The company (which she asked to leave unidentified in this story) now has 105 second-, third-, and fourth-generation family owners. For many years, Daugherty says, almost all family members were passive stakeholders, discouraged from participating in the firm and given no information about its operations. She began pushing in 1995 for more transparency. But it took until 2005 to establish a formal family council, and it doesn’t run the business. It simply handles family matters (such as prenuptial agreements) and allows the owners to communicate with one voice to the company’s board of directors.
For class members who are listening to Daugherty, this is meat-and-potatoes stuff. Several business owners say they are wrestling with governance issues. Three are considering whether and how to establish a board of directors. One wonders what stage of growth her company must reach, and with how many family members having a stake, before a formal mechanism like a family council becomes necessary.
Nobody expresses surprise that Daugherty’s extended clan took so long to form a council. Business conditions can change fast, Sorenson observes, “but families typically change very slowly.” All the more reason to put owners and heirs in the same classroom. In a family business, he says, the real “unit of education” is not a single student but at least a pair of them.
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• 71 percent of family businesses do not have a succession plan in place, though 41 percent do have a CEO successor selected. • More than 64 percent of family businesses do not require family members to meet job qualifications in order to work for the company. • 25 percent of current family business leaders believe that the next generation is not competent to move into company leadership roles. Source: 2007 Family Business Survey conducted by Seattle wealth management firm Laird Norton Tyee. Responses came from 788 executives of family businesses nationally that have annual revenues of at least $5 million. |
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