’s operating company.

Listen to the podcast here:

A nuanced view of family enterprise longevity

As I have noted before, leading scholars in the field of family enterprise have debunked the notion that selling a family business -- even one that has been in the family for many generations -- represents a “failure” or that sustaining a family business indefinitely is always a desirable goal.

A landmark study published in Family Business Review in 2012 -- known as the FFI/Goodman Study on Longevity in Family Firms -- assessed more than 100 business families from around the world and found that nearly 90% owned multiple businesses, and that over their history, these families had spun off an average of 1.5 companies. In other words, these successful business families do not hesitate to sell businesses when circumstances warrant doing so.

Current thinking in the field emphasizes that value is created by a family rather than a family business. Families who are continuing to invest together profitably and harmoniously after selling their operating company -- such as the Power family, featured on the cover of Family Business Magazine’s May/June 2014 issue, or the Agnew family, who appear on our May/June 2015 cover -- represent what family enterprise is all about.

Dave Power and his family sold J.D. Power and Associates to McGraw-Hill in 2005. Dan Agnew and his family merged their beverage distributorships with another family beverage company in 2008 and then sold the merged company in 2012. Both families capitalized on attractive opportunities and are continuing to work together to create wealth, engage in philanthropy, and develop governance structures to ensure long-term sustainability

In a recent edition of The Practitioner, an online publication of the Family Firm Institute, Patricia Angus notes that the myth of the family business as monolith (that a family controls only one business) has had dangerous implications for estate planning.

Angus, a consultant on philanthropy and family governance and an adjunct professor at Columbia Business School, writes: “Trust agreements often prohibit sale of a family business, or at least relieve the trustee of the duty to diversify so that the family business can be held in trust. Provisions forcing the retention of the business can be so inflexible that they can have adverse consequences for the family and enterprise…. A mandate, even if unspoken, to keep a business intact can become quite troublesome; a little flexibility can go a long way to help the family over the long run.”

In other words, think about your real long-term goal. Is it to perpetuate a particular operating company, no matter what the marketplace conditions may be, or to continue collaborating on ventures that provide income and satisfaction to family members? Think about your family’s future entrepreneurs, and make sure you aren’t tying their hands.

Meeting shareholders’ liquidity needs

Cargill, the largest U.S. privately owned company, celebrates its 150th anniversary this year, and in recognition of the occasion the Financial Times recently profiled the giant agricultural commodities trader. (Disclosure: I was one of the people quoted in the article.)

The FT report noted that at two pivotal points in the Cargill’s history, the company -- controlled by about 100 members of the Cargill and MacMillan families, descendants of the founder -- found a way to grant liquidity to shareholders who needed it.

In 1992, Cargill created an employee stock ownership plan. Family members sold an ownership stake of 17% to the plan for $700 million. And in 2011 -- when the company’s largest shareholder, the Margaret A. Cargill Foundation, wanted to cash in its shares -- Cargill spun off its 64% stake in Mosaic, a publicly traded fertilizer company, the FT report said.

Benjamin Oehler, the former CEO of Waycrosse, the Cargill/MacMillan family office, told the FT that the Mosaic transaction would be sufficient “to meet the liquidity needs of the family, I would think, for another generation.”

Though it had annual revenues of more than $100 billion, Cargill needed to find liquidity for its shareholders. If you own a later-generation family company with owners who don’t work for the business, the liquidity issue will most likely arise for you, as well. After the third generation, family members’ lifestyles can be widely divergent. Some owners might require cash to fund a child’s education or to start a business of their own.

When family shareholders’ liquidity needs are not met -- if they are unable to extract cash from what is likely their main investment, the family business -- family conflict is apt to follow; in a worst-case scenario, unhappy owners could file suit or force a sale of the business.

There are ways to find cash for family owners (even if you don’t have a multibillion-dollar asset to spin off, as Cargill did). An adviser can help you evaluate the pros and cons of each alternative.

Former Family Business Magazine columnist Jim Barrett often referred to family shareholders with no means of cashing in their investment in the business as “prisoners.” Even a family that is committed to long-term ownership of its business, like the Cargill/MacMillans, must find a way to set its prisoners free.

Benihana founder’s tunnel vision

A recent Ernst & Young report entitled “Family Governance: The Issues, the Concerns and the Strategies to Deal with Them” lists a number of governance missteps that commonly arise in family companies.

One of the issues cited in the white paper is “tunneling” -- business ownership through cross-shareholdings. The E&Y authors note that this strategy, which usually undermines non-family minority shareholders, can damage the efficiency of the business.

In the case of the Benihana restaurant chain, founder Rocky Aoki’s tunneling strategy caused relationship problems not with non-family partners, but within his oddly blended family -- and, before his death at age 69 in in 2008, ended up undermining his own interest in the company. A lengthy feature article in the March 15 issue of Fortune spelled out the lurid story.

Rocky Aoki was married three times and fathered seven children by three women. His widow, 59-year-old Keiko Ono Aoki, is not the mother of any of his children. Today, Rocky’s kids and his widow are suing each other for control of the enterprise. As the Fortune report explained, that sorry situation is a result of an ownership structure that, while it helped the founder meet his financial needs at the time it was set up, had disastrous long-term effects.

The confusing ownership structure was rooted in Rocky’s 1983 decision to raise funds for expansion by dividing his business into two companies and taking one of them public. As Fortune explained it, Benihana of Tokyo kept 39 of the restaurants, all located outside U.S. Eleven more restaurants were moved into a second company, Benihana Inc. Rocky sold 49.1% of Benihana Inc. to the public; the remaining 50.9% was held by Benihana of Tokyo. Rocky was chairman of both companies, which shared a headquarters.

Rocky did some finagling to get his hands on the Benihana restaurant at the Hilton Hawaiian Village Waikiki hotel, his favorite. Benihana Inc. owns the Waikiki restaurant, but Benihana of Tokyo manages it, the Fortune article explained.

In 1999, Rocky pleaded guilty to insider trading. Although he was not sent to prison, his liquor licenses were revoked, the Fortune report said. In order to keep the licenses at his restaurants, Rocky stepped down from all his company positions, although he continued to be paid as a consultant. And he transferred his interest in Benihana of Tokyo (which owned a majority stake in Benihana Inc.) to a trust that was to be managed by three of his children and his attorney.

Then, in 2002, Rocky married Keiko, to his children’s dismay, according to Fortune. His two eldest children urged him to sign a postnuptial agreement, without success. Later, the children convinced Rocky to sign an amendment to the trust that put them in control and cut out Keiko. Rocky, who contended that he didn’t understand what he agreed to, then made four revisions to his will that progressively gave more control to his wife, the article said.

In 2004, fearing Keiko’s influence, the board of Benihana Inc. (which included Rocky’s eldest son) issued new stock and reduced the family’s stake from 50.9% to 36.5%. Rocky sued the company, but not his son. But in 2006, when three of his children sold more shares (further decreasing the family trust’s holdings), Rocky sued them (plus a fourth child) for breach of fiduciary duty and sought to have them removed as trustees, the Fortune report said.

By this point, Rocky was no longer a paid consultant for Benihana Inc. and “was reduced to asking his estranged children to approve his withdrawing money from the trust he had created out of his own business,” Fortune reported. Rocky revised his will again, leaving his assets in trust for Keiko. The founder “had managed to reach a place of nearly perfect contradiction: Depending on which document you looked at, two kids were guaranteed Aoki’s assets -- or [Keiko] could make all the decisions and keep a quarter for herself,” the article said.

After Rocky’s death, the trust that had given the children control of Benihana of Tokyo was terminated; Keiko became sole trustee and appointed herself CEO. The widow, who has entrepreneurial ideas that she says are in line with what Rocky would have wanted, began taking steps to revitalize the business, the Fortune article noted.

Meanwhile, according to the article, Benihana Inc. also brought in new management and made changes, which Keiko contended amounted to corporatization of the chain, according to Fortune. Lawsuits and countersuits followed.

In December 2012, investment firm Angelo Gordon bought Benihana Inc. The new owners offered to buy Benihana of Tokyo from Keiko, but she declined, the Fortune article said. Benihana Inc. now holds 79 restaurants in the U.S. and South America, including the one at Waikiki; Benihana of Tokyo owns or franchises 18 restaurants in Europe and Asia and manages the Waikiki location.

Among other legal wrangling, the two companies went to federal court over Keiko’s plans to sell a “Beni Burger” at Waikiki, a move that Benihana Inc. argued would cheapen the brand. Keiko’s company sued in December 2014, claiming Benihana Inc.’s complaints “are nothing more than attempts to get her to sell,” Fortune reported.

Between the corporate litigation and the intrafamily suits, Fortune predicted, “The battles, it seems, will continue for years.”

Most likely, your life is not as colorful as Rocky Aoki’s. Even so, you can take a lesson from his story: Trusts and ownership structures you create today will affect your family years later. Before signing any documents that represent long-term commitments for your family and your business, consider various “what-if” scenarios, and make sure your advisers explain all the potential ramifications.

A non-family leader in the interim

In February, the giant French spirits company Pernod Ricard announced that Alexandre Ricard would officially assume the role of chairman and CEO.

The announcement was not a surprise. Ricard, 42, is the grandson of Paul Ricard, who helped create the company via a merger in the 1970s. The Ricard family holds the largest stake in the company, whose brands include Absolut vodka, Jameson Irish whiskey, Chivas Regal Scotch, Malibu rum and Beefeater gin.

When Alexandre’s uncle Patrick Ricard died suddenly of a heart attack at age 67 in 2012, the company had planned that Alexandre (known as Alex) would eventually become the chairman. But although Alex had been with Pernod since 2003 (after first working at Accenture and Morgan Stanley), he did not assume the top job right away.

At the time of Patrick Ricard’s death, non-family executive Pierre Pringuet was serving as the company’s CEO; Patrick had stepped down from the CEO post in 2008 and retained the title of chairman.

After Patrick’s death in 2012, Pringuet added the role of vice chairman, and Patrick’s sister Danièle Ricard, then 73, became non-executive chairwoman. Alex was appointed deputy CEO and chief operating officer.

In February 2015, after Pringuet had reached the mandatory retirement age of 65, Alex became chairman and CEO. About a year before his elevation, the Wall Street Journal asked Alex how he felt about working with Pringuet while waiting to climb the ladder. “The success factor, I strongly believe, is if two people work together hand in hand and get along, which I’m lucky enough is the case,” he said.

A well-chosen non-family interim leader like Pringuet is an excellent option when the family wants a next-generation member to eventually take the reins but would prefer for that family member to gain more experience first. In the January/February 2013 issue of Family Business, we profiled Annin Flagmakers of Roseland, N.J., where a duo of non-family executives led the company between the retirement of the fifth-generation leadership team and the ascent of sixth-generation president Carter Beard and his cousin Sandy Van Lieu, the senior vice president of mass-market sales.

As Pernod’s CEO, Alex Ricard will pursue an ambitious goal of overtaking Diageo, the leader in the market. Only time will tell if he will succeed, but the skills he honed while working closely with Pringuet are likely to be helpful in his new role. “It’s not a question of what I think he should do,” Pringuet told industry website Just-Drinks when asked if he had advice for Alex. “I already know what he thinks.”

Schooling the World Economic Forum

Last month, the World Economic Forum’s online publication, Agenda, featured an article provocatively entitled “Are Family Firms Damaging Europe’s Growth?”

The article was written by Oriana Bandiera of the London School of Economics and Andrea Prat of Columbia University; both authors are also affiliated with the Center for Economic and Policy Research. They presented results from a study they conducted indicating that family business CEOs work fewer hours than non-family CEOs. The authors argued that “hours worked by the CEO are strongly correlated with firm productivity.”

Their concluding paragraph suggested, “Would an increase in taxation that affects the owners of family firms bring about an increase in productive efficiency?”

Dennis Jaffe, a family business adviser and an emeritus professor at Saybrook University, and Isabelle Lescent-Giles of San Jose State University, fired back with a rebuttal, which they posted on “Measuring CEOs’ contributions to society by the time spent in their office, rather than their efficiency and effectiveness as both leaders and managers, is dangerous,” they wrote. “And measuring firm performance on short-term profits only rewards asset stripping, and ignores the contribution of firms over the longer term.”

Jaffe and Lescent-Giles cited multiple academic research findings that show family companies outperform non-family firms when the variables measured are growth and value creation over time.

In their rebuttal, Jaffe and Lescent-Giles acknowledged that there are problems associated with family control. “If the needs of the family are able to undermine good business practice, they can be incredibly destructive,” the write. “In our own recent study of long-lasting family businesses, we have come to see … that the advantages of the family business have to be developed over generations.”

In their conclusion, Jaffe and Lescent-Giles offered this smackdown: “The field is complex and developing nicely, and we do not need simplistic generalizations or conclusions from single studies to move forward.”

Read Bandiera and Prat’s article in its entirety here and Jaffe and Lescent-Giles’ full rebuttal here.

Creating a more humane workplace

The technological advances that have put a wealth of information at our fingertips and enabled us to stay constantly connected have resulted in our being always on the job -- or at least expected to be reachable at any time. In a New York Times opinion piece last May, Tony Schwartz and Christine Porath of consulting firm The Energy Project said what we already know all too well: Being always on call and contending with myriad interruptions from the tasks at hand causes burnout.

Burnt-out employees, Schwartz and Porath noted, are not engaged with their organization or its mission. “Demand for our time,” they wrote, “is increasingly exceeding our capacity -- draining us of the energy we need to bring our skill and talent fully to life.”

Schwartz and Porath added that the most satisfied and productive employees are those whose employers help them meet their “core needs”: physical (having a chance to recharge their batteries at work), emotional (feeling valued and appreciated), mental (being able to focus on their most important tasks and having flexibility in where and when they get their work done) and spiritual (doing what they enjoy most and feeling that their work has a higher purpose).

What’s more, the authors noted that employee engagement is correlated with higher performance at work. “Put simply,” Schwartz and Porath wrote, “the way people feel at work profoundly influences how they perform.”

About a decade ago, Charlie Luck, the third-generation CEO of the Luck Companies, undertook a major initiative to change the culture of his company. The business, which is based in Richmond, Va., produces crushed stone, sand and gravel; owns tennis court company Har-Tru Sports; and has a real estate development division. After Luck observed backstabbing and competition for resources among his employees, he decided to remake the organization to focus on values and improve the way people related to each other.

A 2012 article in Family Business Magazine described the Luck Companies’ culture transformation, and the boost in morale and financial results that followed. The company instituted leadership training centered on its values of integrity, commitment, leadership and creativity. Training programs taught employees how to understand others’ values and work styles, and how to give and receive feedback. One tool presented was the “pause button” -- in tough situations, associates were trained to stop and allow themselves to carefully consider what to do.

The result? Not only did morale and productivity improve in the workplace, but also Luck Stone employees reported that the interpersonal training helped their relationships at home.

Charlie Luck will be speaking about his company’s values at Transitions East 2015 later this month.

“In a numbers-driven world,” Schwartz and Porath wrote in the Times, “the most compelling argument for change is the growing evidence that meeting the needs of employees fuels their productivity, loyalty and performance.” That is a compelling argument for taking steps to make your business more humane.

Development plans for the whole family

Family business consultants and researchers have produced a wealth of literature on training and developing future leaders of the business. Often overlooked, however, is the fact that other family shareholders need training and development, too.

Family shareholders who don’t work in the business might be tremendous family council members; those with high potential could be groomed as a future chair of the council or the family assembly. Other family members might be well suited for service on the family foundation board. Those with strong business skills might be a good fit for the board of directors of the family business.

All too often, family members are thrust into these roles without training; they are given the jobs solely on the basis of their family status. Experience has shown that this is the wrong way to appoint a successor CEO, so why is it so common when installing family members into these other key positions?

As family business consultant Jim Barrett wrote in The Family Business Mentoring Handbook, “Even though these are not managerial roles, they involve as many hassles as full-time company positions do -- and they also can be just as satisfying. Family and business leaders must train next-generation members to assume these positions so that problems, frustrations and disappointments can be avoided later on.”

In the November/December 2014 issue of Family Business Magazine, several family business members comment that family council committees can serve as a good “farm system” for future family leaders. Committees can be organized to perform a variety of functions, such as planning the next family meeting or developing a new family policy. The committee experience can help family leaders identify which family members have leadership potential. Likewise, family members who serve on committees may discover they have a passion for the family business that they hadn’t recognized before.

A panel presentation at our Transitions East 2015 conference will focus on developing talented and committed family members for a range of roles in the family and the business. As Meghan Juday, family council chair and a member of the board of directors at IDEAL Industries, wrote in our November/December 2014 issue, “In order for the family to be the best possible partner with the board and management, it is critical to have the right people in these important roles.” 

The power of your family brand

Our second Transitions East conference, back in April 2011, included a group of sessions organized around the theme of “Family Legacy as a Strategic Advantage.” Several family business leaders -- including Ross Born of Just Born Inc., Tim Hussey of Hussey Seating, Mark Peters of Butterball Farms Inc. and Scott Livingston of Horst Engineering -- spoke about how they use their family legacy and brand to manage internal family issues, attract and retain employees, develop strong relationships with vendors and build customer loyalty.

A newly released study confirms the power of a family brand. The survey, conducted under the auspices of tax and advisory firm Ernst & Young and Kennesaw State University’s Cox Family Enterprise Center, studied 1,000 of the world’s largest family businesses. The researchers found that 76% of respondents refer to their enterprise as a family business in corporate communications. The most common reason cited was that the family strongly identifies with the company and believes that the business is a large part of who they are as a family. Another frequently noted reason was that promoting the family connection helps differentiate the company from its competitors.

At a workshop held during the Transitions East 2011 conference, Ross Born and family business adviser and researcher Dennis Jaffe prompted attendees to consider what action steps they could take to translate their family history and the legacy they wish to leave into a robust, clearly understood brand that supports a successful family business. Born and Jaffe asked participants to identify the enduring “core” or “soul” of their brand as well as factors such as the emotional and functional benefits to the customer and the objective, measurable attributes of the brand.

The Ernst & Young/Kennesaw State University survey report noted that branding the company as a family business helps to promote family cohesion. “Family business branding connects the family to the identity of the business and promotes pride in participation, even if family members aren’t directly involved in the business,” the report said.

Astrachan commented in the survey report, “Quality products and services are requisite for business success, but family businesses can do something others can’t. They can tell the story of the family, its struggles, failures and successes, and in the process customers and stakeholders identify with the company and gain greater faith in its trustworthiness.”

Starting ‘the other talk’ with your kids

In bygone days, many kids first learned about sex from classmates on the playground because their parents were too uncomfortable to broach the subject of “the birds and the bees.” Today, most parents recognize that “the talk” is an essential responsibility of parenthood -- and that “the talk” is not just one conversation but, in fact a series of discussions that begin simply when the children are young and become more detailed as the kids mature.

While sex is no longer a taboo topic, parents remain skittish about initiating “the other talk” -- a conversation about money. Even those parents who acknowledge the importance of an early start never seem to get around to it. In a recent study by Merrill Lynch’s Private Banking & Investment Group, for example, 39% of respondents asserted that it’s never too early to begin talking to children about responsible financial behavior, and 11% said these discussions should begin when the kids are ages ten to 13. Yet only 14% of these study participants said they actually raised the issue when their kids were nine or younger (see FB, July/August 2014).

Experts say that frequent, open and wide-ranging discussions about values, work, entrepreneurship, legacy and wealth help the younger generation develop a healthy attitude toward money -- and that the kids can hold up their end of the conversation. In the January/February 2015 issue of Family Business Magazine, Jeff Savlov, a family business/family wealth adviser trained as a therapist and psychoanalyst, explains that even elementary-school kids are able to participate in meaningful conversations on these topics.

Our January/February issue also features an interview with Scenic Root, a perceptive young lady who at age 13 is an old hand at having frank conversations about the advantages and disadvantages of growing up with wealth. Scenic -- a fifth-generation descendant of C.J. Root, whose company created the original Coca-Cola bottle -- has had in-depth discussions about the connection between business and family with her father, Preston, since she was a small child.

Whether you broach these subjects with your kids or you don’t, they are watching family members’ relationship to money, to the business and to the family legacy, and their future habits will be based in large part on these observations. Opening a dialogue with them is likely to be a revelatory experience.

Every 5 years, a reason to celebrate

During this first full work week of 2015, I’d like to remind you that sometime within the next five years, your family business will be celebrating a milestone anniversary.

If the upcoming anniversary is a big one -- the 50th, 75th, 100th, 125th or 150th -- you probably already have begun to think about how you will mark the occasion. But don’t forget that the smaller milestones are worth celebrating, too. Even if your town’s mayor won’t issue a proclamation on your company’s 35th or 45th or 70th anniversary, you still have an opportunity to promote it to your customers, your employees and -- perhaps most important -- your family members.

At our Transitions West 2014 conference in November, a panel of family business owners discussed how to make the most of these special moments in your company’s history. Luconda Dager spoke about the 100th anniversary of her family business, Velvet Ice Cream. Sam Gault recalled how his company, Gault Energy & Stone, planned its 150th anniversary celebration. And Jamie Richardson of White Castle discussed the 90th anniversary of the family-owned burger chain. Families whose companies are younger than these can incorporate some of the panelists’ suggestions:

• Promote your anniversary on social media. Post old photos and ads. The public loves looking at historic images.

• Your employees are your brand ambassadors. Host an employee event to acknowledge the role they have played in helping your business reach this occasion. Ask for their suggestions for how to get the word out.

• Bring your family together to discuss the founder’s values, entrepreneurship and hard work. Participate in a community-service project in celebration of the milestone (e.g., if it’s your 30th anniversary, donate 30 items).

Brainstorming about how to celebrate your company’s longevity is likely to bring to the surface feelings of pride and gratitude, in addition to clever promotional ideas. Don’t overlook this great reason to throw a party!

Entitlement gone nuts

Accomplished, talented next-generation members must battle the stereotype that all family business successors are good-for-nothings who owe their jobs to nepotism. Heather Cho’s recent tantrum has made their lives more difficult.

Cho, also known as Cho Hyun-ah, is the daughter of Cho Yang-ho, chairman of the conglomerate that owns Korean Air. Until recently, she was a vice president in charge of cabin service at the airline. On December 5, she reportedly became irate when a flight attendant on a Korean Air jet headed from New York to Incheon, South Korea, served her macadamia nuts in a way she found substandard. She demanded information from a purser about the policy on serving nuts; his answer didn’t suit her, and she ordered the plane, which had started to taxi to the runway, to return to the gate so she could boot him off the flight.

Cho threw her hissy fit with no thought given to the roughly 250 passengers who would be inconvenienced. This insensitivity was compounded by the initial, tone-deaf official explanation of her behavior given by the company. According to the Financial Times, Korean Air said “it was ‘natural’ for the executive responsible for cabin services to inspect operations and point out problems, adding that the chief flight attendant neglected procedure and regulations.”

Not surprisingly, the incident drew howls from the press and the public. In South Korea, the criticism took a political tone because of growing resentment of the conglomerates -- known as chaebol -- whose controlling families wield great political influence, allegedly commit fraud and other crimes with impunity and run their businesses like fiefdoms. A New York Times article noted that Cho Yang-ho’s three children all held executive positions in the Hanjin Group, the conglomerate that includes Korean Air. The Times report said the Cho family owns only about 10% of the airline but controls its operations through a network of cross-shareholdings.

The FT article quoted Oh Byung-yoon of the country’s Progressive party, who said, “Ms. Cho’s order of a forceful return could be a threat to passengers’ safety by disabling the pilot.” According to Bloomberg, an editorial in South Korea’s Dong-A Ilbo newspaper said her actions exemplified the “sense of privilege” felt by chaebol families.

Heather Cho is no brash young upstart -- she is 40 and had been with the company for 15 years. She was experienced enough to understand the difference between appropriate and inappropriate ways to criticize an employee (and that one shouldn’t inconvenience hundreds of customers). On December 9, Korean Air announced that she had resigned her post in the company after a board meeting was called to discuss the incident.

