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Sources of Conflict: Family Business "Hot Spots"

Through the years we've noticed several common issues that cause flare-ups or conflicts for a family in business. While these issues typically are neither crimes nor misdemeanors and usually are not inherently unethical, the resulting rifts can be quite serious. Even when such actions can be defended in good faith, we've seen too many cases where such perceived transgressions became the "last straw" in the family's breakdown. When we see these situations, we brace for trouble. Perhaps sensitivity to these issues can help family business leaders avoid some problems.

  • Spouse on payroll. The CEO hires his or her spouse part-time to manage special projects.
  • Company airplane use. The plane is available freely to employed family members and their dependents, but not available to non employed family shareholders.
  • Personal publicity. The family member CEO gets a lot of press coverage.
  • Secret salaries and perks. No one knows what the employed family members earn.
  • Sports or special events tickets. Courtside seats or sky box are available to some family but not others.
  • First class travel. Some family members regularly fly first class at company expense.
  • Young Presidents Organization. The CEO is very active in YPO including attending the expensive International Universities.
  • Outside interests. An employed family member also owns a significant interest in another enterprise that draws some of their working attention or are personally very active in politics.
  • Doing business with friends. The CEO adds a personal friend to the board or hires a friend as an important consultant or adviser.
  • Stock incentives. Employed family earn stock bonuses which give them more shares than other family members who inherited equally.
  • Company contributions. The business donates to a favorite charitable or political cause of the CEO that's not embraced by the rest of the family.

We're not making judgments here. But we observe that most successful families in business work hard to avoid these common situations, or at least to manage their family's perceptions. Fairness, objectivity, stewardship, and articulating and serving everyone's best interest are the principles applied by family business CEOs to avoid or to cool troublesome "hot spots."

 

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