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Where to Draw the Line

Owner-managers in private companies have significant discretion. After all, they combine the prerogatives of both ownership and leadership. They can make decisions that make sense in a broader perspective that might not be as clear from the viewpoint of one who is only a manager or an owner. For example, an owner-manager may take more time off than is allowed other executives in recognition of all the weekends worked in the past and the endless thought given the business--even while on vacation.

But when ownership shifts to the second generation the issues become more complex. Consider the following dialogue between a second generation daughter who is CEO of the business and her brother who is also an owner but not employed in the business.

 

Family Manager Family Owner
Yes, I did take my son to a hockey game using the firm's season tickets. I'm sorry, but I resent that. Those tickets belong to the business and are for business purposes.
I'm surprised you're upset-I'm surprised you even know. Look, I've worked incredible hours and rarely get time with my kids...I missed my son's last two parent-teacher conferences because of business trips. I appreciate that, but I was told to not call our MIS department to use our corporate discount to buy a PC for myself...nor to interrupt them to get some advise on what to buy. I was told to respect the line between business and family.

 

Owner-managers often blur the lines between management and ownership because they are so immersed in both. They easily develop an “ends justify the means” attitude--knowing that in the big picture they are doing all they can for the business, and its owners. As businesses begin to include family members as owners who are not employed by the company, blurred lines create misunderstandings and mixed messages. In all such issues, good advice is “Will what I do stand the ‘light of day’?” Or, said other ways, “What if my brother found out? What if the IRS found out?”

The issue is also one of precedent. Is the action of the owner-manager one that would also be offered to other executives? Is the request of an inactive owner one that you’d offer to all other owners?

These issues are difficult. Owners feel a personal attachment to the business and often expect some benefits from their faithful shareholding. Owner-managers usually sacrifice personally more than any other executive, in part because of their sense of responsibility to all the owners. The best guidance is to study each issue as a matter of precedent as if everyone knew what happened . . . and to discuss the complexities at a family meeting so no one is surprised.

 

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