Family
Business Magazine E-Newsletter
March
6, 2007
Contents
1.
To bridge 'age gap,' a family puts its business in outsiders' hands.
2.
'Bill W.' and 'Bill P.' running Wrigley as a team.
3.
Number of Americans owing estate tax drops farther than expected.
4.
The hazards of sloppy accounting.
5.
Preview of Family Business
Magazine's Spring 2007 issue.
1. To bridge 'age gap,' a family puts
its business in outsiders' hands. The third-generation
leaders of the 102-year old Louis Padnos Iron and Metal Co. of Holland,
Mich., are preparing to put their company in the hands of non-family
members, the New York Times
reported in a recent profile. "The problem for the Padnoses is an age
gap," the Times article noted
-- the third-generation members, now in their 50s, want to step back,
but the fourth-generation members are only in their teens. The company
has hired a philosophy professor to help teach the family's values to
the non-family managers, the Times
reported. Their assignments have included readings by Thoreau and
Sophocles; trips to art exhibits and theater performances; and a debate
on where to donate $40,000 of the Padnoses' money, the article
said. (Source: New York Times,
Feb. 24, 2007.)
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2. 'Bill W.' and 'Bill P.' running
Wrigley as a team. Bill Wrigley, executive chairman of the
Wm. Wrigley Jr. Co., and his new CEO, Bill Perez, are taking a
power-sharing approach to their jobs, according to a recent article in Business Week. Wrigley and Perez
-- known inside the company as "Bill W." and "Bill P.," the article
noted -- used a consulting firm to help them envision and plan for
various scenarios before Perez came on board. "This was a structure,
after all, that simply wouldn't have been possible under Wrigley's
father, who oversaw every decision," Business
Week reported. The article said that "Perez focuses largely on
day-to-day operations and financials, while Wrigley spends much of his
time on strategy, innovation and culture." (Source: Business Week, Feb. 26, 2007.)
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3. Number of Americans owing estate
tax drops farther than expected. Although the number of
millionaire households in the U.S. more than doubled between 1995 and
2004, the number of citizens who filed tax returns stating they owed
estate tax in 2005 is more than a third lower than the number in 2004,
the Wall Street Journal
reported last month. While some drop was expected because of the Bush
administration's 2001 estate-tax reform measures, which raised the
wealth level required to trigger the tax, the figure is lower than
anticipated. "Total collections from estates valued at $20 million or
more fell to $29 billion in 2005 from $32 billion in 2000," the article
said. Edward Wolff, an economics professor at New York University, told
the Journal that the wealthy
are likely getting better at finding ways to avoid the tax. "The
tax-strategy business has become an important component of the
wealth-management business," the Journal
report noted. (Source: Wall
Street Journal, Feb. 2, 2007.)
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4. The hazards of sloppy accounting.
Too many family business owners "use business checking accounts to pay
for personal items," writes business journalist Stan Luxenberg in Financial Management of Your Family
Company. "That inflates expenses and shrinks taxable income....
Such creative calculations may enable a family to live lavishly without
paying much of a tax tab. But sloppy accounting has its hazards -- even
if the owners never get caught." Luxenberg explains, "To begin with,
it's hard to monitor the business when expenses have been inflated. Say
the average profit margin in the industry is 20%, and the tax-avoiding
company's margin is 15%. It's hard to know whether the company is
inefficient or if the profits only appear low because of the inflated
expenses." Cooked books also complicate relations with bankers and
buyers, Luxenberg notes. "Bank loan officers take a dim view of low
profits -- especially if they have been held down artificially. And if
the family ever decides to sell, the aggressive tax avoidance may
reduce the price the company commands."
For more
information on managing your family firm's finances, see Financial Management of Your Family
Company. Learn more about the book and view the table of
contents here.
All
ten handbooks in the Family Business
Handbook Series are on sale -- more than 25% off -- for a
limited time only. Further discounts are offered for quantity orders.
See our Bookstore Order Form for
sale price information.
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5. Preview of Family Business Magazine's Spring
2007 issue. Subscribers to the print edition of Family Business Magazine will
receive the Spring 2007 issue later this month. This issue features a
special report on non-family executives. Rich Products Corp. chairman
Robert E. Rich Jr. explains why his company chose non-family member
William G. Gisel Jr. to be the next CEO. David Doll, the non-family CEO
of Kanaly Trust Co., describes the firm's succession plan journey,
which took more than a decade. We also profile a family who redirected
their role from owner-managers to owner-as-investors, ceding day-to-day
management to non-family members. And a trio of family business
advisers offer their insights on motivating and rewarding key
non-family managers.
Visit our
website for subscription information.
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