Cho’s behavior was so obnoxious that she would have been mocked even if she were not a family executive. But because she is the boss’s daughter, the reaction was more personal. Senior-generation members can use her story to teach their children about the perils of entitlement and the dangers of going nuts while on the job.

A parent by any other name …

I was interested to read recently in the Wall Street Journal about a parenting trend. According to the Journal report, children in an increasing number of families have stopped using “Mom” and “Dad” and are instead calling parents by their first names.

Psychologists interviewed by the Journal don’t think this is a good idea. Madeline Levine, a Marin County, Calif., therapist, “views the shift as fallout from an era of overly permissive parenting,” the article said. John Duffy, a clinical psychologist from the Chicago suburbs, said children use a parent’s first name to test the balance of power and control in the family, as they might try out a swear word at the dinner table.

In family businesses, children who call parents by their first names aren’t testing their limits; they’re usually adhering to a company rule. Many family companies require next-generation employees to call the senior generation by the same name that the employees do to signal the separation of family and business roles during working hours, and to demonstrate to the rest of the staff that family members aren’t receiving special treatment. (These policies also work in reverse; parents vow not to use pet names for their children in the office.)

What’s in a name? In both cases above, the main issue isn’t what the younger generation calls its elders; it’s the quality of the relationship. Some teenagers call their parents “Ray” and “Debra” not out of disrespect, but because that’s what the parents prefer to be called. Some next-generation family business members who are judicious about avoiding “Mom,” “Dad,” “Grandpa” and “Uncle Joe” in the office nonetheless may act as if other company policies don’t apply to them.

I never worked in my family’s business -- my parents sold it while I was in college -- and I never considered calling my folks anything but “Mom” and “Dad.” But when my mother’s faculties started to decline and my brother and I began making decisions on her behalf, I started referring to her by her first name (though I continued to address her directly as “Mom”). To me, the shift was profound.

As is true in so many cases when it comes to families and family businesses, the main points to consider are: (1) What is the family culture? and (2) Is the family culture promoting healthy relationships and a thriving business? 

Letting go

In September, Dan Nosowitz -- great-grandson of the founder of the Madewell clothing company -- wrote an article for BuzzFeed describing his reaction upon seeing a sign for the long-dormant family business on a clothing store in New York’s SoHo neighborhood.

“It was, I thought, forgotten family history, the factories having shut down shortly after I was born in the ’80s,” Nosowitz wrote.

Nosowitz would learn that Millard “Mickey” Drexler, J. Crew’s CEO, had acquired Madewell’s logo and trademark in 2004. Although the revived brand features the date of the company’s inception -- 1937 -- in its marketing materials, “Madewell as it stands today has almost nothing at all to do with the company founded by my great-grandfather almost 80 years ago,” Nosowitz proclaimed. The original Madewell sold workwear and later expanded into children’s and women’s clothes, all designed and manufactured in the U.S. The relaunched brand’s clothes are made in China and are geared toward young female fashionistas. The new Madewell has 77 stores in the U.S.

During the course of his reporting, Nosowitz found that clothing designer David Mullen bought the Madewell logo and trademark for $125,000 in January 2003 from a relative of Nosowitz’s who was by then the sole owner. In April 2004, Mullen transferred the trademark to Drexler, who leased it to J. Crew for $1 a year.

No matter what Nosowitz and his family think about what Madewell is doing today, they can’t do much to change it. Business owners who plan to sell their companies must understand that they will no longer control what the new owners do with the company’s brand, employees, products and reputation.

There’s only one way the former owners can reclaim the right make a course correction: by buying the company back. That’s what Laurence “Laurie” Eiseman and his late brother, Robert, did in 1999, when they teamed up with two executives and some other investors to repurchase the Florence Eiseman Company, the legendary maker of children’s wear founded by their mother. The family had sold the business in 1989, only to see quality decline and the company approach bankruptcy under its new owners. As Family Business Magazine reported in 2003, the Eiseman brothers and their partners rescued the brand. Recently, the company launched new lines that, while updated, retain the spirit of the classic styles.

Nosowitz’s family does not seem to be contemplating such a step. Although the new Madewell’s claims of authenticity and connection to the past are dishonest, Dan Nosowitz writes, he doubts his ancestors would care. “They manufactured in the U.S. because at the time it was cheaper to do so, and because it was easier,” the author notes. “They weren’t noble; companies back then didn’t construct a façade of nobility and purpose….. We look at the past through glasses that bring into focus only what we want, and need, to see; they distort everything else.”

The risks and rewards of co-CEO arrangements

In September, Oracle Corp.’s co-founder Larry Ellison announced that he would step down from his post as CEO to become chairman and chief technology officer. He turned over the reins not to a single successor, but to a pair of co-CEOs, Safra Catz and Mark Hurd.

Morningstar analyst Rick Summer told the Wall Street Journal he doubted this arrangement would work: “Rarely is this a good idea,” Summer said, according to the Journal report. “… In five years’ time, I would be surprised if Safra and Mark are still co-CEOs.”

The co-CEO arrangement didn’t work at Research In Motion, the maker of the BlackBerry mobile phone. In February 2012, upon the departure of RIM co-CEOs Jim Balsillie and Mike Lazaridis, I cited an article in the Toronto Globe and Mail in which RIM employees said they thought “the unusual two-headed structure of the company … slowed things down.”

In family businesses, however, the co-CEO structure often functions quite smoothly, as I noted in 2012. Many family business leaders share the driver’s seat. For example, at Just Born Inc., maker of Peeps, Mike and Ike, Hot Tamales and other candy brands, cousins Ross Born and David Shaffer have been co-leaders since 1992. David and Ben Grossman, fourth-generation brothers, became co-presidents of Grossman Marketing Group in 2010 when their father, Steve, left to run for election as Massachusetts’ state treasurer. At grocery chain Meijer Inc., Hank Meijer serves as co-CEO along with a non-family member, Mark Murray.

The high degree of trust in family companies might be the reason that co-leadership is attempted -- and succeeds -- more often in family firms than in non-family companies. But family ownership doesn’t guarantee high trust. Consider the Mondavi family. Robert Mondavi feuded with his brother Peter at their father’s Charles Krug Winery before leaving in 1965 to establish his own wine business, Robert Mondavi Corp. The pattern was repeated in the next generation with the unsuccessful partnership of Timothy and Michael Mondavi at Robert’s eponymous company.

Back in 2003, consultant Jim Barrett provided some advice on co-leadership in Family Business Magazine. One of his suggestions was “Stake out territories carefully, working to the strengths of each person involved.”

Catz and Hurd apparently have this covered at Oracle. The Wall Street Journal article noted that “Ms. Catz is brilliant with numbers and operations but shuns public roles, said a former Oracle executive. Mr. Hurd is more comfortable spreading the company message and nurturing customer relationships, the former executive said.”

As is true of so much in business -- especially in family business -- there is more than one route to success.

Taking the pulse of the next generation

In Family Business Magazine’s 25th anniversary issue, in addition to revisiting some of the family companies we profiled in the past, we also look forward by profiling next-generation members who are making a difference in their family enterprises. In a special feature entitled “25 Under 35,” reporter Ilene Schneider asked these up-and-coming young people how they view their roles, and what they enjoy most about their connection to their family businesses.

If these interviews are any indication, the future looks bright for these family firms.

• The next-generation members are aware that as stewards of the family legacy, they must pay equal attention to family and business matters. In their comments about their current and potential future roles, they stressed the importance of open family communication as well as solid business training.

• The young people recognize that family members can play a meaningful role in the family enterprise without a position on the staff. Some of the young people we profiled are focusing on their development as owners or family leaders with no plans to enter the family business. Others who are currently working in the company recognize the importance of engaging the family members who don’t.

• They are confident that their experience with technology, educational background and innovative spirit bring a valuable perspective to their family companies. Their comments indicate a great respect for the legacy they are inheriting, but at the same time they’re aware that they themselves have a lot to offer. “I truly love putting in all of my effort to see the outcomes that move our company in a positive direction,” Mike Hiller, the 33-year-old director of marketing and new business development at Laboratory Testing Inc., told Schneider.

Family Business Magazine looks back

Family Business Magazine made its debut in the autumn of 1989, and our September/October 2014 edition celebrates our 25th anniversary. In this issue, we revisit some of the family businesses we’ve profiled in the past to see how they’ve fared over the years and how they envision their future.

Some of these family firms have weathered hard times, including a tough economy, deaths in the family and natural disasters. A few of the families sold their legacy companies and are now pursuing other interests. But for the most part, the folks we interviewed confirmed what researchers in the field have found in study after study: Family business owners are optimistic.

Here are some common themes that emerged from our follow-up profiles:

• Several families whose companies were hit hard by the recession opted to hang in there rather than sell out. The “family factor” likely was at play in these decisions. It’s questionable whether a non-family ownership group would be as committed as these families to riding out a rough patch.

• The companies we revisited exemplify family businesses’ innovation and adaptability. Five of the profiled companies significantly changed their product offerings, moving out of a declining market and into a more promising one. Several others added new products or services or made major acquisitions. One business even changed its name; the healthcare resource management company known as Coalition America when we featured its founders, twin brothers Scott and Sean Smith, in 2002 is now Stratose Inc.

• The business owners we interviewed who are thinking about succession are taking a systematic approach to educating the next generation and eventually selecting the future leader. Susan Gravely, for example, the CEO of tableware importer Vietri Inc., is grooming a team of executives, include her nephew and non-family employees. “We did a lot of consulting with board members and outside experts,” Gravely told reporter Deanne Stone, who originally wrote about Vietri in 1996 and revisited the company for our 25th anniversary issue.

Unpacking the Market Basket saga

The website dubbed the summer of 2014 “The Summer of Market Basket” -- and, indeed, every day seemed to bring new headlines in the saga of the ousted company leader, his rivalry with his similarly named cousin, the employees who staged a walkout to support their fired boss, the lost business and eroding company value as a result of the work stoppage, and the protracted intrafamily negotiations. In the end, the family of the ousted CEO, Arthur T. Demoulas, bought the 50.5% of the company they didn’t already own from the branch led by Arthur S. Demoulas, returning Arthur T. to the helm.

Amid the flurry of news reports describing picketing workers and depleted store shelves, some important points might have been missed:

• Media reports that portrayed Arthur T. as the hero and Arthur S. as the villain were misleading; the real family story is much more nuanced. A court judgment in the 1990s found that Arthur T.’s side of the family fraudulently transferred shares belonging to Arthur S.’s side to entities Arthur T.’s side controlled. The court awarded 50.5% ownership in the company to Arthur S.’s family “as repayment for bad-faith dealings,” a Boston Globe report pointed out. This background makes it easier to understand why Arthur S.’s side advocated so strongly for using profits to pay higher dividends to family members.

• Arthur T., so beloved by Market Basket employees that they risked their jobs to support him, has “a tougher side” and “appears to be at his worst in interactions with relatives,” the Globe report noted. Transcripts of Market Basket board meetings published by the Globe revealed a toxic boardroom environment, with both Arthurs, and the directors who supported them, often using disrespectful language when speaking to each other.

• Rafaela Evans, widow of Arthur S.’s late brother Evan Demoulas, played a pivotal role in the family saga, though she owned only a little more than 4% of the shares on her own and was a shared trustee of just another 1.5%. Although she was related by marriage to Arthur S., for years Evans had voted with Arthur T.’s family. In June 2013, however, Evans -- who lives in London and has not granted interviews -- switched sides, resulting in a realignment of the board in favor of Arthur S. This chain of events shows the power that one family member can have.

• Each day that the sale negotiations dragged on, the company racked up more losses; some estimates put the figure at up to $10 million per day. Arthur S. wasn’t opposed to selling his stake; in fact, a Globe report said he had discussed a sale with private equity firm Cerberus Capital Management in 2011. Kevin Griffin, publisher of the Griffin Report on Food Marketing, told the Globe, “It just seems like [Arthur S.] wants to sell to anyone but Arthur T.” The holdup late in the talks reportedly concerned the Arthur S. faction’s refusal to agree to seller financing. Arthur T. ended up funding the $1.5 billion deal through a mortgage loan secured by the company’s real estate and private equity financing.

• Arthur T. has a long road ahead of him. A article noted that Market Basket’s traditional ability to generate higher profits than its competitors despite low prices and generous employee benefits was partially attributable to the company’s lack of debt. “With Arthur T. and family now taking on debt to make the deal work, all eyes will be on whether it is possible for the company to operate as it has and still satisfy the terms of a financing plan,” the article said.

• Arthur T. won his CEO position back, and seems to have won the P.R. war. Arthur S., for his part, walked away with a big pile of money. But Boston Globe columnist Tom Keane suggested that the real winners were Market Basket’s employees who staged the walkout and the customers who stayed away from stores during the standoff. “Their argument was that if they did return, if things went back to normal, then the pressure to resolve the family feud would be off,” Keane wrote.

Whatever happens with the stores, it’s tough to imagine the family branches reconciling after the explosive summer that culminated 30 years of toxic relations. 

Tapping the next generation’s energy

In a recent article posted on the Harvard Business School Working Knowledge website and on, Michael Roberts and John Davis asserted, “Families that want to stay in business for another generation don’t have a choice except to encourage entrepreneurship in and out of their company.”

Roberts (a retired Harvard Business School faculty member who was executive director of the Arthur Rock Center for Entrepreneurship) and Davis (a Harvard Business School senior lecturer and a family business adviser) pointed out that there are both business and family reasons why family firms’ long-range success depends on entrepreneurship. On the business side, they wrote, “You must be nimble and, as certain lines of business wane, be able to identify growth opportunities in and out of the core industry and pursue them in experimental, cost-effective ways. For that, you need the risk-taking, resourceful attitude of an entrepreneur.”

On the family side, Roberts and Davis noted that not every family member will end up working for the family firm, and “investing in family entrepreneurs can … keep talented members contributing to the broader family’s wealth and mission.”

Family Business has long emphasized that next-generation members can be a vital source of innovative and entrepreneurial ideas. For example, Kyle York, 31, who spoke at our Transitions East 2014 conference, works outside his family’s business, sports gear company Indian Head Athletics. But York and his brothers have developed a plan to license the Indian Head brand from their parents and transform the family firm into a fashion and lifestyle company.

In a 2013 article in Family Business Magazine on her family business, Menasha Corporation, fifth-generation member Sylvia Shepard noted that each succeeding generation has transformed the business model. Menasha, which is more than 160 years old and generates over $1 billion in annual revenues, originally made wooden pails and now provides packaging, logistics and marketing services.

Whether they work in your family business or outside it, your next-generation members’ perspectives on technology, current business-school theory and social networking can add value to your business. These young men and women can bring energy and innovation to family governance and business planning. Set aside your memories of changing their diapers and seek out their opinions.

An unsavory succession plan

What should you do if there are no next-generation family members to take over your business? Many business owners sell their companies. Others appoint non-family successors and continue as passive investors after their retirement. But a Japanese business owner appears to have found an offbeat approach.

Phuket Wan Tourism News, a website that reports on tourism, property, restaurants, nightlife and employment on the island of Phuket in Thailand, reported that the man apparently fathered nine surrogate children born within six months of each other “to create a group of youngsters who can take over his business.”

The report did not give the name of the man or his business, nor did it say what type of business it was.

According to the report, military police and welfare workers raided a condominium in Bangkok and found the babies, ranging from one month to six months old, with Thai and Japanese nannies. Also found in the condo was a woman who was about four months pregnant, who said she was a surrogate mother. A Japanese woman said the was planning to travel with the babies to Japan.

Two of the babies had fevers and were taken to a hospital, the article said.

A lawyer for the man said the father plans to sue for the return of the children, according to the report.

This man’s desire for family successors apparently has led him to develop a plan that seems disturbingly close to sex trafficking.

Someone should tell him that, even if the court awards him custody of the children, there’s no guarantee that they will grow up to become a competent, harmonious successor team -- or have any interest in working for his company.

Loving your kids and setting them free

In 2010, billionaire investor Warren Buffett proclaimed that he plans to give more than 99% of his wealth to philanthropic causes. He famously said, “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing.”

In a recent interview with the Daily Mail, Sting -- the bass player and singer who first became famous with his band the Police and then grew more wealthy as a solo artist and film actor -- also publicly proclaimed that his kids shouldn’t expect a large inheritance. Sting, 62, who was born Gordon Sumner and is the father of six children ranging in age from 18 to 37, told the Daily Mail:

“I told [my children] there won’t be much money left because we are spending it! We have a lot of commitments. What comes in we spend, and there isn’t much left. I certainly don’t want to leave them trust funds that are albatrosses round their necks. They have to work. All my kids know that and they rarely ask me for anything, which I really respect and appreciate…. They have this work ethic that makes them want to succeed on their own merit. People make assumptions, that they were born with a silver spoon in their mouth, but they have not been given a lot.”

You may not agree with what the rock star is doing with his fortune, but his frank conversations with his children are undeniably admirable. As Jayne Pearl and Richard Morris -- co-authors of Kids, Wealth and Consequences: Ensuring a Responsible Financial Future for the Next Generation -- wrote in Family Business Magazine in 2010:

"It’s important to communicate with your children so they don’t base their own decisions -- about spending, education and career -- on what may be false assumptions. Otherwise, they will be not only surprised (and probably resentful) to learn they’re not destined for Easy Street, but also unprepared to support themselves and their own families at anywhere near the level they expected."

Sting also said in the Daily Mail interview:

“With my children there is great wealth, success -- a great shadow over them -- so it’s no picnic at all being my child. I discuss that with them, it’s tough for them.”

Family business advisers recommend that senior-generation members of prominent families talk to their kids about how to respond to their peers’ comments, questions and speculations about the family’s wealth. Pearl and Morris wrote, “Many parents also emphasize that the family is fortunate in ways that have nothing to do with money: We are lucky to be healthy, to have a close family, to have such an interesting history, etc.”

Our Transitions West 2014 conference -- taking place November 12-14, 2014, in Marina del Rey, Calif. -- will include a session entitled “Raising Kids Successfully in a Successful Family Business.” Panelists in this session will discuss how parents can help their children earn credibility, appreciate the family legacy and understand the value of wealth.

One essential lesson the panelists will impart is the importance of open and honest communication between parents and children. Next-generation members who aren’t prepared to function independently are likely to be stung by life’s consequences.

Enterprise longevity vs. business survival

A recent article in The Practitioner -- an online publication of the Family Firm Institute, an organization for professionals who advise and study family enterprises -- pointed out the difference between "firm survival over time" (continuity of a family business through the years) and "longevity of a family enterprise" (a family's ability to create wealth and value over generations).

The Practitioner article -- by Pramodita Sharma, the Sanders Professor for Family Business at the University of Vermont's School of Business Administration and a visiting scholar at Babson College -- argued that family enterprise success can be defined in ways other than leadership transfer from one generation to the next. "Both the creative destruction of firms and pruning of the enterprising family are integral parts of longevity of an enterprising family ....," Sharma wrote. "Recent reviews of the research on succession, governance, professionalization and performance all point in the same direction -- that one size does not fit all and the overarching numbers of ‘success' are insufficient to capture the complexity and heterogeneity of family enterprises and their pathways to success."

Family Business Magazine's cover subjects for May/June 2014, the Power family, sold J.D. Power and Associates to McGraw-Hill in 2005. The Powers are now working together on investment and philanthropic ventures and have implemented family governance structures. Though they no longer run their company, the family is continuing what Sharma refers to as the "pursuit to create value and wealth over generations."

A legacy business that continues for 100 years or more is truly something to celebrate. But that's not the only road to family enterprise success. Today's researchers make a strong case that we must reorient our thinking.

The family as investors, not managers

How many times have you heard a family business owner say, "We have to sell our company because our kids aren't interested in running it"?

If the family is fielding lucrative offers for their business, the proceeds of a sale provide capital for next-generation members to embark on ventures more in line with their passions, and all family members feel good about the outcome, great. But if the family expresses any regret over having their company fall into someone else's hands, I often wonder if they ever considered an alternative to selling: engaging non-family managers to run the company while the family continues to own it.

Marc Puig, third-generation CEO of Puig, the Spanish prestige fragrance and high-end fashion house, recently told the Financial Times that he doesn't expect his family's fourth generation to run the business. "What we have said is that the next generation will most likely not work in the company," Puig told the FT. "They are groomed to become good shareholders and stewards of this project -- but not its managers." The company has a share of about 9% of the prestige-fragrance market, and its revenues are nearly €1.5 million, the FT article noted.

Over the years, Family Business Magazine has published several profiles of families who have taken the role of owner-investors rather than owner-managers of their legacy businesses. In these cases, the family must make an extra effort to engage the next generation so they remain committed to the company. But under the right circumstances, this strategy can foster family satisfaction and financial success.

Governance for the multifaceted family enterprise

At last month's Private Company Governance Summit, held in Washington, D.C., and presented by Family Business Magazine along with our sister publication, Directors & Boards, Steve Lytle, the former chairman of Columbia Distributing and director of The Agnew Company, a family business holding company, made some interesting points about family business governance.

Lytle, participating in a panel discussion entitled "The Effective Private Board," pointed out that many family enterprises are multifaceted. "When we have family ownership involved, we're really not talking about one business, usually," said Lytle. "There's usually kind of a portfolio of [assets] and roles and definitions.... We've got the family to consider, we've got owners to consider. And then we've got the business and the assets to consider."

Lytle said that family businesses should develop governance systems to address the interconnectedness of the various constituencies. "I think it's one thing to race right down and talk about the board," he said. "But we really need to think about the enterprise itself, and how we're governing the entire enterprise." A family enterprise system can include an operating board, an investment board, a foundation board, a family council and an ownership council, Lytle noted.

Most large family businesses have a diverse array of stakeholders, Lytle said. "There are family members that have emotional equity [but] don't have financial equity, and those that have financial equity and not as much emotional equity."

Lytle said that family business boards should consider four questions: "How's the cohesion of the enterprise? How's the clarity developing in the enterprise? How effective is communication in the enterprise? And how effective is education in the enterprise?"

The board can play an important role in building and maintaining cohesion among the family ownership group, Lytle said. On the issue of communication, he noted, "I think it's vital to recognize that when we're talking about communicating to family owners, we want to communicate in a way that speaks at the maturity level, at the sophistication, and at the literacy level of that family group." Regarding education, Lytle said, "I think boards in family enterprise can do an effective job of being part of the education cycle that really ramps up the literacy and sophistication" of family owners, so that they can function effectively as a shareholder group "and for the enterprise to continually grow and mature along the way."

High-yield investment

If you want your family business to last multiple generations and provide wealth to benefit all those future descendants, you must ensure your company is able to hold its own against global competitors. And to compete against the strongest companies in the world, your business needs every edge it can get.

At the second annual Private Company Governance Summit (PCGS) -- held in Washington, D.C., earlier this month and presented by Family Business Magazine along with our sister publication, Directors & Boards -- panelists with experience as directors, board chairs and CEOs of family companies discussed how an independent board can give you the advice you need to move forward with a strategic plan that points the way toward growth and competitive strength.

"I think good governance is not just the right thing to do, but it's a competitive imperative," said Lansing Crane, the sixth-generation former chairman and CEO of Crane & Co. and the chairman of four boards (two of which are family company boards).

"Think of having a board of seven to eight people working for you, putting in what is an average for most companies of 200 to 300 hours a year on your benefit," Crane said. "That's seven times 200 to 300 hours' worth of work from people who are really knowledgeable and committed to your company's success. That's what you're competing with, and that's what you have to have."

Stan Silverman, the former president and CEO of PQ Corporation, a chemicals and engineered glass materials company that was family-owned until 2005, and now a director and lead director on several boards, told PCGS attendees, "You want to hire people as directors that have great critical judgment and have the ability to speak their mind.... And if you do that, you're going to prevent a lot of mistakes from happening."

