THE FAMILY BLACK SHEEP – WHAT TO DO? – MY WEEKLY PERSPECTIVE
Michael Louie
CPA, Partner at D+H Group LLP, Multi-family Office, Family Enterprise Advisor, Investor in the Underrepresented
What do you do when one of the second generation is not compatible or getting along with the rest of their siblings? ?This can pose a problem when that child is serving in a responsible leadership role within the business or if that child is a shareholder. If you are the leader of your family enterprise, you should be alert to these potential causes of dissension. Let’s discuss each of these scenarios.
In a business, diverse opinions and open conversations can create a healthy environment when these opinions are shared in a forthright, supportive and respectful manner. ?Often, though with families, differences of opinion cross over the business line into the personal line. ?That is when trouble can arise. ?It is your role as the leader of the business, to not only referee but also support your children and also try to encourage/teach them to be respectful and value their family relationships.
When there is a black sheep, often the other siblings do not want to work with nor interact with that sibling. ?However, you have a choice, what is more important?
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I have seen a business where one of the children had to be removed, when, after many warnings, that child did not comply with the family wishes for peace in the business or engaging in healthy conflict. ?This is certainly an extreme example but was considered necessary. An alternative is to engage an experienced advisor to help work through the conflict with your child.
As a shareholder, a child has only certain rights, generally set out in the shareholder agreement or in legislation. ?This is where you, as the family leader, have to set out guidelines for their access to financial and other information and decision making /governance for shareholders only. ?Generally a family shareholder, not actively involved in the business, would be entitled to information but could not affect the direction nor make decisions in the business. ?Family meetings would merely be informational sessions with some Q&A thereafter.
Think about how you would best handle challenging situation where one of your children may be the black sheep and how to integrate that child into the business, either in the role of management and/or ownership.
Learn, think, apply!