Women In Family Business-Separating Apples From Oranges

Frank and Sally, who are retired, built a chain of sporting goods stores. Their older son, Stephen, currently runs the business, makes all the major decisions and acts as the business’s visionary. Through good times and bad, Stephen makes sure that his parents and his younger brother, Michael, who also works in the business, have their income. Stephen owns sixty-five percent of stock. Michael manages one of the stores, earns a salary that is almost twice what it would be were he not a family member, but owns no stock. 

Sally is focused on family harmony, specifically, her sons’ relationship. She believes that Stephen is stepping on Michael, and that Michael is entitled to some of the remaining stock. Stephen already makes more money than Michael, who has also committed his life to the business and is an asset to the company.  She also believes that Stephen doesn’t give Michael enough credit. 

Frank, on the other hand, is focused on his sons’ performance, and is making judgments about what is fair based on that. He believes that Stephen is being very generous to Michael, since he’s overpaying him for his skill level; he could hire a twenty eight year old to fill Michael’s job, while Michael would not be able to find another job that would pay him anywhere near what he is making.

 How do Frank and Sally resolve their differing points of view? 

The first step is to understand that they are fighting for different things, with different priorities, but that they both have valid points of view and reachable goals. 

The second step is for Stephen and Michael to substantiate clearly and unemotionally what their respective roles are. Once they articulate how they each contribute to the business, they are more likely to respect and appreciate each other, which in turn will help them resolve issues of control and compensation. They can then talk about whether or not Michael is being overpaid and how he can share the responsibility of the risk more equitably.

 In terms of the stock question, it’s not unusual for the sibling who enters the business first, who has the more entrepreneurial spirit, i.e. makes the decisions and takes the risks, to get the bulk of the stock. But if Michael, who also lives and breathes the business, agrees to carry some burden of risk, he can make it easier for his father to give him some percentage of the remaining stock, which is what Sally is bucking for. Should Stephen wish to be the sole owner when he faces the question of succession, he can even buy Michael out. In sum, as long as the parents separate out business issues from family issues and the brothers communicate, Sally, Frank, Stephen and Michael can find a number of ways to solve their problems. 

Patricia Annino is a nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  For more visit:  www.patriciaannino.com



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