"As you think about your company and your future, I would ask you to have the courage to think about what you or the next generation or the next [management team] needs, and be able to put that guidance in place for them," said Anne Eiting Klamar, M.D., president and CEO of family-controlled Midmark Corporation. Klamar, who had been a practicing physician before taking over as leader of her family's company, said, "My board has really been my guiding light, my rock, through this journey."

Many family business owners are hesitant to form an independent board because they are afraid to share information with people outside the business and to relinquish autonomy. "You have to recognize the upside," Crane said. "Someone who's not willing to let go and give up autonomy is risking the enterprise. Because the world will consume you at the end of the day. And the flip side of that is, if you've got good people, you're going to succeed."

"I've come to realize through my board that, really, family business is about creating value for the shareholders," Klamar commented. "Once I shifted my framework to creating value, it was a lot easier to let go."


Room for improvement

In the forthcoming May/June 2014 issue of Family Business Magazine, Susan Schiffer Stautberg -- CEO, co-founder and co-chair of WomenCorporateDirectors (WCD), an organization for women who serve on corporate boards -- cites a study that found family business boards lag far behind their non-family counterparts in several important areas.

The study was conducted by Harvard Business School researchers Boris Groysberg and Deborah Bell in partnership with WCD and executive search firm Heidrick & Struggles. In 2012, the researchers surveyed more than 1,000 board members in 59 countries. About 80 of the companies represented (8% of the sample) were family-owned businesses.

The investigators' disturbing conclusion: "There was not one meaningful measure -- from missing skill sets to the effectiveness of succession practices to creating more diverse boards and workplaces -- on which FOB [family-owned business] boards outperformed non-FOB boards."

Here is some of their evidence:

• More than half (52%) of the family business directors, compared with 42% of the non-family business directors, said important skill sets or areas of expertise are missing or insufficiently represented on their boards. Missing skills included HR/talent management (lacking in 58% of family business boards, vs. only 20% of non-family business boards), succession planning (26% vs. 19%), strategy (23% vs. 14%), financial audit (19% vs. 10%), risk management (19% vs. 14%) and compensation (16% vs. 6%).

• Only 23% of the family business boards, compared with 50% of the non-family company boards, have a formal process to determine what combination of skills and attributes is required for the board and, therefore, for new directors. And only 29% of the family company directors said their board has an effective succession planning process for directors, while 38% of the non-family company directors reported having such a process.

• Succession is a significant area of concern. Just 41% of the family business boards, vs. 56% of their non-family counterparts, have an effective succession planning process, according to the directors. Nearly two-thirds (63%) of the family business directors, compared with 39% of the non-family company directors, said succession is not discussed regularly at the board level. And only 44% of the family business directors, vs. 54% of the non-family business directors, said the board has vetted at least one viable candidate who could immediately become the CEO if necessary.

• Family business directors were not happy with the human resources function at their comments. A mere 8% said their company is effective at attracting top talent (vs. 18% of non-family business directors). Only 9% (vs. 15%) reported effectiveness in hiring top talent. Just 9% (vs. 17%) said their company was effective in retaining talent. In the view of their directors also said just 11% of the family companies did a good job of developing talent (vs. 15%), rewarding talent (vs. 16%) and aligning the talent strategy with the business strategy (vs. 15%).

• Diversity is a serious problem. Less than one-third of the family business directors (compared with 49% of the non-family business directors) said director diversity was a board priority. And only 17% of family business board members, vs. 41% of non-family business directors, said their board had adopted measures that successfully advanced diversity on the board.

WCD's Stautberg will be discussing this survey in her remarks at the Private Company Governance Summit -- presented jointly by Family Business and Directors & Boards Magazines -- which begins tomorrow in Washington, D.C.

Governance is a continuing challenge for family businesses. Too many family companies lack a board altogether, or have a board in name only that rarely if ever meets. This study shows that family firms that have formed a board should not spend too much time on self-congratulation. In the minds of their directors, they still have a lot of work to do.

New trend: The succession bonus

The Wall Street Journal recently reportedon a budding trend in public company CEO compensation: Sixteen companies in the Fortune 1000 said they tie their CEO's performance bonus to the development of a succession plan. "[T]hat number will grow rapidly in the next few years, governance experts predict," the Journal article said.

The carrot can be a powerful motivator. David S. Pottruck, a director of Intel Corp. who serves as head of its board's compensation committee, told the Journal that "money does matter. And money talks." The $4 million in stock and cash awarded to former Intel CEO Paul Otellini since January 2013 was given partly because Otellini helped groom his successor, Brian Krzanich, the Journal report noted.

At technology distributor Avnet Inc., the next raise given to CEO Richard Hamada, who has been on the job only since July 2011, will partly depend on his succession planning, the Journal article said. Directors added that provision "to make sure the process is started sooner rather than later," Avnet chairman William H. Schumann III told the Journal.

Too bad this isn't a viable option for family companies, where in most cases the CEO is also the chairman and the largest shareholder and doesn't need to anyone to approve his or her raise. All too often, the leader hangs onto the top job even after he (and in most instances, it's a "he") is past his prime. The quintessential example is Robert Wegman, who didn't turn over the reins of the Wegmans grocery chain to his son, Danny Wegman, until he was 86 and Danny was 57.

Some family business CEOs refuse to step down because they think they're immortal, or haven't figured out how to handle the challenges of retirement. Others have trouble thinking of their children as competent, mature professionals. In some cases, the leader feels that naming one child over the others -- or choosing a non-family member over a family candidate -- will cause tension in the family.

None of these reluctant leaders are doing their families or their companies any favors. In fact, problems below the surface will likely erupt if surviving family members are left to cobble together a succession plan on the fly after the leader's death. But if a plan is created early, shared with the family and implemented on a step-by-step basis over a reasonable time frame, impediments can be discussed as they arise. When this occurs, relationship rifts have a higher likelihood of healing. And, of course, an orderly transition is better for the business.

A fatter wallet might not be a viable succession planning incentive for a family business CEO. But shouldn't the prospect of a healthier family and a healthier business be its own reward? -- Barbara Spector

An April Fool’s joke to play on your family

April 1 is the traditional day for practical jokes. If you're a family business CEO, here's a good one to play on your family: Ask one of your key managers to tell your loved ones that you have suddenly dropped dead.

I'm not suggesting you do this to frighten your family, count the number of tears they shed or assess their reaction when you jump out from behind a curtain and shout, "Only kidding!" I'm recommending this exercise -- often called a family business "fire drill" -- because it is a frequently recommended way to test the effectiveness of your succession plan.

Is your chosen successor prepared to take over? If not, is there a plan to name an interim leader? Does the will you executed years ago need to be updated to reflect births, divorces, deaths or disabilities that have occurred since then? Does your family know where the important documents are kept? Asking everyone to act as if you have died may uncover the answers to these and other key questions.

Family Business Magazine has published several articles describing these "fire drills." If you'd like more information about how these exercises work, you can find it here, here and here.

Oh, and if you're looking for a family business joke that actually is funny, you can find one on, here. Smile, everyone!

Hardly working, or working hard?

A study by a team of researchers from Harvard Business School, the London School of Economics and Columbia University's business school found that family CEOs worked about 8% fewer hours than non-family CEOs. Is this an important finding?

The study -- which appeared on Harvard Business School's "Working Knowledge" website in late January and was cited in the Wall Street Journal earlier this month -- was first conducted via telephone interviews with business leaders in India and then replicated with CEOs in Brazil, France, Germany, the U.K. and the U.S.

Is an 8% difference in hours spent at the office something to get worked up about? Commenters on the articles on both "Working Knowledge" and the Journal's websites raise some interesting points (though in the latter case, there are also some off-topic political opinions mixed in).

"Could you tell if any of the family CEOs were conducting some business with family at non-business events or locations?" one commenter on the Harvard site asked.

Another Harvard commenter wondered, "Are the family business CEOs less engaged in their off-hours than the other CEOs? Or do they spend more ‘slow time' thinking about the business, their family and their roles in both? That is, thinking in 20-year or even 100-year perspectives, instead of day-to-day urgent matters and three-month perspectives?"

On the Journal site, one reader noted, "An economic explanation might be that in a family business, ownership has a vested interest in both sides of the work/family tradeoff." In other words, what a researcher might interpret as slacking off can be viewed by family stakeholders as fostering strong family bonds.

Family business consultant Dirk Dreux commented on the Journal site, "Family business CEOs spend more time with their shareholders than any public CEO ever dreamed of, because they are bound by legacy relationships, some relational and some legal (i.e., loan and security agreements, shareholder buy-sell agreements, trusts, personal guarantees, etc.). So even though the family business CEO is away from the business 8% more than the public CEO, it does not mean that the time is being mis-applied. At the end of the day, the family business CEO is playing with his own and his relatives' money, a comment that can rarely be said of public CEOs."

Back in 2006, Family Business Magazine profiled the Wolff Company, a real estate investment enterprise whose second- and third-generation leaders moved the firm from Spokane, Wash., to Scottsdale, Ariz. That wasn't the only change. They also shifted their work schedules to four days a week and took three months off in the summer, plus some extended winter vacations. As reporter Bennett Voyles noted, "as much as they liked their work, the Wolffs liked spending time with their young families more." The family judiciously hired strong non-family managers they could trust to manage operations in their absence.

How did that work out for them? In 2006, four years after they adopted the relaxed work schedule, Voyles reported, the Wolffs were raising more money from investors and doing bigger deals. But increased work hours were a byproduct of that success. Family members told Voyles they were coming into the office on more and more Fridays and telecommuting from their vacation homes during the summer.

Peter Wolff wrote me in an email that today, business is booming to such a degree that family members no longer can maintain a leisurely schedule. "We are busier than ever," he wrote.


Why America needs family-owned newspapers

The Record, the Bergen County, N.J., newspaper that was first to report a connection between New Jersey Gov. Chris Christie's staff and the closure of lanes leading onto the George Washington Bridge, "is an increasingly endangered and valuable species," New York Times media columnist David Carr wrote last month. Carr noted:

As chain owners have denuded local newspapers of muscle, The Record, a family-owned business, has managed to avoid the wholesale cuts that have decimated other newspapers. It helps to have dedicated ownership: Started in 1895, The Record has been owned since 1930 by the Borg family, which has called all the shots.
The family has made sure that the newspaper is a source of accountability and high-quality information.

Carr noted that the Record's editor, Martin Gottlieb, received a tip about unusually high traffic on the bridge from none other than Stephen Borg, a fourth-generation family member who is the newspaper's publisher.

Whatever your opinion on Gov. Christie or Bridgegate, it seems clear that the Borg family's long-term commitment to their newspaper, their community and their staff made it possible for the Record's staff to uncover who was behind the lane closures. John Cicowski, a columnist who writes on commuter issues, has been with the Record for more than a decade, and Shawn Boburg, who reports on the Port Authority of New York and New Jersey, has been on the staff for three years, Carr noted.

The Record's editor, Martin Gottlieb, told Carr that Cicowski and Boburg's sources know and trust them because of relationships forged over the years. "These are reporters who know their beats, who know their sources, who get their goods," Gottlieb said.

"[F]amily ownership allows continuity of purpose and personnel," observed Carr -- who is in a position to know, given that he works for the family-controlled New York Times.

In the January/February issue of Family Business, Frank Blethen -- fourth-generation publisher and CEO of The Seattle Times Co. -- lamented the changes in his industry. Blethen wrote:

Since I first spoke out against newspaper and media consolidations in 1988, there has been a steady erosion of diverse and local ownership. With ever-increasing consolidation and decreased emphasis on journalism, we have a less informed and less engaged society.

Blethen wrote that he is optimistic that the purchase of the Washington Post by Jeff Bezos and the acquisition of the Boston Globe by John Henry signal "that public interest stewardship may be returning, and with it a renewal of local family newspaper ownership."

Yet Blethen -- whose newspaper is one of only five locally owned family newspapers remaining in the top 50 markets -- urged American citizens to be vigilant. "The lack of quality, accessible education and the loss of a once diverse and robust system of independent newspapers," Blethen wrote in Family Business, "are the key drivers of our wealth and opportunity gaps."

Where are the women directors?

The Wall Street Journal recently reported that the U.S. trails a number of other countries in the percentage of women serving as directors on the boards of large public companies.

A study last year by Catalyst, a non-profit research group, found that 16.9% of board seats at Fortune 500 companies in the U.S. were held by women, the Journal report noted. That compares with 36% in Norway, 26.8% in Finland and 20% in the U.K., the article said.

How do family business boards compare? A U.K. study by researchers from the business schools at Imperial College, Leeds University and Durham University, cited last May in Real Business, found that 80% of the private family companies examined had at least one female director.

But U.S. family firms lag behind their British counterparts. In March and April 2013, Deloitte Growth Enterprise Services conducted an online survey of U.S. family businesses (see Openers, FB, July/August 2013). Two-thirds of Deloitte's respondents said women constituted less than 30% of their board membership, and 28% said their companies had no female board members at all. Among companies with revenues between $200 million and $500 million, 48% had no women directors.

One reason for the lack of diversity in U.S. family firms may be the inability to remove sitting directors from family business boards. The Deloitte study found that 82% of respondents' boards had no term limits, and a whopping 89% had no age limits. Small wonder that more than three-quarters (78%) of those queried by Deloitte reported 0 to 5% turnover in any given year.

All-male boards may be hurting a company's bottom line. Real Business, referring to findings from the U.K. study, noted that a board with diverse membership is better able to address potential threats to business survival and is more likely to closely examine a company's spending and risk taking.

Altering the composition of your board -- to include not only women, but also people of color, younger people and more non-family members -- can provide fresh new perspectives, lessen the likelihood of groupthink and increase your company's survival odds in today's global marketplace. The world's companies are diversifying their boards. It's time for American family firms to catch up

Home sweet home

Last week, the newly merged boards of Fiat and Chrysler voted to move the company's main share listing from Milan to New York, its nation of incorporation to the Netherlands and its tax residence to the U.K.

A Financial Times article, noting that Fiat -- controlled by the Agnelli family -- is Italy's largest employer, said that in Turin, home of Fiat's Maserati factory, "the long feared move has been met by hysteria in the local media."

Fiat has 18,000 employees in the Turin area (5,000 of whom are currently laid off). The company estimates that about 10,000 citizens of Turin work for Fiat suppliers, the FT reported. "Among locals it is accepted wisdom that for every Fiat job there are seven more that depend on the carmaker," the report said.

While Turin residents worry what will happen to the city if Fiat continues to move operations elsewhere, Giuseppe Berta of Bocconi University told the FT that the automaker needs to step up globalization in order to survive.

Though they might not be as huge as Fiat Chrysler, many family businesses around the world are also closely connected to the municipalities where they operate.

A 2011 New York Times report, for example, noted that the Marvin family and their company, Warroad, Minn.-based Marvin Windows and Doors, have financed the town library, senior center, high school swimming pool and hockey arena, as well as a scholarship fund for the town's college-bound students. "We could be anywhere," CEO Jake Marvin told the Times. "But we are in Warroad."

When a business and its community are intertwined, the business owners often consider the welfare of the community when making decisions. President Obama lauded the Marvins in several speeches for finding alternatives to layoffs during the financial crisis. (Those alternatives included pay cuts for family members.) In December 2012, the Times reported that Marvin was able to distribute small profit-sharing checks to employees.

Of course, as Bocconi University's Berta indicated to the Financial Times, a business won't be able to serve the community for very long if the owners don't keep the company's long-term health in their sights. Consider the often-cited case of Malden Mills, the family company that made Polartec fleece. When a fire destroyed the company's Lawrence, Mass., factory in 1995, CEO Aaron Feuerstein continued to pay the full salaries of his idled workers while he built a new, state-of-the art facility. But the company struggled because of debt from the rebuilt factory and a downturn in the industry. Malden Mills filed for bankruptcy in 2001, and Feuerstein was replaced as CEO. The reorganized company declared bankruptcy in 2007 and was sold. As David W. Gill wrote on Seattle Pacific University's blog, "Carrying big debt at Malden Mills was significantly related to Feuerstein's choice to invest so heavily in his employees and this made the company more vulnerable."


The forest vs. the trees

Earlier this month I traveled to Burlington, Vt., to serve as a judge for the final round of the second annual Family Enterprise Case Competition. Nineteen student teams from around the world participated in this event, the brainchild of Pramodita Sharma of the University of Vermont School of Business Administration and editor of Family Business Review.

The case that the finalists analyzed described a choice facing the third-generation president of a family company. Most of the student teams focused their presentations on how the company president should approach the choice. Some teams advocated one of the two alternatives; other teams recommended the opposite. All presented an impressive amount of evidence to support their conclusions.

When we judges -- professors, editors, business leaders and family business advisers -- discussed the case among ourselves, we noticed right away that the company faced an array of problems broader in scope than the either/or decision. Performance had declined. Ownership was very diluted, with numerous family members owning small stakes. The family seemed confused about differences in the roles and responsibilities of owners, managers, and family members. Governance structures appeared to be lacking. Family members seemed to take an entitlement attitude toward the business, instead of considering themselves to be stewards entrusted with preserving the family enterprise for future generations.

Only one of the teams in the competition -- the graduate student team from Jönköping International Business School in Sweden -- recognized that it was more important that the company leaders address the larger issues than make the either/or decision.

The student teams' focus on the small-picture issue mirrors many real-world family business situations. Decisions that seem urgent may be symptoms of larger problems that can be resolved most effectively by establishing family and/or business governance structures. An effective board of directors can keep a company president focused on performance. A strong family council can help family members understand their responsibilities as stewards of the family legacy.

The maple trees in Vermont yield delicious syrup. But it's also important to pay attention to the forest.

The value of values education

A recent article in the Financial Times demonstrates that a single member of an extended family who does not share the family's values can wield tremendous power.

The FT report describes a legal battle over a house and artifacts that once belonged to Field Marshal Lord Raglan (1788-1855), the first British commander in chief during the Crimean War best known for his role in the Charge of the Light Brigade military disaster.

Raglan's family have been stewards of Cefntilla Court, a 19th-century manor house in Monmouthshire, in southeast Wales. According to anz inscription over its front door, Cefntilla was "purchased by 1,623 of [Raglan's] friends, admirers and comrades in arms" and presented to his family after his death "in a lasting memorial of affectionate regard and respect." The house was full of items that included a gold ring taken by the Duke of Wellington from Indian ruler Tipu Sultan (Raglan was married to Wellington's niece), a miniature gold sword engraved with the date of Waterloo and the badge of Portugal's Military Order of the Tower and the Sword, the FT article noted.

Raglan's direct descendant FitzRoy Somerset, the fifth Lord Raglan, was a collector who sought to buy back family memorabilia such as his ancestor's Crimean War field canteen. Somerset, who died in January 2010 and had no children, "was immensely proud of the collection," a neighbor told the FT.

The FT report said that FitzRoy Somerset's nephew Arthur Somerset, an entrepreneur who had his own event-management business in London, was regarded as the obvious heir to the property and its contents. But Arthur Somerset irked his uncle when he bought a house near the estate in order to get to know the area. An acquaintance told the FT, "FitzRoy once accused Arthur of just sitting at the end of his drive waiting for him to die."

In a move that surprised the family, according to the FT, FitzRoy left the house and all its contents not to Arthur Somerset but to Henry van Moyland, a recruitment executive in California and a nephew from another branch of FitzRoy's family.

Van Moyland put the property up for sale and made plans for Christie's to auction all the contents. The auction reserve was set at £750,000, a low figure according to an expert quoted by the FT.

In April 2012, Arthur Somerset filed suit to contest the inheritance and obtained an injunction that has prevented van Moyland from selling the house or auctioning off the contents. Arthur Somerset himself died of a heart attack at age 52 shortly after he obtained the injunction; his widow is continuing the legal fight.

The FT predicted that "much of the estate might eventually be sold either by van Moyland or the Somersets, who will face heavy legal expenses even if they are successful."

Arthur Somerset, assumed by the family to be the one who would be the next steward of Cefntilla, took an interest in it, though he expressed that interest in a manner so inelegant that it caused his uncle to disinherit him. But van Moyland -- the son of FitzRoy Somerset's sister, who lived on a different continent from the estate -- likely did not feel as closely connected to the family history. When Cefntilla fell into his hands, van Moyland chose liquidation over preservation.

This sad situation might have been prevented if FitzRoy Somerset had channeled some of his energy from collecting family artifacts to teaching all of his extended family members about the family values. As a man without children of his own, he might never have considered this to be his responsibility. But as the one entrusted with preserving the home given to the family in perpetuity by his ancestor's admirers, FitzRoy should have at least ensured that educational efforts were somehow being carried out, especially given his intention to name a far-flung relative as the heir.

Lord Raglan's family did not own a business together, but a family business consultant might have been able to help them unite around a common value system and preserve their legacy.

The gift of stewardship

Traditionally at this time of year, we gather with our loved ones for celebrations steeped in family tradition. But unfortunately, this time of year is also marked by materialism and excess.

Of course, the wealthier the family or the more successful the family's business, the easier it is to engage in heedless overspending. Family members fall into this trap when they don't appreciate their role as stewards of the family assets.

In an article in The Family Business Policies & Procedures Handbook, Edwin A. Hoover and Colette Lombard Hoover explained what stewardship means:

What separates successful wealth- and business-owning families from those who run into problems is their view of what ownership means. These successful business owners don't see themselves as enjoying the privilege of proprietorship of their businesses; they recognize that their family is entrusted with the responsibility of stewardship.
Stewardship-oriented families appreciate their business as a gift -- not one that they deserve or that they're entitled to, but as a family heirloom and legacy that they accept and treasure with respect and gratitude.

In their article, the Hoovers contrasted stewardship with proprietorship by explaining that "Family members who approach ownership primarily from a proprietorship orientation view their business as a possession that they are entitled to exploit and consume.... In some business families, greed and a self-serving attitude masquerade as claims of rightful reward and return on investment."

Earlier this month in a New York Times article, Count Anton-Wolfgang von Faber-Castell, eighth-generation owner of Faber-Castell, the German company known for making pencils and other writing and drawing implements, eloquently described his feelings of stewardship toward his historic family enterprise.

Count Anton told the Times that he originally hadn't planned to go into the family business but joined the company after his father's sudden death because he felt a responsibility to preserve the family legacy. Count Anton -- who, according to the Times "owns all but a small percentage" of his family business -- said:

"I consider what I got from my father as a kind of fiduciary property, which in a way does not belong to me."

In a 2002 article in Family Business Magazine, the Hoovers wrote: "[W]hether the family money is new or old, all wealthy families struggle with the challenges of linking their descendants with the history, sacrifice and ethic that formed the original basis of the wealth." They advised, "Education and grooming of the next generation to further the stewardship orientation must be an ongoing family commitment."

It's important to remember that consciously or unconsciously, family members' attitudes toward wealth, spending and responsibility get passed down through generations. May your family enjoy connectedness and prosperity for many generations to come.

Include your in-laws

You welcome your in-laws to your holiday table. But do you welcome them to join your family business governance structures?

In his wonderful book Family: The Compact Among Generations, retired family wealth consultant James E. Hughes Jr. writes:

Holding tight to the principle that only shared "blood" entitles a member to participate in family governance requires that many persons be excluded from it and thus from family decision making. Ironically, this out-group consists of people who consider themselves family members and whom the family considers in all other respects to be family members.... 
Given the difficulty of attempting to become a family that lasts five generations, it is highly doubtful that a system of family governance that excludes many of the members governed by it will lead to success. A family needs the human and intellectual assets of every member to enhance the group's well-being and to achieve its mission of greatness. Requiring any subset of family members to be governed by a system that bars their direct participation is unlikely to encourage the commitment and contribution of their human and intellectual assets. Rather, it will certainly discourage it.

For understandable reasons, some families prohibit in-laws from owning stock in the family business (though there are ways to prevent complications of stock ownership that would arise in the event of a divorce). Even if your in-laws can't be shareholders in your company, there are ways for them to participate in your family council or family meetings.

