Governance

Each business family has its own culture, strengths, idiosyncrasies, points of contention and shared history. That’s why each family must do its own work to develop policies and processes — a structure built on the foundation of someone else’s family values probably won’t work for your family.

Even so, there are certain essential principles that generally apply to multigenerational business families who aspire to be conscientious stewards of their entrepreneurial legacy.

Understanding these principles can help clarify several aspects of family business governance — why it’s needed and what practices tend to work well.

1. It’s easier to handle sticky situations in a high-trust culture. High trust — both within the family and between family stakeholders and non-family executives — increases the likelihood that business decisions will be made in the best interests of all shareholders. While some families are naturally trusting, others must work to build trust.

2. Family governance is hard work — but you need to do it. Few people look forward to discussing tough topics, but those issues must be put on the table at family meetings. If they aren’t, there’s little chance that they will be resolved. Many families have found professional facilitators to be helpful in starting these conversations and keeping them on track. Ultimately, however, it’s the family members who must work together to achieve a resolution. If the family doesn’t participate collectively, the results of the process are likely to be ignored.

3. “Best practices” may not be the best options for your family. Some structures or processes implemented by other families may not work well for yours. You might be able to modify a strategy to make it work within the context of your family culture. But sometimes your family might need to invent its own solution from scratch.

4. The process of working through issues is as important as the result. Merely sitting down together to discuss potential solutions is significant progress in itself. The shared experience of working together builds trust. Even if an issue is settled in a way that’s not to everyone’s liking, people will feel better about the result if they feel their voices were heard and the decision-making process was fair.

5. A good place to start is by focusing on what family members have in common. Many families begin their governance journey by creating a list of shared family values and family mission and vision statements. This exercise emphasizes unity and reinforces positive feelings about family membership. When disagreements bubble up in the future or questions arise about the right thing to do, reviewing the family values often provides clarity. Some families begin every family meeting by reviewing their family values.

6. Investing in governance and family member development pays long-term dividends. There are costs associated with governance. Expenses can include consultants’ fees, family members’ travel reimbursement, facilities rental for family gatherings, admission to educational programs and compensation for board members. Wise families consider their governance budget as an essential investment in their business — especially after weighing it against the cost of not doing this work.

7. Several family business challenges can be predicted. It’s best to get out in front of them. Family business disagreements generally are sparked by growth or change in the family or the business (for example, the increased number of stakeholders in later generations or the need to invest profits to expand or diversify the family firm). Proactive families anticipate such changes and create strategies to manage the associated challenges before they arise.

8. A consultant can help you resolve your issues — but make sure you hire the right one. Check references to determine how many family business clients at your generational stage the consultant has helped, and how familiar the person is with family business systems, governance structures and documents. It’s also important to assess whether the consultant understands your family values and is able to create an atmosphere where all family members feel comfortable speaking about difficult issues. Can the consultant relate well to all members of the family, regardless of age, gender, marital status, etc.? Is the consulting firm trying to sell you a product — and, if so, is it a product that can actually help you?

9. The third generation is generally a pivotal one in the evolution of a business family. In Generation 3, most family trees have sprouted branches. The households may be geographically dispersed, likely with different numbers of children and different income levels. They may not share the same political or religious beliefs. Since the family no longer sits at the same dinner table, those outside the family firm don’t get news about it on a nightly basis. At this stage, conscious effort may be required to unite family members in support of the family business — or even just to make sure the cousins, who are or will be business partners, get to know each other.

10. Unwritten rules and unenforced policies put pressure on the family. Many families first realize they need governance when their rising-generation members begin to come of age and express interest in entering the business. Creating a family employment policy will manage expectations about qualifications for joining the family firm and clarify that family members are not guaranteed jobs in the company. This tends to spark the family’s realization that other documented agreements are needed, as well.

11. Family governance documents should not just sit on a shelf. A family constitution (usually encompassing values and mission statements, policies and procedures, charters for family governance bodies, and job descriptions for key governance positions) should be considered a living document. In order to fulfill its purpose in guiding the family, the constitution should be referred to frequently. Although a family constitution is not legally binding, the goal is for family members to consider themselves morally bound to its provisions. The constitution and other key family documents, such as the shareholder agreement, should be reviewed periodically to see if they require alteration because of changes in family circumstances. During this review period, the family should also determine whether additional policies are needed.

12. Communication and transparency are essential in multigenerational business families. Putting a priority on “investor relations” builds trust between the family shareholders and the business leaders. Shareholders who are denied access to information about financial results or key business developments tend to be less committed than informed owners. There should, however, be an understanding that certain information must remain confidential. It’s also important for family members to feel free to express their concerns. Lines of communication should be established so that family members go through a liaison, such as the family council chair, rather than contacting management directly. Larger families also need a way to communicate family news, like a news­letter or family internet portal. That keeps family members connected and united.

