Please activate JavaScript!
Please install Adobe Flash Player, click here for download
ePaper created 2015-05-28, 18:34:54 | version 1.33.0
So what are the areas where potential flashpoints can occur? There are many, but four of the most common are: 1 The lack of a common vision Family members may have different answers to the question: Why are we in business together? For example: • One generation may look at the business differently from the previous generation, particularly when the business moves from a dominant founder to the second generation. • Some family members may view themselves as stewards of the business whilst others may view the business as a method of raising capital from the sale of their shares, whether to other family members or to outsiders. • Those working in the business may feel that the business has reached a stage where real progress will only be made if the family seeks external management and/or external investment. To others this may be anathema. • There may be a view amongst some family members that it is going to be impossible to hand over to the next generation and that there is no alternative to a sale. Others may take a profoundly different view. Many of these issues can be difficult to discuss but unless the family can debate any differences in an open and honest way and arrive at a consensus as to their vision for the business and the values which should be followed in running it, the business is very likely to suffer because the family will not be pulling together. 2 Family executives and family members working elsewhere or not working at all (“outsiders”) Family outsiders who feel excluded – Outsiders can feel very distant from the business, even if they are owners. For some their only contact may be an invitation to an annual shareholders’ meeting (often very brief), the receipt of the annual accounts (which will often not tell them very much) and the receipt of a dividend (with little explanation as to how the amount has been calculated). Family executives need to think about how they can make outsiders feel more included. For example, more information could be provided about the accounts and any budgets or business or strategic plans. An annual family assembly can also help to bind the wider family together. The “unfair” dividend policy – the dilemma that is often encountered here is that family executives may, because of the remuneration they receive, be less dependent on dividends than an outsider (who may have more modest remuneration from another business or be retired or a full- time parent). Additionally there are some family executives who look on outsiders as receiving “something for nothing” when it comes to deciding on the level of a dividend. They may often be more interested in re- investing profits in the business. A frank and open debate about what the dividend policy should be (whether in the context of agreeing a family charter or otherwise) will help. Outsiders need to understand the matters the board will consider when deciding on the level of dividend and family executives need to understand and manage the expectations of outsiders. Outsiders also need to understand that they cannot count on the same level of dividend every year.