Your in-laws are the main sounding boards for their spouses (i.e., your blood relatives). If these husbands and wives are inundated with complaints about the family or the business and have no formalized way to help create unity, a host of problems can result. Hughes's wisdom bears heeding.

Conference emphasized learning and interaction

About 210 attendees, representing 60 families, came to the Coronado Island Marriott Resort & Spa in San Diego for Transitions West 2013, the seventh conference presented by Family Business Magazine and Stetson University's Family Enterprise Center. The theme of the conference, which took place November 13-15, was "Family Business Dynamics and the Dynamic Family Business."

New features
Special sessions were added to the conference to facilitate discussion and sharing. Topic-based focus sessions allowed attendees to focus on areas of interest. In addition, special interest group meetings were scheduled for those wishing to discuss issues facing family councils, family offices, the next generation, senior family business members and non-family executives.

Before the conference officially opened, several families convened family meetings facilitated by family business advisers and coordinated by Transitions staff.

An optional pre-conference session, "Transitions 101," introduced first-time attendees to the conference format and offered tips on how to get the most out of the sessions. This introductory session also included an overview of basic family business concepts to new conference participants and others who wanted to brush up. Family Business staffers Barbara Spector and David Shaw, Stetson's Peter Begalla, Saybrook University Professor Dennis Jaffe and veteran Transitions attendee Dan Agnew, president of The Agnew Company, spoke at this session.

Conference welcome
Transitions West 2013 officially opened on Wednesday evening, November 13, with a keynote address by Deborah Marriott Harrison, global officer, Marriott Culture and Business Councils, Marriott International Inc. The title of Harrison's talk was "The Marriott Family: History, Culture and Succession." Tim O'Hara, audit partner at PwC, delivered the keynote introduction and led the Q&A. A welcome reception followed.

A full day of conference sessions began on Thursday, November 14, with a panel conversation entitled "Know Which Hat You're Wearing." Howdy S. Holmes, president and CEO, Chelsea Milling; Anne Eiting Klamar, president and CEO, Midmark Corporation; and Joshua Nacht, a board member of Bird Technologies, discussed the importance of separating the roles of shareholder, family member and business employee. Bryant W. Seaman III, managing director and head of private asset advisory services at Bessemer Trust, was the conversation leader.

Family dynamics and sensitive issues
A panel conversation focusing on "Family Dynamics -- Building Trust, Respect and Communication" followed. Eric Allyn, board member of Welch Allyn; Harold L. Yoh III, chairman and CEO of Day & Zimmermann, and Julianne Lundberg Stafford of Lundberg Family Farms spoke about their families' strategies for building family cohesion and avoiding or resolving disputes. Arne Boudewyn, managing director -- family dynamics, education and governance at Abbot Downing, served as conversation leader.

After lunch on Thursday, participants broke into focus sessions based on their company's generational stage. Jeff Ladouceur, director at SEI Private Wealth Management, and Nancy Drozdow, principal at CFAR, facilitated sessions for family companies in the founder and second generation. Justin Zamparelli, a partner at Withers Bergman LLP, and Anna Nichols, director of communications at Altair Advisers LLC, facilitated sessions for third-generation family companies. Dirk Jungé, chairman of Pitcairn, and Saybrook University's Dennis Jaffe were the facilitators for sessions geared toward families whose enterprises were in the fourth generation and beyond.

"Dealing with Sensitive Family Issues" was addressed in a panel conversation led by Dana Telford, a consultant with the Family Business Consulting Group. Panelists were Preston Root, president of the Root Family Board of Directors; Dale Marquis, founder and chairman, and Matt Marquis, president of Invest West Financial Corporation and Pacifica Hotel Company; and Frederic J. Marx, a partner with Hemenway & Barnes LLP. They discussed strategies for addressing issues of addiction, illness, unsuitability for leadership and other problems potentially threatening to the future of the family and the family business.

A second set of focus sessions addressed tax and estate planning (facilitated by Jeff Saccacio, a partner with PwC), trusts and ownership (facilitated by Laura Ziegler, principal and fiduciary counsel, Bessemer Trust), wealth management (facilitated by Anna Nichols of Altair Advisers), family dynamics (facilitated by Abbot Downing's Arne Boudewyn), the next generation (facilitated by Greg McCann, director of Stetson's Family Enterprise Center), married-ins (facilitated by Michael Farrell, managing director of SEI Private Wealth Management) and family councils (facilitated by Justin Zamparelli of Withers Bergman and Debbie Bing, a principal of CFAR).

Special interest group meetings followed the focus sessions. Some attendees gathered with their peers to discuss family councils, family offices, and issues facing next-generation members or non-family executives. Other attendees paired up for one-on-one meetings with fellow participants with similar interests.

Group dinners on Thursday night were held at two family-owned restaurants: Boathouse 1887 on the Bay and Brigantine Seafood Restaurant.

Next generation and entrepreneurial innovations
Friday, November 15 opened with a panel conversation entitled "From Child to Owner: The Engaged Next Generation." Phil Clemens, CEO of The Clemens Family Corporation; Kareem Afzal, vice president and business development manager of PDC Machines; and Tim Hussey, president and CEO of Hussey Seating Company, shared their views on what it takes for the next generation to be good owners, and what the family can do to foster a sense of stewardship. The conversation was lead by Rhona Vogel, CEO and founder of Vogel Consulting.

A panel conversation on "Entrepreneurship, Investment and the Dynamic Family Business" followed. The session focused on deploying family wealth in new ways within and outside the family business, investing family capital and encouraging new ways of thinking. Pitcairn's Dirk Jungé led a conversation featuring panelists Jason Pritzker, president and co-founder of Yapmo LLC, and Warner King Babcock, chairman and CEO of AM Private Enterprises Inc.

The conference closed with a keynote address by The Clemens Family Corporation's Phil Clemens, who spoke about how his family made the transition from a "family business" to a "business family."

Transitions West 2013's Platinum Sponsor was PwC. Gold Sponsors were Bessemer Trust, Abbot Downing and Vogel Consulting. Silver Sponsors were the Family Business Consulting Group, SEI Private Wealth Management and The World Residences at Sea. Bronze Sponsors were Pitcairn, Withers Bergman, CFAR, University of Pittsburgh's Institute for Entrepreneurial Excellence, Altair Advisers and Kellogg School of Management's Center for Family Enterprise.

Transitions East 2014 will be held March 26-28, 2014, at the Grand Hyatt Tampa Bay in Tampa, Fla. For information, see

Be discreet when complimenting kids’ work

Lucy Kellaway, who writes a Financial Times column called "On Work," recently advised her readers not to praise their subordinates in public.

Kellaway cited a study by researchers Elaine Chan and Jaideep Sengupta that was published in the Journal of Consumer Research. Chan and Sengupta found that bystanders who overhear someone who is being praised envy the person who receives the compliment and resent the person who gives it.

"This means that most managers are getting it badly wrong," Kellaway wrote. "They have been taught that a vital part of their job is to stroll around the office dispensing praise here and there .... What they are actually doing is creating resentment and making themselves deeply unpopular."

Family business owners who are trying to bring next-generation members along would be wise to pay particular attention to this research tidbit. The risk of staff resentment is already considerable when a next-generation member comes aboard. Chan and Sengupta's findings indicate that senior family members who loudly tout a young relative's accomplishments might exacerbate the problem.

The best way to fight accusations that family members owe their jobs to nepotism is for family hires to demonstrate competence and humility. Their elders can help by maintaining high standards for next-generation members -- and by being discreet and judicious with the plaudits.


Candid comments on the sale of a business

When a family decides to sell their company, they usually issue a press release with a terse statement attributed to a family representative. Such statements tend to highlight a synergy between the family business and the acquiring company; for example, they often note that both entities have similar values or goals.

Statements attributed to family members seldom describe how they feel about selling the business founded by their ancestor. And while some of these comments cite the economy, industry shifts or a tough competitive environment as reasons the family opted to sell, rarely do they mention family dynamics (other than the lack of a family successor).

But last month, upon announcing the sale of his family's United Supermarkets LLC to Albertson's LLC, United co-president Matt Bumstead made some revealing remarks -- not in a written statement, but in person.

United Supermarkets, based in West Lubbock, Texas, had been family-owned since 1916. Four generations of the Bumstead family had owned and operated the company. Lubbock news/talk radio station KFYO reported that Matt Bumstead was "impassioned" as he made the following comments at a press conference:

"Fourth-generation family businesses don't come along very often; there's a reason for that. And there's a reason that very few make it that far, and there's a reason that there are very, very, very few fifth-generation family businesses. The main reason for that, honestly, is the family, and that's it's hard for a family to keep their arms around an enterprise, a mission, as something grows over that many years.
"We've seen other family supermarket businesses who had been great and proud reach a point where they were dying on the vine. In many cases it was because, though no real fault of their own, the family lost control, lost their ability to support. They lost their ability to be good stewards. To make the right decisions or to lead in the right way.
"We were not going to let that happen to our business. Not to this company, not to this mission, not to our people, not to our guests. And there certainly are thousands of people who are second-guessing this decision tonight and they have a right to, and quite frankly it's an honor that they care enough to do that. I assure you, no one cares more about these people than our family. And no one cares more about this mission and the legacy than we do."



A broken philanthropic promise

If you're going to make a promise, you'd better be sure you can keep it. And the bigger the promise, the higher the stakes if it's broken. A recent situation involving a business family's bequest to a Kentucky college bears this out.

As the Wall Street Journal reported last month, the A. Eugene Brockman Charitable Trust withdrew a donation of stock worth $250 million to Centre College in Danville, Ky., less than two months after the gift had been announced. The donation would have essentially doubled the 1,400-student college's endowment, the Journal article said. Robert Brockman, son of the late A. Eugene Brockman, is a Centre College alumnus and a former member of the school's board.

According to the Journal report, the gift of stock in Universal Computer Systems Holding Inc., which does business as Reynolds & Reynolds Inc. of Dayton, Ohio, and makes software for auto dealerships, depended on a recapitalization of the company. Over the summer, the company -- whose owners include Robert Brockman, who is its CEO, and Texas buyout firm Vista Equity Partners -- tried to raise about $4.3 billion in loans and bonds through a recapitalization after an unsuccessful attempt to sell the business. The recapitalization would have valued the company at about $5.36 billion, the article said.

But then the company halted the deal before the credit was funded. A spokesman for the company told the Journal, "We have a lot of confidence in our financial strength and the flexibility it affords us in the future."

The gift would have created 40 full scholarships each year starting in 2014 for science and economic majors. According to the Journal report, the college has halted its marketing campaign for the program. Evatt Tamine, a trustee for the trust, told the Journal it still plans to support the school. "There were all sorts of things we didn't anticipate and couldn't address in time," Tamine said.

Halting the recapitalization may have been the best move for the company, but the withdrawal of the bequest harms the reputation of the Brockman family, and that of the college. It's best to hold your grand announcements until your plans are fully hatched.

Renovation and renewal

I have just embarked on a major renovation of my home. Demolition has begun, and soon the contractors will start the rebuilding process.

To make room for the contractors to do their work, I had to pack up my possessions. This forced me to do something I had long put off -- examine everything I had been saving and consider what I could discard.

Right now there is dust everywhere and most of what I own is in boxes, so I am feeling very disoriented. The renovation project requires me to spend money and temporarily sacrifice my personal space. But after the work is done, I will be living in a sparkling new home, unencumbered by things I no longer need. The moribund appliances and shabby fixtures will be replaced. It will be unpleasant to live through the work, but I'll be so happy at the end of the process.

I'm sure you can figure out where I'm going with this. In business and in life, we often avoid the challenge of discarding what is no longer helpful and changing what we've grown accustomed to. We know things would be a lot better if we invested in renewal, but inertia wins out.

For family business members, resistance to change can be dangerous. Consider the shareholders who would rather take dividends than pursue new opportunities, the ne'er-do-well son who knows he won't ever be fired and the relatives who dismiss ideas offered by "the rebel" or "the baby." If these behavior patterns persist, the future of the family business will be in jeopardy.

Maybe it's time to knock down walls, build a new foundation and raise the ceiling.

Not the retiring type

A study by consulting and market research firm Spectrem Group found that wealthy people are less likely to retire. When asked, "At what age do you expect to retire?," nearly one-third of respondents with annual incomes of $750,000 or more said, "over 70," and 15% said they never planned to retire.

A Los Angeles Times report on the study said:

That stems partially from the way wealthy people view themselves and their success -- as a result of hard work and risk-taking, which they're not inclined to give up just because they can financially. And high-net-worth people also are frequently tied to companies they own or have founded, making it harder to detach logistically and emotionally.

Indeed. Robert Wegman didn't name his son Danny as CEO of grocery chain Wegmans until 2005, when the elder Wegman was 86. Curt Carlson, founder of Carlson Companies, named his son-in-law Skip Gage as CEO in 1989 but returned in 1992 and remained at the helm until 1998, when he named his daughter Marilyn Carlson Nelson as his successor. Curt was 83 and Marilyn 60 at the time.

A strong work ethic is admirable. But there is a time to let go. A younger person -- either a member of your family or a non-family executive -- will bring new energy and fresh knowledge to your company. He or she is likely to be more inclined to take risks, which can pay off in ways you can't even imagine.

I'm not suggesting that senior leaders retire to a lifetime of golf and early-bird specials, if that's not their thing. There are many ways to make valuable contributions and engage your mind. One way is to serve as a director on the board of a family business that's trying to achieve the level of success your company enjoys. Another is to become active as a mentor via your region's family business center.

Of course, you need to plan your retirement before you walk away. Family Business Magazine's Directory of Advisers includes many consultants who are able to help. If you're getting on in years, maybe it's time to give one of them a call.

The directors who would not leave

A recent Wall Street Journal article noted that 34% of the independent directors of companies in the Russell 3000 stock index have served on those boards for a decade or longer, compared with about 18% in 2008. And among that cohort of outside directors, there are 28 who have remained on a board for a whopping 40 years or more.

Some investors and corporate governance experts consider long-tenured directors to be as helpful as gum that's permanently stuck to the bottom of a shoe. As the Journal report pointed out, these board fixtures occupy seats that could be taken by younger people with fresh ideas, and their continued presence thwarts efforts to bring diversity to the board. (All of the directors with 40+ years of service, for example, are men; their ages range from 67 to 87.)

What's more, older directors may not be up to speed on today's business practices or technology. The Journal report quoted Richard E. McDowell, 69, a director of Northwest Bancshares Inc. since 1972 and the son and grandson of previous Northwest presidents, who confessed to having some difficulty accessing board briefing materials via the iPad; McDowell plans to retire from the board at 72. And -- perhaps most significantly -- directors who have served on a board for decades may have developed close relationships with managers that could potentially compromise their presumed independence.

But there is another point of view on the matter. Some corporate directors consider their long-standing directors to be like a fine wine that improves with age or a vintage watch that still keeps perfect time. "Board colleagues say long-serving members often provide useful context about a company, its industry and its past...," the Journal article said. "Some highly experienced board members believe their long-term ties with a company make them tougher monitors of management -- partly because they understand its prior missteps better than newer directors do."

This appears to be the majority viewpoint. The Journal article cited a study by recruiter Spencer Stuart of companies in Standard & Poor's 500 index; only 17 of those companies have term limits for their directors.

The Journal article didn't discuss family companies, but a recent Deloitte study (discussed in the July/August 2013 issue of Family Business Magazine) reveals that family firms also tend to keep their directors on board for indefinite periods. The study found that 82% of the respondents' boards had no term limits for directors, and 89% had no age limits.

As the Journal pointed out, one possible alternative to using term or age limits to force directors off a board is instituting evaluations of individual directors. Under this system, board members -- of any age -- who are determined to be poor performers are asked to leave the board. This practice, however, apparently has not yet caught on in family businesses: Two-thirds of the respondents to the Deloitte study said they don't conduct formal director evaluations.

The Graham enterprise post-Post

News that the Washington Post Co. had agreed to sell the Washington Post to Amazon founder Jeff Bezos took the staff of the legendary newspaper by surprise, according to an account in the New Yorker by David Remnick, who worked at the Post for a decade.

Remnick wrote that when Post staff were called to a meeting on the afternoon of August 5, they thought they were going to hear an announcement that the company had sold its headquarters building, which has been on the market since February.

A letter to readers from Post publisher Katharine Weymouth that was posted on the newspaper's website started, "This is a day that my family and I never expected to come." The Graham family has led the paper for four generations.

The accompanying graphic featured images from pivotal moments in the paper's storied history, including the resignation of President Richard Nixon, brought about by the coverage of the Watergate scandal by Post reporters Bob Woodward and Carl Bernstein.

Weymouth told the Post staffers that she thought her late grandmother and namesake Katharine Graham, who led the paper in the Watergate era, would have approved of the sale, Remnick wrote. But her uncle, company chairman Donald Graham -- Katharine Graham's son -- told Remnick, "Well, she doesn't know that. And I don't know that."

According to Remnick's report, Donald Graham consulted with the company's board and "quietly began looking for a potential buyer" in late 2012, after seven years of declining revenues and forecasts of continued decline for two more years. Newsroom staff had been cut from more than 1,000 to about 640. Remnick wrote that Graham

sacrificed his family's ownership in the hope of saving the thing itself. From another owner, you wouldn't believe it, you would think he was bailing....

Former Post executive editor Leonard Downie told Remnick, "Don hated all the cutting and he just didn't want to cut anymore."

Media pundit Michael Wolff, writing in The Guardian a few weeks before the sale was announced, listed several missteps by the Post management and flatly stated that Weymouth "has been a disaster in a job for which she had, other than her lineage, no qualifications." A profile of Weymouth in the New York Times shortly thereafter pointed out that she was "carving a path in a capital, and an industry, vastly changed from the one her grandmother inhabited when big-city newspapers were flush with advertising."

The Times report said Weymouth and her grandmother were "extremely close" and noted that the publisher's office is lined with pictures of Kay Graham; Weymouth wore her grandmother's pearls on her first day in the publisher's job, the Times article said.

The Washington Post's report on the sale to Bezos said it includes the Post and its website, the Express newspaper, the Gazette Newspapers and Southern Maryland Newspapers, the Fairfax County Times, El Tiempo Latino, a production plant and a Maryland facility that prints military publications.

What's next for the Graham family enterprise? The Post's report said that after the deal closes, the publicly traded Washington Post Co. will be renamed and the Graham family will control it through its supervoting shares.

The company will continue to own the Post's headquarters,, Foreign Policy magazine, the WaPoLabs digital development operation and land in Alexandria, Va. It also owns the Kaplan education division, which recently acquired Grockit, a social media-based test-preparation business. Kaplan, which been a profitable division that supported the newspaper, now is facing declining revenues. The business, and the for-profit education industry in general, has been criticized for students' low graduation rates and defaults on student loans.

Last month, the Post Co. announced that it had acquired Forney Corp., which supplies products and systems that control and monitor combustion processes in electric utility and industrial applications. In 2012, the company acquired a majority stake in Celtic Healthcare. Pundit Wolff noted in The Guardian that these moves turn the Post Co. "into a holding company, in essence an investment vehicle."

Katharine Weymouth will stay on as publisher of the Post under Bezos's ownership, at least for a while. She told Remnick, "I don't feel like it's the end and that I have to summarize my legacy in terms of this news. I hope I'll be here for the long term and I will stay as long as Jeff will have me.... History will have to judge."

Whatever you think about the third- and fourth-generation Grahams' stewardship of the company, it's hard not to wince at the pain they must be feeling. Like all inheritors of great legacies, they were always afraid of being the ones to screw it up, as the Times noted in its profile of Weymouth.

In a letter to employees made public on Jim Romenesko's media blog, Donald Graham wrote:

"All the Grahams in this room have been proud to know since we were very little that we were part of the family that owned The Washington Post. We have loved the paper, what it stood for, and those who produced it.
"But the point of our ownership had always been that it was supposed to be good for the Post. As the newspaper business continued to bring up questions to which we have no answers, Katharine and I began to ask ourselves if our small public company was still the best home for the newspaper.... We were certain the paper would survive under our ownership, but we wanted it to do more than that. We wanted it to succeed."

One unnamed Post reporter told Remnick: "This was the family acknowledging that we can't do it anymore and we have to give it to someone else. And we love the Graham family, we are proud of the family."



The perils of primogeniture

A recent Financial Times article about revenue growth for British mid-market companies raised an interesting family business issue.

The article compared the U.K. companies' revenue growth from January to April 2013, which averaged 2.3%, with revenue growth for the German Mittelstand companies -- mid-cap businesses, mostly family-owned, that are known for their strong performance and their significant contribution to Germany's economy. During the same period, the Mittelstand's average growth was 2.4%, the FT article said.

In discussing why the Mittelstand's success has been hard for British businesses to replicate until now, the FT cited a McKinsey study that found only 10% of German family businesses were run by the eldest son, compared with 50% in the U.K. The FT article said:

Where the default choice was to appoint the eldest son to run the company, [the McKinsey study] said companies were drastically restricting their ability to find the right talent.

Of course, there are plenty of firstborn sons who are succeeding at running the family business. One example -- Hal Yoh, CEO of Day & Zimmermann -- is on the front cover of the May/June issue of Family Business Magazine.

But many other successful family business leaders are younger sons (like third-oldest child Paul Jacobs, chairman and CEO of Qualcomm), daughters (such as Craigie Zildjian, CEO of the Avedis Zildjian Co.) and non-family members (take, for example, Alan Mulally of Ford Motor Co.).

The best person to take over the family business is the most qualified person for the job, regardless of birth order, gender or family membership. That isn't an earth-shattering revelation. In fact, it might not even seem worth noting. But what may be obvious in theory may be hard to put into practice when tradition and expectations stand in the way.


Family and private company leaders convene at PCGS 2013

Family business owners and directors joined with other owners of closely held and private equity-owned businesses for the inaugural Private Company Governance Summit, sponsored by Directors & Boards and Family Business magazines. The summit took place May 15-17 at the Fairfax at Embassy Row in Washington, D.C.

Attendees packed the hotel's Fairfax Ballroom to hear the panel presentations and keynote addresses.

Jim Ethier, third-generation chairman of Bush Brothers & Co., was among the panelists who offered insights on board composition, the relationship between management and the board, succession planning and board governance practices in a session entitled "Private Company Boards -- One Size Doesn't Fit All."

Directors & Boards' Jim Kristie moderated a panel focusing on "Private Board Roles, Committees and Independence." Panelists included Dave Phillips, chairman of Midmark Corporation (a family company in the fourth generation of leadership) and a director on multiple other private and public company boards.

A panel presentation addressing "Private Company Director Service: Risks and Responsibility" included David Meachin, who has served on the boards of public, private and family-controlled companies, and management consultant George Isaac, who has served on numerous public and private boards, including several Isaac family business boards.

Panelists at a session entitled "The Effective Private Board" included Jill Kanin-Lovers, a member of the boards of Dot Foods, a family company. Dan Hatzenbuehler, chairman of E. Ritter & Company, a fifth-generation family business, was among the panelists who spoke about "Identifying, Securing and Paying the Best Private Company Board Members."

The conference also featured breakout sessions, including one geared toward family company boards. Norman Augustine, retired chairman and CEO of Lockheed Martin Corp. and a former undersecretary of the Army, delivered the conference's closing keynote address, entitled "Lessons for Private Boards from the Public Company World."

The Private Company Governance Summit 2013's premiere conference partner was Deloitte. Conference partners were Heidrick & Struggles, Diligent and Chubb.

Will industry consolidation affect family funeral homes?

Last week, Service Corporation International (SCI), North America's largest operator of funeral homes and cemeteries, agreed to buy Stewart Enterprises Inc., the second-largest funeral-care provider. If approved by federal authorities, the merged company would own 1,653 funeral homes and 515 cemeteries in 48 states, eight Canadian provinces and Puerto Rico, with revenues of nearly $3 billion, Reuters reported.

