On Friday, May 7, 2010, the Oregon FFI Study Group met at the offices of Ater Wynne, LLP, in Portland, Oregon. There we met with a family member from each of three family-owned business each of which had been in the family for over 100 years. While each family business differed in their governance structure and size, there were important similarities.
First, the current generation in management of the family business had worked outside of the family business as adults where they were able to find success and build confidence. And, each speaker thought this was a significant element in the success of business currently. Their insight is supported by the best practices espoused by consultants in the field of family-business advising and succession planning.
Second, each representative discussed the importance of a trusting relationship between the family members. Two of the families felt that to continue that trust it was important to only have those working actively in the business be the owners of the business. The third family has built trust through professionalizing management and adopting governance structures that include family members. In both cases, the family has found a mechanism for allowing non-interested and non-involved family members to withdraw from any participation or ownership in the family enterprise. There has been sufficient resources in the family to equalize the value of business with other assets so that fairness in the estate plan is achieved. Treating children equally is such an important consideration for parents who are owners of businesses or business interests that a way must be found to equalize the the wealth among the next generation. In these 100 year old family businesses, the generations have found a way to do this.
Third, each of these businesses have a generation in management and control that is able to clearly articulate what is expected of the next generation and what the next generation can expect. There is no guessing. There are clearly defined rules regarding entry into the ownership of the businesses and management in the businesses. While each of these businesses differ as to the expectations, there is no doubt within each business what is expected and what is to be anticipated.
And lastly, the current generation sought the assistance of professionals skilled in family business succession planning to assist them in gaining an understanding of succession and articulating the expectations for and of the next generation.