13. Family members must be educated about the family’s business legacy. Educated family members become committed stewards of the family enterprise. Family education programs can be created by the family council or developed with the help of a consultant. The most comprehensive programs include curricula for children of all ages, young adults, and married-ins or significant others. Topics include a history of the family in business, the family values, philanthropy, financial basics such as how to read a balance sheet, and information related to the family business and its industry. Educational programming has another benefit, too — it brings cousins together in a business context.

14. There are many ways for family members to contribute and lead. Family business leadership opportunities aren’t limited to the C suite. Roles beyond the business could include family council members, meeting planners, newsletter writers, family education curriculum developers and organizers of philanthropic activities. Those who excel in such roles might be interested in a development path that could culminate in taking on a key position such as family council chair or family business board ­member.

15. The “benevolent dictator” model doesn’t work well in large families. In the founder and second generations, the founding patriarch or matriarch makes all the decisions. When family business ownership is spread among multiple households, family members generally begin to clamor for a more inclusive approach to decision making. Also at this stage, more work is required to keep family members educated and informed about the business. At this point, families often form a family council to coordinate tasks and give more people an opportunity to participate. In the fourth generation and beyond (depending on the size of the family), it might be expedient to create an additional governance body, often called an owners council, to deal exclusively with issues pertaining to shareholders of the business.

16. Income disparity among households is a reality in multigenerational families. At some point in the life cycle of a family firm — often at the outset, but sometimes not until the third generation — business leaders will realize that welcoming every family member into the business and paying them all the same salary isn’t practical. Families need to understand the difference between what is “fair” and what is “equal” and engage in frank discussions on this topic, if necessary. Establishing a dividend policy can provide needed liquidity for shareholders while preventing excessive strain on the business.

17. “Professionalizing the family business” doesn’t mean separating the family from the business. While it may be wise to hire non-­family executives to manage the business and independent directors to provide strategic oversight, the family must not remove itself entirely from the business. Family members must be developed as engaged, responsible owners and stewards of the business who serve as partners with the board and management. If the family does not step up to assume its role, the business will suffer.

18. The best way to find out what family members are thinking is to ask them. Consider surveying the family to identify areas of concern or get their views on recent programs or activities. Invite dissenters to comment before final decisions are made; better yet, welcome them into the group that makes the decision. Include next-generation family members on the com­mittee developing NextGen ­educational programs and social activities.

19. The need for formal succession planning should be obvious, but many family businesses neglect it. A succession plan should be documented — including a timeframe for developing the future leader and an emergency plan in case disaster strikes before the successor is ready. It’s important for the plan to be communicated in advance to the family and other key stakeholders. Multiple studies have found a significant percentage of family firms falling short in this area. Succession is a multi-stage process, so ample lead time must be built into the plan. An effective independent board will hold the CEO accountable for succession planning and make sure the process is on track.

20. The leadership needs of the business in the future will be different from its leadership needs today. In the next generation, the business will likely have grown. Technological advancements and changes in the competitive marketplace will have sparked new customer expectations. The family will also have expanded, with a different set of family dynamics. The next CEO must have the right skills and the right leadership style to guide the business in this future landscape. Succession planning should involve an assessment of future needs, not a search for someone whose strengths mirror those of the current leader.

21. The family must reach agreement on risk tolerance. Family business owners tend to have a conservative attitude toward debt, but borrowing can help a business capitalize on opportunities. The family must work together to determine how much risk they’re willing to assume and how they feel about taking on a partner (for example, a private equity investor or a family office investing directly in the company).

22. Solid family and business governance are essential prerequisites to hiring a non-family CEO. Talented executives seek assurance that they’ll be given the freedom and support they need to do the job. Family firms with an independent board, a high-functioning family council and strong family policies are more attractive to top candidates than family companies without this infrastructure in place. The family should be able to speak with one voice when communicating to the non-family executive, and boundaries must be respected.

23. Long-term continuity of a family enterprise often requires divestitures and creation of new businesses. Most families who have been in business together for 100 years or more have sold or closed underperforming business units and started new businesses. Research has found that the key to family enterprise sustainability is the family, not the business. The hallmarks of long-term viability are the ability to innovate, to adapt to changing markets and to make tough decisions in the best interest of the enterprise. Many family enterprises have been sustained long after the closure or sale of the legacy business.