How will further growth of the corporate burial behemoth affect family funeral homes? According to National Funeral Directors Association spokeswoman Jessica Koth, about 86% of the funeral homes in the U.S. are family-owned. These business owners "are watching the news with great interest," Koth tells Family Business. "Family-owned funeral homes are taking a wait-and-see approach."

Regulatory authorities may require SCI and Stewart to make divestitures before combining in order to avoid antitrust concerns, Koth notes. This means some funeral homes that had been sold to the conglomerates by their founding families may once again be family-owned.

SCI has made big acquisitions before. In 2006, it bought out the Alderwoods Group, which at the time was the industry's No. 2 funeral home operator, for $856 million, the Houston Chronicle noted.

Stewart Enterprises itself is a family-controlled company. Founded in 1910 by Albert Stewart, it expanded in the 1980s from its base in Louisiana and Texas into Florida, Maryland, Washington, D.C. and West Virginia. The company went public in 1991. Chairman Frank B. Stewart Jr., 76, the founder's grandson, has a 30% stake in the company.

Daniel Isard, president of funeral industry consulting firm Foresight Companies, speculates that a potential estate tax liability for Frank Stewart's heirs drove the decision to merge. SCI had tried unsuccessfully to take over Stewart Enterprises in 2008. "It was just a matter of egos being put aside and logic taking over," Isard tells Family Business.

As for potential ramifications for family-owned competitors, "I don't think [the merger] is going to have any marked effect on family-owned or privately owned funeral homes," Isard comments. He says family funeral home operators should not be concerned about price competition from the combined company. "Neither [SCI nor Stewart] was price-focused," Isard says.

But John Bachman, 56, the eighth-generation operator of Bachman Funeral Home in Strasburg, Pa., says has been experiencing price competition from corporate consolidators for years. "They can buy in bulk and keep salaries low," he notes.

In the past, says Bachman, whose business was founded in 1769, his family could avoid the expense of advertising. "Word of mouth has been very effective for us," he says. "But now, we have a lot of people shopping for price." Today's price-sensitive clients, for example, are opting for inexpensive veneer caskets to save on funeral costs, he notes. "I haven't sold a cherry casket in three years."

Societal factors, such as increased mobility, have had an effect as well, Bachman says. "People are not loyal to a particular funeral home just because it's in their town." And many municipalities have more funeral homes than can be sustained, given the death rate of their populations, Bachman observes.

Bachman, who once ran three funeral homes, now operates only one. "There isn't a lot of money in this business if you're small," he says.

Keynote speakers among Transitions East ‘13 highlights

Attendees at the Transitions East 2013 conference gave high marks to the event's three keynote speakers. The conference, presented by Family Business Magazine and Stetson University's Family Enterprise Center, took place at the Grand Hyatt Tampa Bay on April 17-19. More than 230 people, representing 77 family companies, participated in the conference.

Thomas J. Pritzker, executive chairman of Hyatt Hotels Corporation, set the tone for the conference with his opening keynote address, in which he shared the lessons he learned about business and life.

In a keynote address entitled "Reclaiming Our Heritage," Bernadette Castro, CEO of Castro Convertibles, reminisced about starring as a young girl in the furniture company's early television ads. The business, founded by her father, was sold in 1993 to a company that eliminated the Castro name and later went out of business. Today, Castro and her children have revived the Castro Convertibles brand.

Dini Pickering, vice chairman of the board of directors at The Biltmore Company, presented the closing keynote speech, entitled "Governance, Bringing in Outside Talent and the Successful Transition." Pickering, a fourth-generation descendant of George Vanderbilt whose family operates the Inn on Biltmore Estate and related businesses, presented the history of the family enterprise, her family's succession journey and the policies and procedures they have established.

Transitions East 2013 also featured panel discussions centered on several main topic areas: "Family and Business Challenges by Generational Stage," "Getting Succession Right," "Developing the Next Generation for Leadership and Ownership" and Harnessing the Expertise of Non-Family Executives." Other conference offerings included breakout sessions, a workshop and a group dinner at the family-owned Columbia Restaurant in historic Ybor City.

A full report of Transitions East 2013 will be published in the July/August 2013 issue of Family Business Magazine.

Transitions West 2013 will be held Nov. 13-15 at the Marriott Coronado Island Resort in San Diego. For information, see





I can quit you—but please don’t quit

As the song says, breaking up is hard to do ... especially when spouses work together.

Last month, Cablevision Systems Corp. announced that Kristin Dolan, wife of CEO James Dolan, had been promoted -- a few weeks after the company said the Dolans had separated on a trial basis, the Wall Street Journal reported.

Kristin Dolan has worked at Cablevision for 23 years; she and her husband met at the company, the Journal report said. Her role at the company has been increasing since 2011. Her new duties will include sales oversight of cable TV, Internet and voice products, plus product management and marketing, according to the Journal. Prior to her promotion, she had participated in company earnings calls alongside her husband, the article noted.

What happens when you don't want your ex in your life, but you need that person in your business? Family Business Magazine pondered that question back in 2008. Our article cited a study by family business researchers Patricia Cole and Kit Johnson of nine former couples who despite their breakup continued working as business partners.

Cole and Johnson told Family Business that the couples trusted each other in business matters -- even if trust in their personal relationship had been violated through infidelity! "They were able to compartmentalize business trust as separate from their personal relationship," Johnson said.

In other words: Even if someone turns out not to be your soulmate, he or she may be the best person for the job at your company.

Of course, trust goes only so far. As our 2008 article pointed out, family business advisers say carefully negotiated documents such as a shareholders' agreement and a buy/sell agreement are crucial when former romantic partners continue as "co-preneurs."

As for Cablevision, James and Kristin Dolans' marital troubles don't seem to have altered the company's view toward married-ins. As the Wall Street Journal article noted, at the same time Cablevision announced Kristin's promotion, it also announced that it had promoted Brian Sweeney to a new position focused on corporate strategy. Sweeney is married to James Dolan's sister.

Is it time to revamp your board?

In my "From the Editor" column in the current issue of Family Business, I note that later-generation family firms can fall prey to insularity and other foibles that can stifle innovation. That is often a fatal flaw in today's rapidly changing technological and competitive marketplace. Every generation of family owners, I write, must assess the business "with an eye toward creating opportunities, changing what isn't working and moving forward."

A board of directors that includes experienced outside members can help a family business leader to spot changes on the horizon and determine which products, processes or procedures should be rethought. But every so often, some strategic rethinking should be applied to the board itself.

At a roundtable discussion in New York in December, a group of prominent private company directors noted that while many business owners engage in rigorous planning to form their boards, they don't put any thought into changing their boards for the future. While term-limiting directors is considered a best practice for public companies, all too often private companies keep the same group of directors on their boards past their ability to help take the business to the next level.

Your company's concerns will change as your business grows, your products mature and your family prepares to transition to the next generation. Your board should evolve in parallel to the evolution of your business. Think about where you see your company in five years. Then consider bringing new members onto your board who have already taken their businesses to that place and beyond.

A group of business owners and directors will be discussing this and other topics at the Private Company Governance Summit, a national conference focused on the unique governance challenges facing family-owned and other closely held businesses. The Summit, presented jointly by Family Business Magazine and Directors & Boards Magazine, will be held May 16-17, 2013 in Washington, D.C. You can learn more about this exciting new conference at

Every year, take some time to ask yourself these questions: What do you want from your board? And are your current directors capable of giving you what you need?

The case for sharing your story

Here at Family Business Magazine, we are humbled by the families who generously share their stories with our readers -- including not only the history and growth of their family enterprises, but also the mistakes they made along the way, the measures they took to resolve their disagreements and what challenges they see on the horizon.

As it turns out, these families aren't just sharing the secrets of their success; they're fostering healthy family relationships and resilience in future generations.

Bruce Feiler, a New York Times columnist on faith and family and a bestselling author, recently wrote about the benefits of developing "a strong family narrative."

Feiler cited a study by psychologists Marshall Duke and Robyn Fivush that assessed how much children knew about their family history. The kids who knew more family stories had a greater sense of control over their lives and higher self-esteem than their peers. They also believed that their families functioned more effectively when compared with kids who didn't know much about their families' past. And after the terrorist attacks of Sept. 11, 2001, the children with a strong sense of family history were better able to cope with the fear and stress that gripped the nation.

According to Feiler, Duke's term for this phenomenon is a strong "intergenerational self." Duke told Feiler that the most healthful narrative includes an honest account of the family's lean years as well as the good times, with a moral along the lines of, "No matter what happened, we always stuck together as a family."

Sticking together as a family doesn't mean that family members must always agree on everything. As we note in The Family Business Conflict Resolution Handbook, conflict isn't on its face a negative thing; rather, it's an opportunity for all parties to air their concerns and work collaboratively to arrive at a solution that's best for the group.

The most effective families don't neglect the periods of difficulty and conflict when telling their family stories. But they do put anecdotes into a positive framework. Feiler wrote:

When faced with a challenge, happy families, like happy people, just add a new chapter to their life story that shows them overcoming the hardship.

We in the family business community are grateful to those who share their family narrative with others.

Generational baggage

Each time a new generation joins a family firm, new family and business life-cycle challenges arise. When the transition has proved to be successful, family members can't afford to sit back and congratulate themselves -- they must begin planning for a new cartload of generational baggage.

Founder to G2. The generation gap between the founding entrepreneur and his/her children is a quintessential challenge. Another classic source of strife stems from sibling rivalry. But there are other issues, as well.

• By the time the second generation comes aboard, most businesses have grown. Middle managers must be hired. The business may have to take on debt to fund its expansion.
• At the founder stage, there was a single decision maker; now, decisions are made by a group of family members, and perhaps key non-family managers as well. Consensus building is required.
• It may be difficult for the founding parents to accept their children as competent businesspeople and to relinquish control of their other "baby" -- the business.
• Siblings must begin to think of each other in a new way: They are now business partners as well as brothers and sisters. The presumption of equality in a sibling relationship poses problems when siblings have different business roles.
• The addition of spouses/significant others to the family can be a source of stress.
• The family must determine how the founder's retirement will be funded.

G2 to G3. Many family business experts say that this is the most difficult generational transition of all. The exponential increase in the number of heirs results in complexity that can overwhelm a family, causing a return to the proverbial "shirtsleeves."

• In order to support a larger group of family members, the business must grow significantly.
• Unlike G2 siblings, the G3 cousins didn't all grow up in the same home; they lack a shared history.
• A larger shareholder group requires a formal decision-making structure.
• An imbalance in ownership can occur if one of the family branches has more G3 descendants than the others.
• Conflicts can develop between active and inactive owners over payment of dividends.
• For these reasons, many business families consolidate ownership -- known as "pruning the family tree" -- at this stage. This process can cause resentment.

G3 to G4+. By this point, the family is likely to be widely dispersed; they are scattered all over the country, or even around the world. Some of the cousins may not even know each other.

• Later generations may not feel the same connection to the founder and the business that their forebears had.
• With a large shareholder group, it's impractical for everyone to vote. The family must develop a representative governance structure.
• Voting blocs can arise within and between family branches.
• Differences between active and inactive owners are magnified. Inactive owners may feel ignored by company managers.
• Younger-generation members may not take a stewardship approach to the family's wealth.
• Family members who rely on dividends to support their lifestyles may be more risk-averse than those who work in the business.

How does a family manage these challenges? By instituting policies (covering family employment, share inheritance, premarital agreements, etc.), creating family documents (like a mission statement and family constitution), developing governance structures (an independent board and a family council), communicating constantly and seeking outside help.

I will be discussing these issues, along with a panel of business owners representing the second, third and fifth generation of their families, at the Transitions East 2013 conference in Tampa on April 18. The panelists will discuss the work their families have done to meet the challenges of the current generation and to set themselves on the right track for the future.

The greater the number of people involved in a family enterprise, the wider the disparity of interests, talents and concerns. This diversity need not be a source of strife. Indeed, it can be a family's great strength -- if family stakeholders work on their relationships at every generational stage.

Tribulations of a non-family executive

Studies have found that many MBA candidates don't aspire to careers in family-controlled businesses because they perceive family firms to be less professionally run than non-family companies. Academic family business researchers, publications like Family Business Magazine and organizations such as Family Enterprise USA have been working diligently to combat this bad reputation.

But every now and again, a well-publicized piece of family business news comes along to undermine our efforts.

Take the recent report of changes at the helm of Pilot Flying J, based in Knoxville, Tenn. In September 2012, the company hired John Compton to replace family CEO Jimmy Haslam, who announced he was stepping down. But on February 11 -- just five months later -- Haslam announced he was returning to the helm of his family business and bumping Compton to another position.

Now, Pilot Flying J is no mom-and-pop shop -- it's North America's largest operator of travel centers and travel plazas, with more than 600 such outlets. And John Compton isn't a newly minted business school grad. Before joining Pilot, he was president of PepsiCo, and he had been considered a leading candidate to replace Indra Nooyi as chairman and CEO of the soda giant.

Haslam's original intent in vacating the top job at Pilot was to run the Cleveland Browns, the struggling NFL football team he bought for $1 billion in August 2012. But then he hired Joe Banner, former president of the Philadelphia Eagles, to be CEO of the Browns; Rob Chudzinski, former Carolina Panthers offensive coordinator, to be the coach; and Mike Lombardi, the Browns' former personnel executive turned TV analyst, to return to the team as VP of player personnel.

With seasoned football veterans in place to work on fixing the Browns' problems, Haslam evidently felt he didn't have enough to do over there. So the prodigal son returned to the business his father founded in 1958.

Haslam told the Knoxville News Sentinel that he was coming back to Pilot simply because he missed it. Haslam said:

"It's not at all about John, it's more about Jimmy having a change of heart in terms of what he wanted to do ... I realize people will look at it in different ways but that's the reality."

What will Compton do now? According to the News Sentinel, he "will work as a strategic adviser to Pilot Flying J, the Browns and the Haslam family." Asked by the newspaper whether observers are likely to view the role change as a demotion for Compton, Haslam said, "people will read into it what they want to."

In an interview with the News Sentinel, Compton appeared to be taking the switch in stride. He said he wasn't angry about the change, there had been no disagreements about the way he ran Pilot and that he wanted to help Haslam run all of his businesses.

Compton told the paper that he joined Pilot Flying J "with my eyes wide open."

"I think if I had started at age 21 or 22 building a company with my family, it would be hard to walk away from, so I understand."

Bookies who are taking bets on the Cleveland Browns' win-loss record next season might want to add a wager on how long John Compton continues to work with Jimmy Haslam.

In PwC's latest family business survey, "attracting the right talent" was one of the top four challenges that U.S. family business leaders said they would face in the next five years. Let's hope Compton's story doesn't make that challenge even more daunting.

Transaction or Transition?  A Family Business Magazine Webinar

On Feb. 13, 2013, Family Business Magazine's Barbara Spector hosted a webinar exploring the three traits shared by successful business sellers. The webinar featured SEI Private Wealth Management's Michael S. Farrell, Doug Pugliese and Jeff Ladouceur.  This complimentary webinar is available for viewing at any time by clicking here

Intrigue at Ikea

Ingvar Kamprad, the 86-year-old founder of Ikea, rarely speaks to the press. When he recently gave an interview to a Swedish tabloid, his comments were interesting indeed.

Last September Mikael Ohlsson, non-family CEO of the 79-year-old company, announced the Swedish furniture retailer's ambitious plan to double the pace of its expansion. Ohlsson -- who is scheduled to leave the company in September 2013 -- told the Wall Street Journal that by 2020 the chain would open 20 to 25 stores per year, compared with its present pace of six to 12 new openings annually.

As the Financial Times recounted in a Jan. 25 report, Kamprad said in an interview with the Swedish tabolid, Expressen, that these plans were news to him -- and that he wasn't thrilled with them. According to the FT's account, Kamprad told the tabloid:

"I talked with my secretary who said what was in [Swedish newspaper] Dagens Industri that we had record profits and sales and that we should build 25 new stores a year. I rang the chairman and asked how is that possible.
"We have spoken about building 10-12 stores a year until 2020 and I don't know who has sent out this information [about 20-25]."

Kamprad was emphatic in a subsequent statement to the FT: "I believe that the number of new stores should be less than what was communicated from management," the statement said.

Kamprad no longer has a formal role at Ikea, though he remains a senior adviser on the board. His family controls the company via a complex ownership structure. His three sons all have board positions in the family enterprise, "but it is unclear which, if any, will wield the ultimate power," the FT noted in a follow-up report on Jan. 30.

In responding to Kamprad, the company "underscor[ed] that the number of stores was a management decision," according to the FT's Jan. 25 account. The company said:

"There is a decision in the board where Ingvar Kamprad is a senior adviser to have a growth of 5 per cent from existing stores and 5 per cent from new stores every year. For that, 20-25 stores are needed."

But the Jan. 30 FT report said that Ikea executives "have been scrambling to play down the story," contending that the media were blowing it out of proportion and stressing that both management and the board agree that sales should be increased by 10% each year.

In the Jan. 30 report, the FT quoted Ikea's chairman, Göran Grosskopf:

"To make sure there is no misunderstanding, every single store that will be built will be examined by the board again. This is not a carte blanche for management to go ahead and build as many stores as they like."

The Jan. 25 FT report said Kamprad's remarks signal that "conflict appears to be brewing at the top of Ikea" and that "his comments caused consternation among some Ikea executives," especially since the plans had been announced four months earlier. The article cited Ikea officials who stressed that "decisions are made by management and the board."

The Jan. 30 article said some observers "worry that the current management and board may be trying to minimise Mr. Kamprad's massive influence at the company." One Ikea official reportedly said, "Why would you want to listen to an old man?"

So what's the lesson here? Is it that an 86-year-old founder should step out of the way and let the executives run the company? Or is it that the executives must take extra care to ensure that the company board and the key family member are kept fully in the loop?

What do you think?

Vive la différence

A recent article by Spencer Bailey in Bloomberg Businessweek noted that in making hiring decisions, more companies are emphasizing cultural fit over skills or experience. "A cooperative, creative atmosphere can make workdays more tolerable and head off problems before they begin," Bailey noted.

But Bailey's report also pointed out the downside of an overemphasis on cultural fit. Eric Peterson of the Society for Human Resources and Management told Bailey that "A lot of times, cultural fit is used as an excuse" for not hiring "diversity candidates" -- that is, people who are not the same race, religion or gender as company executives.

Family businesses in particular should be careful not to fall into this trap. In corporate America in general, business experts warn against the tendency to favor candidates who "look like you." In family businesses, of course, many employees literally look like the boss -- because they share the boss's DNA. If all key non-family employees are drawn from the same demographic pool, the company's brain trust runs the risk of falling into the "groupthink" trap.

Diversity in hiring is desirable for reasons other than political correctness, Bailey's article noted.

"Numerous studies have proven that diverse workforces give companies competitive advantages in skill, employee retention, innovation and profits," Bailey wrote. One such study cited by Bailey -- research conducted by University of Illinois sociologist Cedric Herring in 2009 -- found that companies with the highest levels of racial diversity reported an average of 15 times more sales revenue than other businesses.

It's important to ensure that your employees share the values that guide your business. But that doesn't mean you should hire a team full of clones. As Bailey put it, often when hiring decisions are made, "abstract notions about corporate culture collide with instinct and bias."

You might do well to heed the advice of Amy Hirsh Robinson from workplace consulting firm Interchange Group, who told Bailey:

"Sometimes you need to change your culture because there might be that one person who has a different thought that could have saved a business."



A banner year for Family Business Magazine

As we close the book on 2012, I'd like to take a minute to thank the readers of Family Business Magazine and the Family Business Magazine E-News for supporting our efforts.

The staff of Family Business is committed to bringing our readers essential tips and strategies on building and sustaining their family enterprises, as well as in-depth profiles of families who have put these techniques to work in the real world. Beginning in 2013 -- a time when many newspapers and magazines are cutting back on their publication schedules -- Family Business is expanding its frequency from five issues per year to six, without increasing our subscription price.

Our twice-yearly Transitions conferences, presented in association with Stetson University's Family Enterprise Center, offer family business owners an opportunity to learn from each other in a confidential atmosphere of sharing. Our Transitions events bring attendees who are working through challenges at the nexus of family and business together with business owners who have successfully addressed these issues. Our last Transitions conference, held in California in November, set attendance records, and we expect our next event -- Transitions East 2013, taking place in Tampa in April -- to sell out quickly.

In May 2013, Family Business will expand its conference offerings with the addition of the Private Company Governance Summit, presented in association with our sister publication, Directors & Boards. This unique event, a gathering of company owners/shareholders and directors, will focus on the governance challenges of family-owned and other types of privately held businesses, and will feature high-level discussions of best governance practices for private company boards.

We have more exciting plans in the works, so keep watching this space for announcements. I welcome your feedback and suggestions for future content. Best wishes for a happy, healthy and prosperous 2013!

Canada’s wealthiest family faces governance challenges

In the pages of Family Business Magazine and in panel discussions at our Transitions conferences, we often discuss the governance challenges that arise as a family business passes into the third generation. As I have said and written many times, these dilemmas arise organically -- they are a natural consequence of the family and business life cycle -- and thus can be predicted and addressed before they cause family strife.

The quintessential challenge involves the differing commitment levels of family shareholders who are involved in the business and those who are not. Family members not active in the business who rely on dividend checks to support their lifestyles will become disgruntled when those checks get smaller (or disappear). A liquidity mechanism must be provided for those unhappy shareholders; otherwise, the business -- and often the family as well -- will suffer.

Another governance challenge as the family group grows and disperses involves keeping all the shareholders engaged and informed. Those who don't know (or don't care) what's happening with the business are less likely to support its strategic plan -- i.e., what the business intends to do with "their money."

It's always nice to have one's observations illustrated dramatically in a front-page article in a widely read national newspaper, and so it was on Dec. 5, when the Wall Street Journal ran a lengthy piece on recent changes at Thomson Reuters PLC and at Woodbridge Co. Woodbridge is the holding company of the Thomsons, Canada's wealthiest family. Woodbridge owns 55% of media giant Thomson Reuters, as well as 13.2% of Strategic Hotels & Resorts Inc., 85% of the Globe and Mail, and $3 billion in funds managed by private equity firm General Atlantic LLC, according to the Journal.

Thomson Reuters, the family's biggest asset, generated $600 million in dividends in 2011 but, as the article reported, the company's stock price has dropped since Thomson Corp. acquired Reuters Group PLC in 2008.

The Journal report noted that in 2007, before the Thomson-Reuters deal closed, Forbes magazine ranked the Thomsons as the world's 10th-richest family, with $22 billion in assets. By March 2012, they had dropped to No. 35 on the Forbes list, with assets of $17.5 billion.

Third-generation member David Thomson is chairman of Thomson Reuters. He co-owns Woodbridge along with his brother, a sister and four cousins. As often is the case when a business family enters the third generation, the Thomsons' extended family is spread out across Canada, and many family members are pursuing their own careers, according to the Journal. Citing anonymous sources, the article said that some of the Thomsons have complained about Thomson Reuters' performance.

David Thomson, according to the Journal report, has been taking steps to address these issues. In 2011, there was a dramatic management shakeup at Thomson Reuters. Last month, the head of Woodbridge, Geoff Beattie -- "well-known as a deal-maker," as the Journal described him -- stepped down from that post. Woodbridge, the Journal article said, is shifting its focus from buying and selling assets to acting as "a more traditional holding company with a focus on income rather than new acquisitions."

To that end, according to the Journal report, family members and Woodbridge executives have discussed the possibility of "restructuring" assets:

This could involve, over time, either distributing shares in some of those other assets [besides Thomson Reuters] to family members or selling them and passing the proceeds on to the members....

The family has begun to consider a mechanism for keeping far-flung shareholders in the loop, the article said:

In a sign of how the family has tried to adapt to its growing size, members in May discussed hiring someone to write a family newsletter that would inform the clan of their investments' performance, according to one person familiar with the plan. It isn't clear whether the newsletter got off the ground.

