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Owners vs. Executives: Avoiding the Battle

In the public company world, war is breaking out between stockholders and management. Even sanctified General Electric has suffered investor wrath for financial reporting procedures, heavy leverage and inadequate communication with investors.

Executives practically stand accused of theft by stock option. “The transfer of wealth from companies’ shareholders to their executives in recent years has been nothing short of immense," says Gretchen Morgenson of The New York Times, and cites research that options granted at the 325 largest U.S. companies equaled almost 20% of their pretax 2000 profits. In theory, of course, the purpose of stock options was to align executive and ownership interests.

“Start acting like the owners you are. Make demands of managers, keep a watch on their activities, rein in their obscene pay packages,” Morgenson shouts. “Corporate executives are your hired hands, after all, but you’ve let them get pretty uppity in recent years. It’s time to show them who’s boss.”

The owners of family businesses might watch this gathering battle with the quiet satisfaction of being noncombatants. They should, however, beware battles of their own. Keeping family business owners and executives on the same page can be an even more challenging, complex and intense task.

Family business bosses can afford to be “uppity” even less than the executives of public companies can. As servant leaders, participants in family businesses chosen as executives must build both value and values for kindred owners.

 

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