24. An independent board with the right members is a tremendous asset to a family business. Independent members of a company’s board of directors or board of advisers bring an objective, third-party perspective and proven business experience to a family firm. They can take the heat off the CEO in family compensation decisions, assure the family that management is being held accountable and provide crucial feedback on strategy. The most effective independent board members are truly independent — not the CEO’s cronies or people who provide professional services to the company. They should have the right skills to provide strategic oversight and help the family business reach the next level of growth. And, importantly, they must understand and fit in with the family culture.

25. “Pruning the family tree” is a wise strategic move in some cases. Family shareholders who want to redeem their shares and exit the business should feel free to do so. Family governance will not function smoothly if a faction of the family doesn’t want to participate. An exit may result in fewer family disagreements and a smoother path to business growth. Having a buy-sell agreement that establishes a mechanism for the sale and purchase of shares will reduce the likelihood of conflict over the valuation.

26. Family dynamics play just as much of a role in philanthropy as they do in the family business. People often say it’s more fun to give money away than it is to earn it, but in reality, it can be just as challenging. Philosophical differences in a diverse multigenerational family can lead to heated discussions over which causes to support. Family members who aspire to jobs in the family foundation or seats on the foundation board must be qualified for those roles; problems will arise if the family views its foundation as a place to employ underperformers.

27. Family meetings must include opportunities for fun and bonding. If your family gatherings focus entirely on business and education, interest in attending will decline. Fun activities — a family softball or soccer game, group tours, trips to the lake — will enable cousins to get to know each other and create the “glue” that keeps the family together. Many families hold family assembly meetings (gatherings of the whole family) in fun locations. Some also build in time for the extended family to participate in a charitable activity together.

28. Some problems may need to be left for the next generation to resolve. Some controlling senior-generation members insist so strongly on maintaining the status quo (or continuing their family feud) that contentious issues must be tabled until the next generation takes the reins. Many families have had breakthroughs when a NextGen steps up with a strategy to escape from the dysfunctional dynamic.

29. Sharing your stories with other family business owners can be revelatory. Owners of private family companies are understandably reluctant to discuss family issues in public. While that strategy may keep their name out of the newspapers, it also leads to a feeling of isolation. It’s very likely that another family has confronted an issue similar to yours and found a resolution that might also work for you, perhaps with modifications. There are many opportunities for family business owners to get together in a confidential setting. Taking a risk may have a high payoff.

30. It’s possible to have a family business without any family members working in the business. If the next generation isn’t interested in spending their careers in the family firm but feel strongly connected to the business and are willing to put in the work to create solid family and business governance, the business could continue as a family-owned, professionally run enterprise.      

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.                        

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Lester and Vanola Wittwer opened the Wittwer Motel in Las Vegas in 1948. After several years, the couple moved their family back to Southwestern Utah, the area where they were both raised. In 1955, they opened the Wittwer Motor Lodge in St. George, Utah, where the family business is based today. The Wittwer Motor Lodge, now the Best Western Travel Inn, is still in the family’s portfolio.

Lester and Vanola’s four sons, Royden, Tony, Mel and Sheldon, joined the business and helped it grow. Wittwer Hospitality continues to develop hotels under its own ownership and provides management services to other hotel owners. All told, there are nine hotels, with others under development.

In 1974, the enterprise expanded by adding a furniture store company, Boulevard Home. Boulevard Home has three store locations, a clearance center and consignment and flooring stores. The family enterprise also has a property management side.

In honor of its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

 

Each of the second-generation brothers had six children. The G2 siblings had equal ownership and equal salaries. The 24 cousins in G3 have mostly equal ownership, although that is beginning to change. Nine of the cousins work in the family business.

The Wittwers have been taking steps to address the challenges that arise when a big family owns a small business. As of today, there are 75 G4s. No one in the fourth generation has ownership yet.

The need to update the family employment policy was a major impetus for the establishment of the Wittwer Family Council in 2005. Family members were asking questions about hiring decisions and salaries, and the younger G3s were concerned that they might not have an opportunity to work for the family business. At the same time, family members in leadership wanted to ensure they would have a qualified pool of family applicants; they also feared family members might expect positions they were not qualified to hold.

The family council borrowed copies of other family companies’ employment policies and determined the key points to be covered in the Wittwer policy. A family council member was assigned to draft the policy. The policy was added to the family constitution with board approval.

The family also created a policy governing compensation for family members who work in the business. Compensation is now based on job duties, fair market value and job performance.

The family employment and compensation policies have resulted in a substantial decrease in family employment concerns. Family members are seeking quality education and outside work experience, and those who return to the family business after gaining this experience are better qualified for their positions.

The Wittwer family constitution includes core values/guiding principles, family council bylaws and policies to cover a wide range of family and business situations.

The board consists of seven members: five family members and two independent members. Family directors are chosen through an application-and-interview process; non-family directors are chosen by a Nomination and Selection Committee.