Chairman David Thomson, described by the Journal as a reclusive sort who in the past took a hands-off approach to management of his family's flagship company, is now "playing a more assertive role," the article said. People who knew him as a young man told the Journal that Thomson feels the weight of the family legacy and has a strong desire to see the company do well.

If the Journal's account is accurate, it appears Thomson has identified the third-generation challenges and is working to address them. Because his family enterprise is so large, his family business drama is playing out on a large scale. But because many of the issues he's confronting are rooted in generational transition, his story offers lessons for business owners who haven't (yet) made the Forbes list. Even if your family firm's dividends don't run in the hundreds of millions, you must address the concerns of family members who expect their checks.


Getting on board with boards

An essential step in the growth and evolution of a family business is the establishment of an independent board of directors -- one with a majority of members who are not family members, employees, service providers or the business leader's cronies.

Too many family business leaders hesitate to form a board because they fear a loss of control. They don't realize that an independent board can help them take their company to the next level. A board can not only advise business leaders and executives on key strategic moves but also help protect a family firm from destructive conflict over family issues.

Establishing this essential component of corporate governance is particularly important once a company reaches the third generation of family ownership. At this point in its life cycle, there are key decisions to be made about family participation (because of the expanding number of descendants) and business strategy (because the company has evolved past the entrepreneurial stage).

In talking with family business stakeholders, I've found that a number of them recognize the need for a board, but they don't know how to begin forming one.

To address that need, Family Business -- in partnership with our sister publication, Directors & Boards -- is planning a new conference, The Private Company Governance Summit 2013, which will take place May 15-17 at The Fairfax at Embassy Row, Washington, D.C.

Conference sessions will include "Private Company Governance Structures," "Defining the Various Roles of the Private Company Director" and "Identifying, Securing and Paying the Best Private Company Board Members."

Information will be available on the conference website at The site will be continually updated as speakers are confirmed.

The event will be a high-level discussion on best governance practices for private company boards, along with ample opportunities for networking with like-minded business owners, private company directors and key advisers. We hope to see you there!

Death and taxes

Now that the 2012 election is behind us, all eyes are on Congress as members consider the soon-to- expire tax cuts passed during the presidency of George W. Bush. Family business owners in particular are wondering what will happen to the federal estate tax. The current inheritance tax rate is 35% on estates worth more than $5 million. If the Bush tax cuts expire as scheduled on Dec. 31, the inheritance tax will revert to its 2001 level of 41% to 55% on estates worth more than $1 million.

As the end of the year draws closer and closer, everyone is wondering what the new estate tax rate and exemption level will be. But if family enterprise continuity is the goal, minimizing the tax burden is only one of several concerns -- and it's not the most important one.

Don't take my word for it; consider the estate-planning wisdom that experienced family business advisers have contributed to our pages over the years. Andrew Keyt, executive director of the Loyola University Chicago Family Business Center, wrote in The Family Business Succession Handbook:

If we think only about tax efficiency, and not about the implications of the ownership structure on future generations, we may be sowing the seeds of family conflict. If we try to control conflict through the provisions of trusts without teaching the next generation how to resolve disputes, we are ignoring the true opportunities to develop enduring values.

Attorneys Henry C. Krasnow and Karin C. Prangley wrote in Family Business Agenda 2009:

Successful businesses all need some of the same things: cash, leadership that can implement forward-looking plans to keep up with competition, and owners who understand the need to sacrifice short-term satisfaction for long-term goals.... Denying these to a business in order to save taxes is a very shortsighted tradeoff.

Also in Family Business Agenda 2009 (a special issue that focused on estate planning), the late Sam H. Lane, along with his Aspen Family Business Group colleagues Bill Roberts and Joe Paul, offered this observation:

In some cases, a concern with saving on estate taxes dominates the planning process and has excluded from consideration other factors, such as the impact of the plan on the family and the business. We have found when this occurs, it always presents problems down the road, if not a complete implosion of the plan, and any success at saving taxes is negated.
We advocate a more balanced approach that not only emphasizes saving estate taxes but also anticipates various issues that may arise for the family and the business when the transfer of ownership through future generations is plotted out.

The upshot of all this advice: Your estate planning should be conducted with an eye toward the non-financial legacy you are passing on to your heirs. Will they inherit wealth before they are ready to handle it? Will they be free to modify the structures and entities you are creating if family circumstances change over the years? Are your estate planning documents creating an business relationship between heirs who are unable to work together productively? Questions like these, which address the "soft" issues that are too often ignored, should be considered before you sign any papers -- no matter what Congress decides to do by December 31.

Now we are six

Family Business Publishing Co. has made a strategic move that makes me very happy -- because we are giving our subscribers more for their money!

Starting in 2013, Family Business Magazine will be published on a bimonthly basis -- six times a year instead of five -- and we are not increasing our subscription price! To borrow a line from A.A. Milne, "Now we are six."

This means we are able to offer our readers more profiles of real-life business families, more tips from renowned family business advisers, and more strategies for achieving business success while maintaining family harmony.

This represents the second time in three years that Family Business has increased its commitment to family business owners. In 2011, in partnership with Stetson University's Family Enterprise Center, we began offering our Transitions conference series twice a year -- once on the East Coast and once on the West Coast. Transitions, launched in April 2010, was an annual event until we doubled down on our programming.

You can find subscription information here and gift subscription information here. We are planning more new offerings in the near future, so keep watching this space!

Sulzberger family unity post-Punch

As New York Times staff and members of the paper's founding Sulzberger family mourn the Sept. 29 death of iconic publisher and chairman Arthur O. "Punch" Sulzberger, challenges and speculation are swirling around the New York Times Co.

The company's dismal fiscal picture -- it has lost $7 billion in market value since 1999 -- has been well publicized. In 2009, the Times Co. suspended dividend payments to shareholders.

Meanwhile, negotiations for a new contract with the Newspaper Guild have been protracted and contentious. Unions representing workers at the Times denounced a $24 million exit package given to former CEO Janet Robinson, who left at the end of 2011, including a $4.5 million one-year consulting fee. On Oct. 8, some 400 Times staffers participated in a 10- to 15-minute walkout to emphasize their demand for, in the words of the Guild, "Nothing less than fair wages and benefits." On Oct. 10, Times management agreed to the Guild's recommendation that a mediator be hired.

Alex Jones, co-author along with his late wife, Susan Tifft, of The Trust: The Powerful Family Behind the New York Times, wrote in The Daily Beast after Punch's passing that despite the uncertain business climate in which the company operates, the family owners have signed covenants that "make it all but impossible for the Times company to be acquired by a hostile takeover." Under an intrafamily agreement, any family member who wants to sell Class B supervoting stock must first offer it to other family members or convert it to less powerful Class A stock. Jones -- who comes from a newspaper family himself -- wrote:

"[T]here can be no doubt that the depressed stock price and disappearance of dividends in the past several years has made the family significantly poorer. It is in just such strained financial circumstances that some family members or in-laws emerge to express complaints, demand new leadership, or even put the company in play to be sold. It was just such a situation that led to the Bancroft family selling Dow Jones to Rupert Murdoch.
"As a practical matter, that couldn't happen to the Times, even if such an apostate group of family members wished it to. The covenants are too tight. The passing of Punch, who was without question the head of the family, will not change that.... Another of the family's extraordinary moves to preserve itself was to make participation in family governance open to all members of the increasingly dispersed descendants of Adolph Ochs. And to make in-laws full members of that governance, which was a brilliant stroke."

Yet according to an Oct. 10 report in New York, Punch's four children "are moving quickly to sell stock he held in [Times Co.]." The report says that Punch's $70.2 million fortune includes $41 million in Times Co. shares. Citing court records, said three of the children temporarily renounced their rights as executors "in order to facilitate a sale of the company's stock in Sulzberger's estate." The report noted that the siblings' request to the court "expressed concern that their roles in the Times Company could hurt the value of the stock sale." The article also said the heirs aim to complete the sale within four to six weeks but didn't specify whether they plan to sell all or part of the stock.

In August, the Times Co. named former BBC director general Mark Thompson as its new CEO to replace Robinson. The New York Post and New York magazine published articles indicating that family tensions beneath the surface were at play in the departure of Robinson, who had been championed by Arthur Sulzberger Jr., chairman of the company and publisher of the Times (which, assuming the reports are accurate, illustrates Alex Jones's point that family members complain about leadership when times are hard). Reports cited sources close to the family who said some members are upset about the loss of dividends, which have supported the lifestyles and hobbies of those who don't work for the company.

Recently, the Times Co. has been selling off its non-core assets. In 2011, it sold its 16 regional newspapers. Earlier this year, it sold its remaining stake in Fenway Sports Group, the owner of the Boston Red Sox, as well as its stake in the websites and Observers are speculating that the company will soon sell the Boston Globe, which reports to Times Co. vice chairman Michael Golden, who is Sulzberger Jr.'s cousin and also a fourth-generation family member.

The asset sales enabled the Times Co. to pay off a high-interest $250 loan from Mexican billionaire Carlos Slim Helú in 2011, before the loan was due. In an August 2012 article, Edmund Lee of Bloomberg News mused that the company might be planning to go private. "Going private would help the family reassert control of Times Co.'s cash, without having to answer to public investors," Lee wrote.

Reed Phillips, co-founder of New York investment bank DeSilva & Phillips, told Lee that if the Times Co. were to go private, "The best buyer would be the family itself." Alex Jones noted in his Daily Beast article that "a fifth generation is embedded into the fabric of the company."

Five fifth-generation members currently work for the Times Co.; a sixth G5 serves on the board along with fourth-generation members Sulzberger Jr., Golden and another G4, Steven Green. (Lynn Dolnick, also a G4, retired from the board last year.)

The article said that the central family trust has been reported to hold between $270 million and $300 million in stock.

In Jones's view, the family will set aside their differences to carry on their hallowed legacy, which was started by founder Adolph Ochs and continued by his daughter Iphigene Ochs Sulzberger and her son, Punch, whose long list of achievements includes publication of the Pentagon Papers.

"Punch will be sorely missed by his family and his many friends," Sulzberger Jr. said in a notice to Times Co. employees upon his father's death, "but we can take some comfort in the fact that his legacy and his abiding belief in the value of quality news and information will always be with us."

Family business in Spain’s sputtering economy

Last month I spent a glorious four days soaking up the culture -- and the food, and the sun -- in Barcelona. It was my first trip to Spain, and I enjoyed it immensely.

Unfortunately, shortly before my trip Spain's National Statistics Institute released data showing that the country's economy performed far worse than initially believed in 2010 and 2011. GDP grew only 0.4% in 2011; in 2010, the economy contracted by 0.3%. The revised 2011 figures also noted that exports were slightly weaker than first thought.

According to a Reuters report, these findings suggest that Spain "may find it even harder to emerge from a recession that threatens to push it into seeking a sovereign bailout."

ING Bank economist Martin van Vliet told Bloomberg, "We fear that things are likely to get worse before they get better" in Spain. "With much more fiscal austerity in the pipeline and unemployment at astronomic highs, the risks are clearly tilted toward a more protracted recession."

In early September, the New York Times reported that many people who are able to do so are transferring their savings from Spanish to British banks, and some are moving their families out of the country as well. In July, according to the Times report, "Spaniards withdrew a record 75 billion euros, or $94 billion, from their banks, an amount equal to 7% of the country's overall economic output."

I witnessed a massive Catalonian separatist protest in Barcelona on Sept. 11, the region's national day. Officials estimated that up to 1.5 million people crowded the city center. Along with my family and friends, I watched protesters waving yellow-and-red Catalan flags and setting off noisy (and scary) fireworks on Las Ramblas, Barcelona's most famous street. Citizens of this rich region (it accounts for 19% of gross domestic product, according to the New York Times) want to reduce its contribution to a national system that redistributes tax revenue to Spain's poorer areas.

In August, Catalonia had to request 5 billion euros in emergency funds from Madrid, and its regional government has made extreme budget cuts. The separatists contend that they could refinance the region's debt and manage their deficit if they could lower their taxes and keep more of their revenue, according to a Financial Times report.

On the bright side, an August op-ed in the FT by Spanish official José María Beneyto and Harvard Fulbright scholar Alexandre Perez noted that although domestic demand is falling in Spain, exports are increasing rapidly. "In the first months of 2012 exports of goods and services reached the highest level on record." This solid private-sector export performance is likely due to strong family firms.

Family businesses are a major part of Spain's economy. According to statistics from the Family Firm Institute, 85% of Spanish businesses are categorized as family-owned, and family firms contribute 70% of Spain's GDP.

Back in February, Madrid's IE Business School and Signum International released results of a study they called the "Big Spanish Family Business Barometer 2011." El Economista reported that Spanish family businesses were most concerned about difficult access to credit, labor reforms, uncertainty and difficulties arising from the international political and economic environment and the tax system. These concerns undoubtedly sound familiar to U.S. family business owners.

The IE/Signum study revealed an optimism among family business leaders that was likely unfounded, given the current state of the local economy. The February report said that a whopping 94% of Spanish family businesses thought their sales figures would improve in 2012 or at least be the same as they were in 2011.

The IE/Signum researchers also asked Spanish business leaders about their corporate governance. An impressive 83% of the Spanish family businesses surveyed said they hold more than six board meetings per year. American family business stakeholders would do well to take a lesson from their Spanish counterparts; in Family Business Magazine's 2011 survey of U.S. family firms, only about 30% of respondents said their fiduciary board meets more than four times a year.

Interestingly, 21% of the Spanish family firms in the study said that more than a quarter of their directors are women. As one Spanish observer noted, this finding is surprising, "given Spain's macho reputation."

September/October issue: Bonus images

Have you had a chance to read the September/October 2012 issue of Family Business Magazine? This just-published edition is full of helpful advice on family banks, family codes of conduct, board member recruitment and more. In addition, we profile several business families who successfully re-engineered their enterprises.

If you've seen the issue, here are some bonus images that add context to two of the articles. If you haven't picked up your copy, I hope they whet your appetite!

• In an article entitled "Your story is important," Ann Kinkade, president of Family Enterprise USA, explains how publicly discussing your family's commitment to its business -- to the media and to elected officials -- helps to dispel the public's many misconceptions about family businesses.

Family Enterprise USA is a national, non-profit organization whose mission is to educate the public, policymakers and the media about the issues facing family firms and to promote their contributions to society. In her article, Kinkade mentions FEUSA's Capitol City Family Reunion, which took place last May. Family business owners traveled to Washington, D.C., and met with lawmakers. Here is a photo of members of the group meeting in May with Rep. Paul Ryan (R-Wis.), who in August was named as the Republican nominee for vice president.



• Kirby Rosplock, a fourth-generation owner of Babcock Lumber Co., discusses her family's 2007 sale of its 92,000-acre Crescent B Ranch (within Charlotte and Lee counties in southwest Florida) to a green developer, Kitson and Partners, in an article entitled "Being green is golden."

At the time the family closed the sale, Kitson & Partners simultaneously sold 73,000 acres of the ranch to the state of Florida for the Florida Forever Program, the state's conservation and recreation lands acquisition program. Kitson & Partners is developing the remaining 19,000 acres as a sustainable, environmentally sensitive community. The "green city" will be named Babcock Ranch in honor of the family. This map shows where Babcock Ranch will be located.


For information on obtaining a copy of the issue, contact Barbara Wenger at


A touch of class

Well, Labor Day is over, and the academic year is now under way. Students from preschool to graduate school are about to be fully immersed in their studies. But it wouldn't hurt the rest of us to do a little learning, as well. Indeed, many of the world's most successful businesspeople cite lifelong learning as one of their personal values.

There are many opportunities available for those who want to increase their knowledge of family enterprise ownership and management:

• Universities across the country offer family business centers and forums where business owners and other stakeholders gather to hear speakers, network and learn from their peers. Some of these campuses also offer executive education programs geared especially toward family business owners. For a list of these academic programs nationwide, see Family Business Magazine's Directory of Advisers here (search under "Category" for "Academic Programs/Family Business Centers" and "Family Business Centers").

• Learning together helps a business family build unity. Consider creating a family education program with curricula that combine learning and fun. Charlotte Lamp, Ph.D., a longtime educator and family business owner, explains how to get started in an article in the July/August issue of Family Business Magazine. Read it here.

• Family business conferences bring family business stakeholders together to learn from each other in an environment of safe and candid sharing. Of course, I'm partial to our own Transitions conference (read about Transitions West 2012 here), but many other organizations offer conferences, as well. Some of them are listed in our Family Business Calendar (see it here), which is updated regularly.

• Add some family business literature to your reading pile! Many family business advisers have written books; search for them on or check out Family Business Magazine's "Toolbox" and "Book Corner" sections.

The family business community abounds with wise and experienced people with knowledge to share. So make your education plan today -- and then go hit the "Back to School" sales!

The importance of innovation

recent article in the Financial Times analyzed the success of the Mittelstand, Germany's midsized, family-owned companies whose export strength is credited by many scholars for the country's economic growth in the 20th century. The FT report called these companies "the envy of the world."

Several elements of the Mittelstand business model are familiar to North American family enterprises -- for example, "Avoid debt, maintain independence and focus on the long term," as the FT put it. But there are some additional lessons of the Mittelstand that merit further study.

One principle that has led to these companies' success, the FT report noted, is continual innovation. Carl Miele, who founded appliance maker Miele International, a Mittelstand firm, more than a century ago, put the motto Semper Melior ("Always Better") on the company's first washing machines, the article said.

Hermann Simon, author of a book on the Mittelstand, Hidden Champions of the 21st Century (discussed in Family Business Magazine's Spring 2009 issue), told the FT, "There are some Mittelstand companies who file more patents in a year than an entire country like Portugal and Greece."

Another lesson from the Mittelstand, according to the FT, is the importance of diversification. The Brandstätter Group, for example, is best known for its Playmobil toys, but it also uses its expertise in molding plastic to create products in other categories, such as self-watering plant containers. Brandstätter CEO Andrea Schauer told the FT, "You can stand on one foot for quite a while but on two you stand definitely much more solidly."

More than 10% of Miele's sales come from the commercial market, though the company was founded as a maker of consumer appliances. Markus Miele, great-grandson of founder Carl Miele, told the FT, "It's an extra pillar but also an innovation generator. We create ideas here that later find application in our consumer products."

The challenge for a family business is to sustain the founder's values while being constantly on the lookout for promising new ventures -- especially in the 21st century, when technological advances are rapidly making old business models obsolete. Resistance to innovation can be a problem in later-generation family firms: Active shareholders who want to invest in new opportunities are often opposed by passive owners who rely on dividends to support their lifestyles.

The multigenerational Mittlestand firms have found a way to achieve a balance between continuity and advancement. Their philosophy is worth emulating.

CEOs on the mommy track

The business press was all aflutter in mid-July when it was disclosed that the board of tech giant Yahoo named Marissa Mayer, 37, to be the company's new CEO -- even though board members knew she was pregnant when they hired her.

Observers praised Mayer for her skills and her performance during her 13-year career at Google. Many people -- especially women -- were excited that a pregnant woman was named to lead a Fortune 500 company. At the same time, they expressed skepticism about Mayer's pledge that "My maternity leave will be a few weeks long and I'll work throughout it."

Women in family businesses know all too well the challenges of balancing work and motherhood. Indeed, many of them never get the chance. Stories abound of capable daughters who were bypassed for the top job.

Daughters who rise to the top of their family firms while juggling the responsibility of raising the next generation often find a third item on their to-do list that may not be put on a son's plate: taking care of Dad. As reporter Sharon Nelton wrote in a 2005 Family Business Magazine article on women CEOs:

[T]he biggest issue, family business women say, is finding the right balance between being CEO and being a good parent, wife and caretaking family member. Often their role is also assumed to include meeting the needs of the family patriarch. Many female family business leaders say they experience guilt over what society expects of them and what they can actually deliver.

In the book Father-Daughter Succession in a Family Business: A Cross-Cultural Perspective -- which I reviewed in Family Business Magazine's May/June 2012 issue -- Daphne Halkias and co-authors acknowledged the pressures of striving for work/life balance but offered many global examples of women who succeeded. The book quotes a Spanish successor with three children under age six: "There are times when I am tired, but I cannot be surprised because it was my choice."

Like many women (and men), I'm rooting for Mayer to succeed as a tech company CEO and as a happy mom. And I hope talented daughters who aspire to take on such daunting challenges receive a fair chance to prove that they can.

Getting to know you

When a family business is in its fourth generation and beyond, family members face a very basic challenge: getting to know each other. In a family ownership group that includes multiple, geographically dispersed branches, there's a distinct possibility that several of the cousins have never met.

There are several good reasons to rectify that situation. First of all, it's cool to meet people who share your blood and your family history. And second, extended family members who have forged a personal connection are less likely to develop irreconcilable differences.

The Eddy family -- owners of Port Blakely Companies, a forestry and land development enterprise based in the Pacific Northwest -- has done a lot of thinking about bringing family members together to share fun and educational experiences. Charlotte Lamp, Ph.D., a member of the Eddy family who was instrumental in developing its family curriculum, offers her advice in the July/August 2012 issue of Family Business Magazine.

Lamp's article details the topics that are taught in Port Blakely's family education program, which includes knowledge strands related to the company's business operations as well as the family itself. The family presents its educational programming during its annual meetings, which are held over a weekend during the summer. Lamp notes:

"Gathering family members and sharing eyeball-to-eyeball on a regular basis is important, but including some fun and entertaining activities can deepen the relationships. Family members have special talents, and those need to shine forth!"

Every few years, the Eddy family council chooses three family members to be profiled in brief videos that are shown before the family dinner at the annual meeting, Lamp writes. She tells of one family dinner that featured placemats illustrated with the Eddy family tree. The following year, the family tree was enlarged to 120 feet, with squares for each family member to stand on. "It was great for all members to look around and visualize where they fit on the tree," Lamp writes.

Family events like this move the conversation away from small talk and toward a deeper connection. If your extended family members have a history of shared experiences, odds are that they will work hard to find common ground in a debate over dividends.

Family business in the good old summertime

Though the summer holiday season is upon us, we in the family business community know that there's no escape from family enterprise. Here are some suggestions for integrating family business awareness into your summer plans.

• Summer jobs. Many family business stakeholders who worked in their family firm during summer breaks from high school or college say the experience deepened their connection to the family and the business. In the new July/August 2012 of Family Business Magazine, family business members will share their summer job memories.

• Family vacations. Getaways involving the whole extended family allow everyone to enjoy each other's company without business interruptions. As Family Business Magazine reported in a Summer 2005 article, vacations can build connections among shareholders, especially the younger set. "The older generation must accept that some family members may not be able to go and that others may not want to," reporter Deanne Stone wrote. "But if those who go enjoy themselves, more family members will probably want to go on the next one."

• Family meetings. Many families hold their annual retreats during the summer, when it's easier for everyone to get away. In a Summer 2009 article in Family Business, Tim Hussey, sixth-generation CEO of Hussey Seating Company, described how his family combined education with fun during a Family Forum gathering held at a resort off the coast of Maine. "Lobster bakes, boat rides, golf games and ‘Family Olympics' competitions have created fun for all," Hussey wrote. His 2009 article detailed a trivia contest/scavenger hunt, in which young participants had to answer questions on a variety of topics -- some related to the company and some just for fun.

• Everyday fun. Many businesses that specialize in summer fun -- such as ice cream shops, amusement parks, camps and resorts -- are family-owned. When you visit them, take time to chat with the owners about how they juggle business and family. You're likely to find that you have a lot in common -- even if your family business makes parkas or snow shovels.

Why you shouldn’t shun the spotlight

In these days of relentless self-promoters and people who are famous just for being famous, there's still one group of individuals who persist in avoiding the limelight: family business owners.

