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Ownership Inequality

Ownership of a family business is often distributed unequally among successors. For example, some parents give more to those in the business and less to those who are not. Some treat natural and stepchildren differently when it comes to inheritance. Or perhaps the oldest has been in the business longer and accumulated more shares over the years.

Sometimes share holdings among descendants, especially siblings, can cause problems. Even if the descendants accept the parents' will and have absolutely no resentments, awkward private thoughts can occur from a previous generation's kind goodwill.

Consider two siblings, active in the business, who have dominant shareholdings and two siblings, never active in the business, who have received relatively small ownership stakes.

Majority Owners

  • We are extremely fortunate that our siblings have accepted the parents' decision and have supported us all these years. Had their attitudes been different, we might have had to deal with family and business issues.
  • They've been so trusting and unassuming -- we feel almost guilty that we have more ownership. And we worry what our kids will think of the arrangement. They really like their cousins.

Minority Owners

  • We feel very fortunate that our siblings in the business have been such fine leaders. They have contributed so much to the business. They have been open and honest. They have guarded our interests. Their involvement has kept the dream of an on-going family business possible.
  • I hope our kids will want to hold the shares, as a heritage. We do wonder, however, if our kids should work in the business. After all, they will be in a secondary ownership position.

Those in the second generation with more shares can feel ambivalent about their privileged circumstance. Those in the minority are often reluctant to raise questions for fear of appearing ungrateful, even if it is not the case. The majority don't feel like opening up a "Pandora's box" for fear of releasing repressed emotions or buried conflicts.

Once the third generation begins to own shares, new feelings can emerge. Will some feel unfairly treated by the grandparents? Or will they worry that there's a "class difference" that will keep family members from feeling close and being open? Will a sense of "ins" and "outs" persist?

Even with tremendous goodwill among kin, feelings of inequality or unfairness are hard to surface. Perhaps an advisor or board members can delicately explore differences over which family members had no control. Often, surfacing and discussing such issues will result in all accept the circumstances, and the worry and wondering can be put behind.

 

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