But business families who avoid the media hurt their own cause. I spoke about this in Washington, D.C., last month with participants at Family Enterprise USA's Capitol City Family Reunion. The business owners came to Washington to discuss the value of family enterprises with lawmakers, including senators from both sides of the aisle, Speaker of the House John Boehner (R-Ohio) and Chairman of the House Budget Committee Paul Ryan (R-Wis.).

The day before the group held their meetings on Capitol Hill, I participated in a panel discussion entitled "The Power of Your Story." I explained to the group that most Americans are unaware of what family enterprises really are, or how they benefit society. That's because too many family business owners hide their proverbial light under a bushel.

Talking to a reporter gives you the opportunity to explain that instead of taking advantage of other investment opportunities, your family is choosing to commit your personal wealth to sustaining your business into the next generation. You have the chance to describe the hard work and planning involved in the "family" side of the enterprise -- on top of the labor and sacrifices involved in building the "business" side. You can stress your contributions as a responsible corporate citizen and a good place to work, and the ways in which you give back to your community.

A good way to emphasize your point is to have several family members participate in interviews, not just the CEO. That demonstrates that your commitment to the business is shared among multiple family members. You might want to make your non-family executives available, as well. Including them shows that people who don't share your last name make significant contributions to your company and have opportunities to advance.

Of course, my viewpoint is biased; after all, I'm a member of the media. But I've heard the misconceptions about family businesses -- they're all small corner stores; they're not professionally run; the owners argue all day and do no actual work; the owning families look down on their non-family employees.

Someone should dispel these myths and show the public how family enterprises benefit society. It's true that there are plenty of statistics confirming this conclusion, but numbers tend to make the public's eyes glaze over.

The best way to make the case for family businesses is through inspiring family stories told by sincere business owners. So what are you waiting for?

FBN takes the pledge

What distinguishes family firms from other types of companies? We in the family business community know the main area of difference involves length of commitment. While shareholders of other companies are primarily concerned with short-term financial results, family business stakeholders are focused on preserving their enterprises for future generations.

The Family Business Network -- a worldwide, non-profit network of family businesses -- has codified that long-term commitment in a sustainability pledge. The organization has posted the document, signed by its board members, on its website. "We believe that our inherent understanding and appreciation of legacy brings an obligation to support and promote a sustainable future in all that we do," the pledge says.

The FBN board pledges:

• "To do all that we can to create and nurture workplaces and working cultures where our people flourish."
• "To be responsible global citizens making positive contributions to the communities that we work and live in."
• "To constantly search for ways to reduce the ecological impact that we create and safeguard the environment that we all share."
• "To pass on our values and long-term aspirations to future generations."

Click here to read the entire pledge and see a related video.

Back to the future

A Wall Street Journal article last month noted an entrepreneurial trend: Enterprising businesspeople are purchasing the rights to defunct brands in an effort to revive the once-beloved products or concepts. Resuscitated brands noted in the Journal report included Astro Pops, National Premium beer and the Seafood Shanty restaurant chain.

All the revivals cited in the Journal were orchestrated by entrepreneurs who are unrelated to the brands' original creators. That's what makes it a new trend. In the family business universe, on the other hand, this is nothing new. There are many examples of founders' descendants who have rescued their family's legacy from the scrap heap of history.

I wrote about one such rescue in the Autumn 2003 issue of Family Business Magazine. Neil Marko, great-grandson of hinge inventor Joseph Soss, bought back his ancestor's brainchild from the mega-corporation that had acquired it and was sorely neglecting it. Once the company was under Marko's control, he began expanding it and pursuing new ventures.

That 2003 issue also profiled Canadian brewer John Sleeman, who in1988 revived his great-grandfather's recipe for Cream Ale. The brew, developed by George Sleeman in the late 1800s, had been out of production since 1933.

And in her Publisher's Page column in our Summer 2009 issue, Caro Rock mentioned Pierre Emanuel Taittinger, who in 2006 bought back the Taittinger Champagne house from the Starwood Capital Group.

The entrepreneurs cited in the Journal article obviously feel an attachment to the brands they bought. But those who reclaim a family legacy are even more committed to their brands' success.

Neil Marko told me that when he had signed the last of the paperwork returning Soss hinges to family control, "it was a wonderful moment. It felt like I was recapturing something that had slipped away."

John Sleeman noted that the "family factor" helped draw Canadians to his product. "We showed consumers that they could trust us to make a great beer," he said, "because our roots went back 150 years."

Unintended consequences

All too often in family businesses, a decision made in the previous generation has long-term ramifications that the decision-maker didn't intend.

During workshop sessions, at the recently concluded Transitions East 2012 conference in Orlando, Fla., attendees reviewed examples of such unintended consequences. Participants discussed how they would advise the fictional families contending with problems rooted in precedents that were set long ago.

• In one case study, two siblings purchased the family firm from their father 15 years ago; a third sibling opted not to buy in. The non-participating brother's son is now working in the family business and making key contributions; the company has grown significantly. His father has expressed some bitterness and regret that his branch of the family does not have an ownership stake. Is it fair to shut this third-generation member out of ownership? If the second-generation owners follow their father's precedent and require their nephew to purchase a stake in the company, he would have to take on more debt than they did, because the company has grown. Is it practical or desirable to continue to require that all stock be purchased?

• Another case focused on a family firm whose three second-generation owners joined the company directly out of college. The three business owners, plus a fourth sibling, have a total of 15 children. Two of the 15 third-generation members are now working in the business; both of them also joined the company without any outside work experience. Now three more members of the third generation are preparing for their university graduations; meanwhile, the company has experienced some pressure on profits. The second-generation owners are wrestling with some tough dilemmas. Is it practical or desirable to continue to permit next-generation members to join the business straight from college? If they decide that future third-generation employees must have outside experience, a fairness issue will arise, since two third-generation members are already working for the company, and neither they nor their parents worked elsewhere first. If the family institutes a requirement for outside experience, how will they explain it to the three college seniors hoping to join the business?

In The Family Business Succession Handbook, Andrew Keyt of Loyola University Chicago's Family Business Center wrote that business owners must look beyond immediate succession concerns to ensure that the framework they create won't entrap future generations. If the goal is business survival across multiple generations, Keyt wrote, "we must move from tactics to process ... from focusing only on this generation to recognizing the impact on future generations." He added:

If the family council or the board of directors thinks of succession only in the context of the current generation's needs, we may limit the opportunities for future generations. If we think only about tax efficiency, and not about the implications of the ownership structure on future generations, we may be sowing the seeds of future conflict. If we try to control conflict through the provisions of trusts without teaching the next generation how to resolve disputes, we are ignoring the true opportunities to develop enduring values.

Many disagreements between siblings or cousins did not originate in their generation; their elders' choices set them up for conflict -- often unwittingly. You can avoid falling into this trap by choosing advisers who can guide you in long-term thinking.

What price success?

What defines a "successful" family business? Should we consider a family firm to be a shining star in the corporate firmament if the enterprise has grown into a thriving multinational, billion-dollar corporation -- but the family shareholders despise each other?

In a recent column, provocatively entitled "A family feud is not always a bad thing," Andrew Hill of the Financial Times raised this issue. Hill argued that feuds, though inadvisable, "create a rocket fuel that powers certain ruthless, entrepreneurial family members and the companies they head to the top."

To make his point, Hill cited two family business leaders that made headlines this spring. One was Gina Rinehart, who controls Hancock Prospecting (the giant Australian mining company founded by her father) and is being sued by three of our four children. "I think the ruthless vigour with which she has prosecuted this and other family feuds ... is also part of the reason for her success," Hill wrote of Rinehart, who is Australia's richest woman.

The columnist also mentioned Ferdinand Piëch, chairman of Volkswagen, who has long been engaged in a power struggle with his cousin Wolfgang Porsche. Control of VW under Piëch's branch of the family was recently ensured when his wife, Ursula, was nominated to the carmaker's board, a move that "flouts corporate orthodoxy so flagrantly it takes the breath away," Hill wrote.

Hill noted that both Piëch and Rinehart have said publicly that their companies come first -- even before family. He wrote that this attitude gives them an advantage against takeover artists such as LVMH's Bernard Arnault: "[H]ard-hearted insiders who have already neutralised their less competent, or less ambitious, relatives are proof against the predations of such opportunists."

Hill, in other words, is lauding these ruthless moguls for keeping their businesses in the family, by whatever means necessary. But they might be alienating their relatives to the point that there are no family members left to inherit the business.

There are many ways to define family enterprise "success," and each business family must develop its own definition. For many families, feud avoidance will continue to be an ingredient in the recipe.

The pitfalls of professionalism

Professionalizing your family business is a good thing, right? Don't the experts all agree that formal structures, outside directors and management best practices can ensure the sustainability of your family firm?

Well, yes -- but professionalism alone won't guarantee a healthy family business. In the March/April issue of Family Business Magazine, Andreas Raharso of the Hay Group's Singapore-based Global R&D Center for Strategy Execution writes, "A strategy that overemphasizes professionalism and neglects the family will lead to a deteriorating family business."

As a case in point, consider the Bancroft family, who controlled Dow Jones & Co. (publisher of the Wall Street Journal) before selling that company to Rupert Murdoch's News Corp. in 2007. As family business adviser Jim Barrett noted in a 2011 Family Business column, Bancroft matriarch Jessie B. Cox, who died in 1982, decreed that the family would "leave the business to the professionals."

But Cox went too far in her insistence that the family not meddle in the day-to-day running of their investment. As the Bancrofts debated whether to sell the company, Cox's grandson Crawford Hill lamented in a letter to his relatives, "[T]here has absolutely never existed any kind of family-wide/cross-branch culture of teaching what it means to be an active, engaged owner and more crucially, a family director.... We are actually now paying the price for our passivity over the past 25 years."

Barrett observed in his 2011 FB column that as the years went on and the Bancroft family grew bigger, dissent began to fester among the various family branches. As Internet competition heated up and Dow Jones' stock price fell, family members grew less inclined to hold on to the company. We all know what happened next.

"The initial success attained through professionalizing family firms is often offset by problems, squabbles or even family feuds," Raharso cautions in our current issue. In addition to recruiting key non-family managers and outside directors, you must also focus on developing your next-generation family owners if you want your business to stay in the family.

Theories of relativity

In the just-published March/April issue of Family Business Magazine, attorney Joe Goodman explains that because of today's demographic and medical realities -- divorce and remarriage, increased longevity, unmarried and gay couples raising children, in vitro fertilization and gestational surrogacy -- estate planning is more complicated than it used to be.

In my March/April "From the Editor" column, I note that these new realities also complicate the question of who should be considered part of "the family," and thus who is permitted to own or inherit stock in the family business. A panel of family enterprise stakeholders will discuss this topic at our forthcoming Transitions East 2012 conference, which will be held in Orlando, Fla., April 25-27.

Each family must determine its own stock ownership policies by considering the family values and how family units might be formed in the future. It is instructive, however, to consider how others have answered those questions.

With the enactment of the Family Office Rule, which Congress inserted into the Investment Advisers Act of 1940 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Securities and Exchange Commission has considered this question, as well. The Family Office Rule determines whether a family office must register as an investment adviser with the SEC. Family offices that provide investment advice to people not considered as family clients must register.

On a "Frequently Asked Questions" page on the SEC's website, staff of the SEC's Division of Investment Management tell us who they consider to be "family members," for the purpose of determining compliance with the Family Office Rule:

• Same-sex domestic partners and unmarried opposite-sex partners are considered family members. (Presumably, so are lawfully married spouses.)
• However, "in-laws related through the spouse of the common ancestor, or through spouses or spousal equivalents" do not qualify as family members.
• Spouses or descendants of a stepchild whose parent later divorced the family member stepparent are not considered family members under the rule.

Whether or not you agree with the U.S. government on these matters (or if you find the SEC's wording to be so confusing that you don't know whether you agree!), these definitions are a way of opening a discussion on this topic with your family members.

The small-business advantage

Owners of small family businesses often tout their connection to their communities as one of their strengths. A new study by researchers at Baylor and Louisiana State universities offers some evidence to prove it.

In an article in the Cambridge Journal of Regions, Economy and Society, sociologists Troy Blanchard of LSU and Charles Tolbert and Carson Mencken of Baylor analyzed health statistics from more than 3,000 U.S. counties and parishes (what Louisiana calls its counties). They found that counties with a greater concentration of small, locally owned businesses had lower rates of mortality, obesity and diabetes, based on their review of national population, health, business and housing data.

At first blush, this conclusion seems counterintuitive, since small businesses are not known for providing their employees with lavish health insurance coverage. But the co-authors note that it's in the financial best interests of small, local companies to take actions such as supporting bond issues for health infrastructure, promote community health programs and support local farmers' markets. The researchers write:

"Small-business owners produce important noneconomic rewards for communities, such as enhanced stocks of social capital and collective efficacy. In this way, the small-business sector may produce salutary rather than unfavourable community health outcomes.... Entrepreneurial culture provides a local orientation that allows for greater levels of interaction and trust among community members. This, in turn, helps to create collective efficacy, which has positive effects on community health in a number of ways...."

The sociologists also note that the trend in large, multinational companies is to lay off workers, whereas small-business owners strive to retain their employees -- especially if those employees are their family members or neighbors.

"In addition to health, we expect that our entrepreneurial culture approach could be applied to a variety of indicators of well-being, such as crime, suicide, population growth and school performance."

Evidently, small-business owners' investment of their social capital is paying off.

Are two heads worse than one?

In a recent column in the Financial Times, business writer Andrew Hill reflected on the departure of former co-CEOs Jim Balsillie and Mike Lazaridis from Research In Motion, the troubled BlackBerry maker.

Hill acknowledged that RIM's problems -- the company did not respond quickly enough to challenges from iPhone and Android -- could also have occurred at a firm with a single CEO. "That said," he added, "I nurse an innate suspicion of co-chief executives."

And indeed, according to a January 2012 article in the Toronto Globe and Mail, the co-CEO arrangement at RIM may have played a part in the Waterloo, Ontario-based company's inability to quickly produce a smartphone that rivaled the functionality of the popular new competitors. Some RIM employees, the article said, "believe the unusual two-headed structure of the company ... slowed things down."

What's more, the Boy Genius Report blog noted in July 2011 that Lazaridis and Balsillie had "titanic" arguments in front of employees.

In his FT column, Hill wrote that many family firms use the dual-CEO structure and that "toxic sibling rivalry" is often a byproduct. (You knew he would go there, right?) To prove his point, he cited the case of Robert Mondavi Corp., where rivalries between second-generation co-leaders Timothy and Michael Mondavi repeated a pattern established in their father's generation. (After feuding with his brother Peter at the family's Charles Krug Winery, the elder Mondavi left to form his eponymous company.)

But not every co-leadership arrangement -- in family or non-family firms -- is doomed to end in disaster. The key is to ensure that the partners at the top respect each other, define their respective roles in the partnership, and present a unified front to the staff.

"Build in lots of communication on a regular basis," family business adviser Jim Barrett wrote in a 2003 Family Business Magazine column on co-leaders. "If they don't enjoy each other's company or are content merely to trust each other, this ain't gonna work."

At our Transitions East 2012 conference in Orlando, Fla., to be held April 25-27, brothers Ben and David Grossman, co-presidents of Grossman Marketing Group, will discuss their focus on alignment of interests, and how each brother celebrates his sibling's success as his own. They signal to each other through a window between their offices.

In my years of working with family businesses, I've found that co-CEOs can work quite well together -- if the leadership team members are willing and able to work on their partnership. One of the issues that must be resolved at the outset, for example, is how deadlocks will be resolved.

Co-leadership arrangements don't inevitably lead to "toxic sibling rivalries." And it's also important to note that "toxic rivalries" can occur even if the co-leaders are not related by blood.

Customers like to ‘buy American’

Anheuser-Busch, the brewer of Budweiser, was once the largest U.S. brewer. Then in 2008, the Busch family of St. Louis sold their company to InBev in a $52 billion deal.

Coors, once brewed by the Coors family of Colorado, merged with Canadian brewer Molson in 2005 and three years later entered a joint venture with SABMiller -- established in 2002 when South African Breweries bought U.S.-based Miller Brewing Company. Today the brewer is known as MillerCoors.

With these popular brands now operated by foreign conglomerates, who is the largest American brewer? As of 2012, it's D.G. Yuengling and Son of Pottsville, Pa. Founded in 1829 and now in the fifth generation of family ownership, Yuengling is also America's oldest brewer. (Family Business Magazine profiled Yuengling in our Spring 2010 issue.)

Citing statistics from trade magazine Beer Marketer's Insights, the Morning Call newspaper of Lehigh Valley, Pa., reported that Yuengling's 2011 sales surpassed those of the Boston Beer Company (brewers of Samuel Adams), making Yuengling the largest American brewery, though the flagship Yuengling Lager and the company's other beers are available in only 14 states.

Of course, the company known as Anheuser-Busch InBev still sells more beer. In 2011, the no-longer-American company sold 98.8 million barrels in the U.S., compared with 2.5 million barrels sold by Yuengling, the Morning Call reported.

But the sales figures reveal an interesting fact: Anheuser-Busch InBev sales dropped 7.7% in 2011, while sales of Yuengling rose nearly 40% during the same period, according to the newspaper article.

Why did this happen? In 2011, Yuengling entered the Ohio market, so the additional territory obviously played a role in its revenue surge. Anheuser-Busch's Belgian owners changed the company's marketing strategy, which may have contributed to the drop in Budweiser's sales. But David Casinelli, Yuengling's non-family chief operating officer, told the Morning Call that something else might be going on, as well. After the Anheuser-Busch InBev merger was announced, Casinelli said, Yuengling was inundated with letters from customers begging the family not to sell their company.

"There are obviously a lot of people who pay attention to that stuff and take it seriously," Casinelli told the Morning Call.

Anheuser-Busch InBev continues to employ Americans, of course, but American ownership seems to affect U.S. beer drinkers' choice of brew. Yuengling's fifth-generation owner, Dick Yuengling, told the Morning Call that his customers needn't worry that his family will sell out:

"Our game is longevity. Being the biggest doesn't matter. We want to see how long we can survive. My daughters Jennifer and Wendy are in the business now and we want their kids to be able to run it some day. That's what's satisfying to us."

Even if you neither make nor drink beer, you should be paying attention to this news. The bottom line is that American customers care about who makes the products they buy. This is likely even more true as high unemployment continues to plague the country.

In the Winter 2012 issue of Family Business Magazine, I mention a free way for American family businesses to promote themselves. The website offers artwork, at no charge, that you can use on your website or packaging.

Yuengling's rising fortunes are evidence that American family-owned companies satisfy customers' thirst.


Planning for the unknown

For years, Family Business Magazine has been advising readers that the talents and abilities that are required of family business successors are likely to be far different from those required current and past leaders. In today's business climate, this is more true than ever.

In the current issue of Family Business, PwC's Ken Esch writes that since the global financial crisis, "uncertainty may be a defining characteristic of the new normal, not a temporary condition." Citing findings from PwC studies, Esch notes that significantly more leaders of private companies are uncertain about the U.S. economy (49%) than are optimistic about it (27%).

Business writers like to use the phrase "seeing around corners" to refer to the skill of anticipating future market trends, conditions and needs. The late Steve Jobs was a master at it. Imagine what technology might be like today if Jobs had been intent on doing things the way they had always been done.

How do you train your next-generation members to see around corners? In his article, Esch recommends that they receive training in macroeconomics and strategic planning (including scenario planning) via a combination of higher education and work experience outside the family company. He also suggests that senior leaders carefully build an executive team that includes non-family executives. "A leadership team, with a wide base of knowledge and expertise," Esch writes, "is often able to manage change better than a single person can, particularly when that change occurs suddenly and on multiple fronts." In fact, Esch notes, it might be wise to consider whether a non-family member might be best equipped to be your company's next CEO.

The bottom line, according to Esch, is that family companies must assume an uncertain future when developing their strategic plans. The challenge will be to ensure your next business leader is prepared to steer the company in an uncertain world.

Family enterprise stars in ‘The Descendants’

When I went to see The Descendants, I hadn't read much about the film. I knew only that the performance by the star, George Clooney, had been highly praised by critics and that the director was Alexander Payne, who previous credits include Election, Sideways and About Schmidt. As I sat in the theater, riveted to my seat, I was surprised that the film addressed so many of the issues I encounter each day in my professional life (although, alas, my workdays involve neither Mr. Clooney nor Hawaii, where the action takes place).

In mid-December, I called some family business advisers who also had seen the film to share our thoughts on the issues of wealth and inheritance confronted by the characters.

(Warning: The rest of this post is full of spoilers. If you haven't yet seen the film -- and I highly recommend that you do -- stop reading now if you'd prefer not to learn key plot details.)

The film, shot on location, is based on the novel by Kaui Hart Hemmings, who grew up in Hawaii. George Clooney's character, Matt King, is one of many cousins in a prominent family descended from the marriage of a Hawaiian princess to a white banker generations ago. Matt, an attorney, is the sole trustee of 25,000 acres of unspoiled land on Kaua'i held in a family trust. Because of the common law rule against perpetuities, the trust is due to expire in seven years.

Matt has lived frugally (too frugally, his father-in-law complains), saving all his income from the trust and living solely off his earnings as a lawyer. Some of his cousins, however, have spent all their trust income. Evidently, few of them work. ("All I have is time," says one cousin who offers to give Matt and his family a ride on Kaua'i.) Most of the cousins want to sell the family's land quickly.

A subset of the large group of cousins has been meeting regularly in Matt's law firm's conference room to discuss offers for the property. They have rejected the highest bid, from a Chicago group seeking to build big-box stores on the property. Instead, they favor an offer from a Kaua'i man, Don Holitzer, who plans to turn the land into a golf course and residences (though two of the King cousins oppose any sale of the property). A shareholder vote has been scheduled to confirm the family's decision.

At the same time that Matt is pondering the sale of his ancestral property, he is dealing with a devastating situation in his nuclear family. His wife, Elizabeth, lies in a coma after having been injured in an accident on a rented boat. Doctors have told him that she will not recover, and under the terms of her living will she must be taken off life support. By his own admission, Matt up until now has focused primarily on his work and has assumed the role of "back-up parent," but because of Elizabeth's accident is now serving as single dad to his two daughters: substance-abusing 17-year-old Alexandra and ten-year-old Scottie, who has been acting out at school.

That's a lot for Matt to deal with, but there's more. Matt learns that Elizabeth had been having an affair and at the time of her accident hoped to run off with her paramour. Midway through the movie, Matt finds out that the man his wife had been seeing is a real estate agent who is Holitzer's brother-in-law and would stand to profit considerably if the deal the King family favors is closed.

"The movie portrayed [Matt's] conflict very effectively," says Allison Shipley, a principal at PwC. "The role of a trustee is really a hard thing to take on." The responsibilities are especially challenging for a sole trustee acting on behalf of an extended family, Shipley notes. "It's an unbelievable job for that one person," she says. "There's an incredible amount of pressure."

"[Matt] was a trustee in so many ways," observes Justin Zamparelli, a partner at Withers Bergman LLP. "He was even entrusted to protect people's feelings." For example, Zamparelli notes, Elizabeth's father blames her accident on Matt (angrily speculating that she wouldn't have injured himself if Matt had bought her a boat of her own) and calls her a faithful wife, an assertion that Matt doesn't contradict. In another scene, Matt hosts a gathering for all Elizabeth's friends (significantly, no King cousins are present) and invites them to go to the hospital to say goodbye to her -- without mentioning her affair and its effect on him. He enlists Alexandra's help in protecting her younger sister's memories of her mother.

I was struck by the portrayal of the extended King family as a group that lives near each other yet is not close-knit. Matt and his daughters run into several King cousins at various points in the movie, but these relatives express only a perfunctory interest in Elizabeth's condition -- and none of them offers much in the way of consolation to the young girls whose mother is dying.

Obviously, the King cousins could have benefited from family governance and education efforts. "There doesn't seem to have been any real effort by the family to cement the relationship between the family and the asset," comments David Lansky, a principal consultant with the Family Business Consulting Group.

The King ancestors, PwC's Shipley observes, had created a trust to preserve their land, but had taken no measures to preserve the family values. "Clearly," she says, "that family hadn't done anything to reinforce, or even establish, the cultural importance of the land." Even though the family hadn't inherited a governance structure, Matt could have worked with his relatives to institute one, Lansky points out. "He was the trustee, but he really didn't see himself as the family leader," Lansky says.

Throughout the film, local residents whom Matt encounters urge him not to sell the property, and after those conversations an internal conflict registers on Clooney's face. "The whole state of Hawaii had an investment in keeping the land pristine," FBCG's Lansky notes. "Should [the King family] do anything about that? What does it mean to be a steward?"

The film's dual plot lines -- Elizabeth King's marital infidelity and the King cousin consortium's planned infidelity to their legacy -- intertwine as Matt takes his daughters (and Sid, a slacker friend of older daughter Alexandra) on a trip to Kaua'i to visit the land and get a look at the man who has been sleeping with his wife.

As the family gazes at the pristine property, Alexandra reminisces about her experiences camping on the land with her mother. (Interestingly, it was her mother -- not her father, the parent with the ancestral tie -- who instilled in Alexandra a connection to the land.) Younger daughter Scottie plaintively asks, "What about me?"

To PwC's Shipley, that question is a pivotal turning point in the film. Revisiting the family's land, she says, gives Matt "the perspective of the ancestors, and of the daughters." I agree. Though one can think of several alternative titles for the film, The Descendants is the most appropriate, and that scene demonstrates why this is so.

As Clooney prepares the ancestral property for the arrival of his cousins who will gather to vote on the sale, the camera lingers on portraits of his ancestors and other family mementos. The family stakeholders cast their votes and, unsurprisingly, they overwhelmingly favor a sale to Holitzer. In the end, however, Matt refuses to sign the papers. His cousin Hugh (played by Beau Bridges) warns Matt that the family would sue him. "Then I might see more of you," Matt responds.

The King family, Zamparelli says, "basically were fortunate members of a DNA pool that owned this property; they hadn't earned it. And at the end of the day, I think that was part of [Matt's] decision."

Of course, there are more alternatives available to the family than just selling or not selling the land. The Kings could work with advisers to find a way to generate some cash from the property while preserving a significant portion as open space. A family council or family office could provide a forum for them to explore such options in the seven years before the trust expires -- if, after the contentious issue of the vote, the cousins could possibly agree to establish such structures.

Matt never tells his cousins that someone connected with the Holitzer bid had had an affair with his wife. His failure to disclose the relationship would not necessarily help his cousins prevail in a suit against him, attorney Zamparelli says, because Matt did not benefit in a pecuniary way from his decision not to sell -- and it would be difficult for them to prove that the situation was a factor in his decision.

In the film's penultimate scene, Matt and his daughters board a boat and scatter Elizabeth's ashes at sea. Zamparelli says he was taken by the camera's focus on the serene coastline, followed quickly by a view of unsightly developed land off the coast.

Matt's refusal to sign the papers feels like a victory to the audience in the theater. Whether or not the fictional family ever could come to terms with his action, they certainly would always view it as a pivotal point in their shared history.

Story time

If your extended family is planning to gather together over the next week, you have a built-in opportunity to foster engagement of your next-generation members, married-ins and other relatives who have a stake in your family business, though they may not work there.

Unlike other activities related to the holiday season, this one does not require any shopping, decorating or cooking. It gets everyone interacting together and thinking positively. And there are no costs involved!

When your family gathers in your living room or around your dining table, start a conversation about the history of your company. Don't just recite the narrative that's on your company website; use your founder's story as the basis for a discussion in which everyone can participate -- even the youngsters and in-laws who never got to meet Granddad.

How do you make this happen? By sprinkling the family story with questions designed to get people thinking. Here are just a few examples:

  • How did your founder (and subsequent business leaders) cope in tough economic times? Are there lessons that can be adapted to today's economic challenges?
  • What were the major innovations that enabled the company to grow?
  • How did each succeeding generation put their own stamp on the company?
  • How did the founder's spouse contribute to strengthening the family and building the business?
  • If you had the opportunity to go back in time and ask the founder one question, what would it be?
  • What fact about the family business makes you the most proud?

Questions like these get everyone focused on what is special about your family and its business. And they can spark a brainstorming session that takes your relatives to a new level of collaborative thinking. That's a gift no one will want to return.

Planning for a dispute

In the past couple of blog posts, I have cited findings from our U.S. Family Business Survey that raise some red flags. Today -- during this season of family get-togethers -- I note another area of concern:

Only 31.7% of the U.S. business owners who participated in our survey said their company has a redemption plan or other mechanism to remove a disgruntled shareholder.

One might expect older family firms (which tend to have a larger shareholder group) and larger family companies (where more money is at stake) to have a better track record in this regard. But results for these companies are not that dramatically different. Only 38.6% of those whose companies are in the third generation or older have such a plan. Of those whose companies generate annual revenues of $26 million and above, the percentage rises only slightly, to 43%.

Why is this a problem? Because one disgruntled shareholder who continues to hold stock can cripple your business (financially) and your family (emotionally).

Many families don't want to consider the possibility that today's harmonious relationships might turn sour in the future. One participant in our survey commented, "It's kind of assumed that anyone who was given stock and leaves the company will give stock back."

Rather than put your trust in assumptions, consider codifying an agreement that will set the tone for smooth dispute resolution and help prevent litigation, or even the breakup of the company. Yes, this will require your family members to meet and discuss various unpleasant scenarios. But consider how much easier it is to do this work while everyone is getting along.

Watch out for that beer truck

Bob Rock -- the president of Family Business Publishing Company and the husband of our publisher, Caro Rock -- is fond of posing a rhetorical question involving a beer truck. Bob, who serves on a number of corporate and non-profit boards, believes every company's board and managers should prepare an answer to this question: What would happen if the CEO were to be fatally struck by a beer truck while crossing the street?

It seems that not enough family business leaders have considered close encounters with beverage-bearing vehicles. Our Family Business Survey, conducted this past summer, found that 45% of the respondents' companies lack an emergency succession plan that covers the leader's unexpected death or severe disability. (More than 400 family business owners responded to the survey, which was published in Family Business Agenda 2011.)

Keith L. Alm, the retired president and CEO of Hallmark Cards International and a board member at family firms Follett Corp. and McKee Foods Corp., wrote in the 2009 Family Business Agenda that emergency succession planning is "a crucial board responsibility." Alm noted:

Should an emergency occur, it's essential that operational confidence be restored as quickly and effectively as possible. Boards that have a solid plan in place engender confidence -- both within and outside the company -- that the business and its continuity are well in hand, heading off potential damage due to either poor decision making or lack thereof, and protecting the interests of all shareholders.

Having an emergency plan is arguably even more important in a family-led company than in a non-family firm. It's imprudent to make essential decisions hastily at a time when key members of the board and executive team are in mourning.

The next time you convene a meeting of your key stakeholders, it might be a good idea to put a beer truck on your agenda.

Breaking ties can prevent broken hearts

Over the summer, Family Business Magazine conducted a survey of U.S. family business owners. We received responses from 431 qualified individuals (senior leaders of U.S. family businesses or those in executive positions). Respondents' companies generate an average of $75.54 million in annual revenues. The average survey participant's company is between the second and third generation of family ownership (2.78).

The survey enables to take a snapshot of the diversity in the practices and policies of American family businesses today. We are very excited about the results, which we're releasing in Family Business Agenda 2011. The issue is currently on its way to subscribers.

Here's a preview of one interesting finding from the survey: More than two-thirds (72.6%) of the respondents said they have a formal shareholder agreement. But only 29.4% of these agreements establish a tie-breaking process in the event of a dispute.

The lack of a tie-breaking process, individual or entity can cause problems that imperil the future of the family business. Frederick D. Lipman, an attorney with the law firm of Blank Rome LLP, offered an example of how this can happen in his book The Family Business Guide. (Full disclosure: I moderated a panel discussion at a program featuring Lipman and his book.) The case he cited went to the Wyoming Supreme Court.

Lipman cited the case of Imperial Homes Inc., a Wyoming construction company founded by Raymond Woods. Woods transferred his shares in the company to a trust, which remained the majority shareholder after his death; the other shares were divided among his four children and his brother. His sons Steven and Roger were named as successor co-trustees.

Disputes arose between the two brothers, and Roger sued Steven. The district court ultimately removed both of them as trustees and named a bank as the sole successor trustee. The bank "exercised the trust's rights as majority shareholder and served on Imperial's board of directors," Lipman wrote. "A bank trust officer was eventually named president of the company."

If Raymond Woods had provided for an impartial tiebreaker -- perhaps a trusted friend -- to mediate disputes between Steven and Roger, that person could have hired a non-family member to serve as Imperial's president. "The failure of Raymond Woods to include an impartial tiebreaker provision in his succession plan resulted in a bank trust officer ultimately running his family business," Lipman wrote.

There are many different approaches to family business ownership. But some "best practices" merit serious consideration. A tie-breaking provision is one of them.

Big birthday for an important association

Last week I was in Boston to attend the annual conference of the Family Firm Institute, a global association of professionals serving family enterprises. At this year's conference, FFI marked its 25th anniversary.

FFI is an important organization because it fosters professionalism and promotes scholarship in the field of family business advising (69% of its members are advisers or consultants to family enterprises, 23% are educators or researchers, and 8% are students).

The organization publishes an academic journal, Family Business Review. It has developed training and certification programs for family and wealth advisers and recognizes members with exceptional expertise as FFI Fellows. It also presents interdisciplinary seminars worldwide and convenes regional study groups that members can attend to explore critical issues affecting family enterprises.

Because of FFI's efforts, advisers to family businesses are better trained and more professional. Happy 25th birthday!


Business owners often ask me for referrals to family business resources. Here are some answers to frequently asked questions.

Where can I find statistics on family businesses' economic impact? Data on the prevalence of family businesses and their economic impact are posted on the website of the Family Firm Institute at

Can you refer me to a family business adviser? Family Business Magazine offers a Directory of Advisers, both in print and online, that's searchable by professional specialty as well as by region. The online version includes links to the advisers' websites.

Would Family Business Magazine publish my dissertation or research study? As a business-to-business publication, Family Business does not publish academic research. Research findings on family enterprise are published in Family Business Review and the Journal of Family Business Strategy.

I'm a business owner based outside the U.S. Where can I find networking resources? Information on family businesses outside the U.S. is available via the Family Business Network, a global association. See

Yay, team

Though the U.S. Armed Forces mandate unity of command, family businesses throughout history have grown and prospered under co-leadership arrangements. In the founding generation, husbands and wives work together as "co-preneurs" to nurture a fledgling business (though for centuries the wives labored without compensation or credit). In the second generation, many a firm has appointed sibling partners as co-presidents or co-CEOs. Some family companies even perpetuate the team approach to leadership when they reach the cousin stage.

Business consultants have been known to criticize such arrangements, often implying that they arise not because they are the optimal choice for the company, but because the senior generation has been too chicken to select one of sibling as first among equals. But under the right circumstances -- with an auspicious blend of personalities, abundant mutual respect and the proper governance structures in place -- co-leadership can work beautifully.

Ross Born, who serves as co-CEO of candy company Just Born Inc. along with his cousin David Shaffer, shared their philosophy with me. "The secret of our success," said Born, whose company makes marshmallow Peeps and Mike and Ike, "is that we have the same values and the same commitment to the business."

Guess what? It seems that non-family companies -- including some big ones -- have adopted this model, too. A recent article in the St. Louis Business Journal cited a study by Stephen Ferris of the Financial Research Institute at the University of Missouri Trulaske College of Business, who identified 111 publicly traded companies that had a co-CEO leadership structure between 1998 and 2008. Among them are Bed, Bath & Beyond; food conglomerate Ralcorp; and CGA Global Partners, the parent company of flooring, lighting mortgage banking and cycling companies.

According to the Business Journal report, Ferris found that co-CEOs stayed in their positions for 4.5 years, compared with an average of six years for solitary CEOs. He also found that combined median cash compensation for a pair of co-CEOs was slightly lower than the median cash compensation for two solo CEOs. In other words, two heads are better than one, cost-wise.

These newly released findings come at a time when co-leadership has been very much on my mind. The Autumn 2011 issue of Family Business Magazine features several examples of such arrangements. In my "From the Editor" column you'll find more comments from Ross Born, as well as some thoughts from David and Ben Grossman, co-presidents of Grossman Marketing Group in Somerville, Mass.

Our Autumn issue also includes profiles of two family companies that have taken the co-leadership concept to an extreme. Both Magid Glove & Safety Manufacturing Co. of Chicago and Times-Shamrock Communications, based in Pennsylvania, have established teams of four partners at the top. These two family firms have done a lot of work to ensure that their unconventional structure functions smoothly. Despite their success, I doubt that Wall Street will be adopting a four-headed model anytime soon.

These interesting times

"May you live in interesting times" is said to be a Chinese curse (although the origin of the phrase is in question). Lately the global economy has been "interesting" indeed. Though we may yearn for dull, predictable prosperity, the challenges we face today are likely to preoccupy us for quite a while.

Threats to business competitiveness and investment assets during these uncertain times are keeping many family enterprise leaders up at night. Family stakeholders who would rarely be heard from in a thriving economy are coming forward to voice their concerns. Meanwhile, employees' worries about keeping food on the table may be affecting job performance. With so many distractions, it's hard to keep one's eyes on the road.

While some circumstances are beyond anyone's control, it's helpful to consider what can be done to put your business in the best possible position to succeed -- and to maintain family harmony through the economy's harrowing twists and turns.

  • Keep the lines of communication open. Give your stakeholders a chance to air their concerns. Share stories of how your business weathered tough times in the past. Encourage cooperation and teamwork. Ask for cost-cutting suggestions and other ways to make the most of limited resources.
  • Take advantage of ‘teachable moments.' This is a great time to teach next-generation members about wealth management and other financial issues. When times are good, there is less incentive to pay attention.
  • Consider the future. Brainstorm about ways to leverage strengths and reposition your business. If some of your family stakeholders don't understand why you shouldn't just stick to the old ways of doing things, consider engaging outside experts to educate them.
  • Embrace change, and focus on risks. In today's environment, change and uncertainty are inevitable -- and adapting to them involves risk-taking. Educate your successor generation about risk management, in business strategy as well as investing. Whether they will be business leaders or family council members, they must understand the risks entailed in running a family enterprise.


Family Business Magazine receives awards

Family Business Magazine was recently honored with several awards for editorial excellence.

"The accidental CEO," by Margaret Steen (FB, Spring 2010) -- a profile of Anne Eiting Klamar, CEO of Midmark Corp., based in Versailles, Ohio -- received a Gold editorial award in the Focus/Profile article category in the national Tabbie Awards competition. The Tabbies are presented by Trade Association Business Publications International.

Steen's article also received a Regional Silver Azbee Award of Excellence (Individual Profile category) in the annual competition of the American Society of Business Publication Editors (ASBPE).

"A family summit gets the succession conversation started," by Josh Wimmer (FB, Spring 2010) received a National Gold Azbee Award (How-To article category) in the ASBPE competition. Wimmer's article is a first-person account of a family meeting that was specially designed to introduce next-generation members to his family's business, Wimmer's Diamonds of Fargo, N.D. The article includes step-by-step advice for business families seeking to develop their own family summit, including a schedule of events and a budget.

My "From the Editor" column entitled "Money wasn't enough" (FB, Spring 2010) received a national Apex Award for Publication Excellence in the Editorial & Advocacy Writing category.

We at Family Business extend our congratulations to writers Margaret and Josh, and to the family stakeholders at Midmark Corp. and Wimmer's Diamonds, who generously shared their stories.

Succession and the Murdochs

Since the eruption on July 4 of the phone-hacking scandal at News Corp.'s now-shuttered tabloid News of the World, numerous reports have described the media giant's flawed corporate governance and questionable management decisions, as well as tensions among members of the controlling Murdoch family.

As the hacking revelations proliferated, observers worldwide were questioning James Murdoch's viability as a successor to his father, 80-year-old News Corp. CEO Rupert Murdoch -- even before two former executives from News International, the conglomerate's British subsidiary, publicly disputed statements James made in his July 19 testimony before a U.K. parliamentary committee investigating the hacking.

Although his testimony indicated otherwise, the former executives said James knew that the hacking involved more than just one "rogue reporter," and that he was fully informed when he authorized an unusually large amount of money to settle a lawsuit brought by hacking victim Gordon Taylor. British police are now considering an investigation into the two executives' claims that James's testimony was "mistaken."

The Taylor settlement was one of James's first big decisions after he became head of News Corp.'s Europe and Asia operations in 2007, according to the Wall Street Journal (which is owned by News Corp.). As the Journal pointed out, James didn't work for the company at the time the hacking occurred. But he was expected to resolve the problem, as a report in the Financial Times noted. The scandal's explosion "rais[es] questions about his crisis management skills," the FT article said.

The resignation on July 15 of Rebekah Brooks, former News of the World editor and News International chief executive -- who was James's lieutenant -- "will move the spotlight onto James Murdoch," Labour lawmaker Tom Watson said on British TV, according to a Bloomberg report. "Terrible things happened over a long period of time in that company, and they tried to cover it up."

James did clear one hurdle on July 28, when the board of pay-TV provider British Sky Broadcasting unanimously voted to retain him as chairman. News Corp. owns a 39% stake in BSkyB and had planned to bid for the remainder, but withdrew its offer -- the largest deal ever attempted by News Corp. -- after the hacking scandal erupted.

The Journal reported that in voting to retain James as chairman, the BSkyB board apparently considered the fact that the TV company "has been largely untouched by the scandal" but will watch out for what a source euphemistically called "any external issues."

According to a New York Times report, James -- who ran BSkyB from 2003 to 2007 and was respected for his performance there -- was "the principal champion of the BSkyB purchase within the News Corporation." The Times said James had argued that the News Corp. should continue to press for regulatory approval of the deal even amid the scandal but was overruled by his father and by News Corp. chief operating officer Chase Carey.

There's little wonder why James wanted to do the deal. As the Times noted:

With BSkyB reporting to James, who runs the News Corporation's European and Asian operations, the businesses in his portfolio would account for half of all the News Corporation's revenue.

Indeed, James devoted a lot of energy to jockeying for position in the company, according to a July 19 Journal report. In his rapid rise to his current post, the article said:

[James] got ahead of himself, some people familiar with the matter say. He clashed with management in the U.S., asserting strong opinions over personnel matters and business decisions that were at times viewed as acting outside of his territory....
As he took over in Europe, James began hiring corporate staff, leading executives inside the company to joke that he was building a "shadow government," according to people familiar with the situation.

James had been scheduled to move to the New York office this summer. The Journal article cited sources who said the move was "not a promotion, but a plan to unite two different power centers: James's operation in London and headquarters in New York."

There's been jockeying for position within the family, too, according to reports. A fascinating account in AdWeek by Michael Wolff, author of a biography of Rupert Murdoch, called James "his father's closest family ally in accommodating Wendi -- the patriarch's divisive third wife."

James's sister Elisabeth, Wolff wrote, "has a tense relationship with Wendi," and James's relationship with Elisabeth is also tense. Rupert's oldest son, Lachlan, Wolff wrote, "fights with his brother and is most closely aligned with his sister Elisabeth. Their older half sister, Prudence, is aligned with James." (The Journal indicated that the rift between James and his siblings Lachlan and Elisabeth may have arisen because James has recently become more involved in News Corp., while the latter two have been away from it.)

Wolff and others have noted that each of the four adult Murdoch children have equal votes in the Murdoch Family Trust, which holds Rupert's voting shares in News Corp., thus giving the family control of the company. The four, according to Wolff's account, are split 2-2 against each other.

News Corp.'s board of directors has also been roundly criticized. The board includes Rupert, James and Lachlan; next year, Elisabeth (whose TV production company, Shine, was acquired by News Corp. in a deal that prompted a shareholder lawsuit) will also join it. Other board members are Rupert Murdoch's confidants and current or former executives.

Many observers -- including the shareholders who sued in an effort to block the Shine acquisition -- have decried News Corp.'s poor stock performance, called the "Murdoch discount" because many of the company's strategic moves seem to have been made to indulge Rupert's whims.

"The company must be reformed from the top," the Financial Times' John Gapper wrote.

Instead of a board of insiders who obey [Rupert] Murdoch's whims, it needs a new chairman who can recruit new directors and provide the oversight that its executives plainly need. The dual-class share structure, through which the Murdochs hold power ... should be dismantled and its non-voting shareholders enfranchised.

In a scathing New York Times column, David Carr opined:

James Murdoch is done. He and his father both know that. His testimony curdled as he emitted it, and within two days a couple of former News Corporation executives publicly challenged it. The hooks are still in him, as Prime Minister David Cameron made clear when he said James still had "questions to answer." And so he will, gradually sinking further into the mess he has overseen.

Several analysts have predicted that COO Chase Carey will eventually take the top job. FT media editor Andew Edgecliffe-Johnson noted that Carey is untainted by the hacking scandal and is on good terms with James, Lachlan and Elisabeth. Edgecliffe-Johnson wrote:

"Unless something absolutely drastic happens, there is no way Rupert would give up on James," one person close to the board says. But with drastic developments occurring every day, no one is ruling anything out.

The Journal cited sources who said Rupert Murdoch has considered taking the title of executive chairman and making Carey the CEO. "But even if Mr. Murdoch decided to make such a change," the Journal article said, "one of the people said he wouldn't do it right now, so close to the current turmoil."

The FT's Gapper wrote that if Carey were to lead News Corp.,

This would not preclude James, Elisabeth or Lachlan occupying executive roles but it would stop the company being run for the benefit of their family instead of investors. It would probably also reward them financially, since the family's 12 per cent economic stake would be worth a great deal more without the Murdoch discount.

Back in April, when James Murdoch had just been promoted to his current post, I wrote that his performance should be assessed on its merits. "[S]ometimes family businesses name the wrong person as the successor (usually for the wrong reasons)," I asserted, "but that doesn't mean all family business successors are destined to fail."

Well, it appears that Rupert Murdoch and the News Corp. board indeed elevated James "for the wrong reasons." And it seems we will be learning more about the wide-ranging ramifications of this and other family-centered decisions at Murdoch's powerful global company.

U.S. family business owners: Please complete our survey

Earlier this month, we marked the 235th anniversary of American independence and commemorated the heroism and foresight of the country's founding fathers.

While those celebrated citizens laid the foundation for our government, American enterprise -- and, especially, American family enterprise -- has been the engine of the country's growth. How has this been achieved?

Family Business Magazine is planning to find out by conducting a survey of family enterprises in the USA ( We plan to assess the scope of their diversity in leadership and ownership. We will also study the policies and systems they have established to achieve their economic goals of growth and prosperity while preserving family harmony and loyalty. In short, we plan to offer a snapshot of U.S. family businesses and their practices.

To that end, we have developed a confidential online survey, and we are inviting U.S. family business owners to participate. (To obtain the most accurate results, we request that the questionnaire be completed by only one member of each owning family -- preferably the senior leader, or someone in an executive position.) The questions are brief; most can be answered with a single click.

The deadline for completing this survey is August 15, 2011, but if you could fill it out sooner, we'd appreciate it. You can find it by clicking the link below:

Your answers will be held in the strictest confidence and used only to create pooled averages.

The results of this anonymous survey will be included in Family Business Agenda 2011 -- a special issue focusing on "The State of U.S. Family Business." This special edition will be published in late October.

We know that in matters involving the creative mix of family and business, there is no one-size-fits-all prescription. Through classic American ingenuity, enterprising families have devised a range of ways to manage the complexities. We'd like you to tell us what works for you -- to identify the processes that helped you discover your successful approaches, and the decision makers who worked out the details.

Family businesses play an instrumental role in making America great. Please take a few minutes to tell us how you keep your enterprise running smoothly.
Thank you for your participation.

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