In 2004, the family started paying annual dividends to family shareholders. The checks are distributed at the annual family assembly meeting, providing an incentive for family members to attend the meeting. Family members appreciate not only the checks but also the associated transparency. They are more interested in the company’s performance and recognize the benefits of business ownership. Because attendance at family assembly meetings has increased, the meetings are more meaningful.

The family introduced a stock buyback program in 2010. An amount to be offered is determined annually, with a discount applied. A policy was implemented to divide the amount fairly if more than one person wants to sell back shares. Stock buybacks have helped individual family members expand their own businesses, pay off student loans, reduce debt and buy homes.

A Compensation and Continuity Committee was created to oversee dividends, the family companies’ incentive plans and other complex, high-level issues. The incentive plan encompasses profit sharing and cash incentives and is open to family as well as non-family team members. A phantom stock plan, instituted in 2012, is open to family and non-family team leaders and executives. Partly because of the incentive plans, skilled family executives are choosing to remain in the family business or to return to it.

Recently added committees include Business Growth, Investment and Borrowing. An advisory board, consisting of the four second-generation brothers, has also been established. All of the G2s are retired from day-to-day operations, and only one still serves on the board of directors. The advisory board has provided the opportunity for the company’s founders to be involved and have a voice while enjoying retirement.

Programs and policies are in place to better develop family members of all ages. An education program is presented at the annual family assembly, with curricula for three age cohorts: 8-11, 12-18 and 19 and older. All have learned more about the company’s history, the family values, the company’s current operations and business basics. The older youth have opportunities for summer internships, mentorships and donations and have stock market investing competitions.             

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The company, founded in 1908, manufactures fire engines, pumps and related equipment for first responders and distributes tactical equipment to the Department of Defense. W.S. Darley is headquartered in Itasca, Ill., with manufacturing, engineering and R&D operations in Chippewa Falls, Wis., Janesville, Iowa and Grand Rapids, Mich.

The company is co-owned by three branches of the Darley family. Paul Darley serves as president, CEO and chairman. There are 13 family owners in the third generation, seven of whom work at W.S. Darley, plus seven of the 32 fourth-generation members. The family employment policy requires them to work elsewhere before joining the family business.

Paul’s father, Bill Darley, joined the family business in 1950. He became president in 1962 and held that title until 1997. He retired as CEO in January 2010 and stayed on as chairman until 2015.

Bill, who passed away in 2018, had sole authority when he ran the business under a voting trust. In the second generation, there were only four family shareholders and no pressing need to grow the company, which generated enough profit to support the four owners. Bill realized that situation would change when the business transitioned to a cousin consortium in the third generation.

In honor of its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

Wittwer Hospitality/Boulevard Home

 

Around 1980, Bill established a division structure in the company. That enabled family members coming into the business to have an area of their own to grow. The third generation grew and diversified the company. Division leaders make decisions independently, with major decisions made by consensus.

After Bill had emergency heart bypass surgery in 1989, he prioritized succession planning. In 1994, he formed an executive team consisting of three third-generation members and requested reports from each of them on how they would run the business. In 1997, after realizing he could not choose a successor, he left it up to the executive team to make the choice.

The team considered several options, including a co-presidency, rotating the president’s job among the three of them and choosing a president from outside the family. In the end they decided one president would be the best option for the company and selected Paul, the youngest of Bill’s five sons. The family empowered Paul and put their trust in him based largely on his communication, organizational and leadership skills.

The Darley family has had a family council since 1991. A family constitution, developed by the council early on, emphasizes that family members are a team, regardless of their individual positions in the company. The constitution outlines how the company would handle a serious family disagreement. The family revisits the constitution in annual meetings and makes revisions when warranted. Core values have been documented.

A family participation plan outlines the qualifications required to work in the family company and requires that family members be paid at market rate for their positions.

The family council emphasizes transparency and works on team-building among different generations and family branches.

Shareholders receive communications via email, webcasts and other means on matters such as dividends, strategic planning, new hires and forecasts. Family members have a chance to voice their opinions behind closed doors but present a united front to the board of directors.

The company began to professionalize its board in the early 2000s and has seen sales and profits increase ever since. The company bylaws require the board to include more family than non-family directors. Today the nine-member board has four family directors who work in the business (including Paul) plus one family director who represents shareholders who are inactive in the business and four independent directors.

The board has become increasingly involved in succession planning and in the hiring and onboarding of family members. The fourth-generation members working in the business present a report to the board at each board meeting.

W.S. Darley also has a seven-member defense advisory board, which meets once a year for two full days. The company views the defense advisory board as a training ground for potential independent directors.

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Vertex is the leading indirect tax software and services provider to U.S. and global businesses of all sizes. Vertex provides cloud-based and on-premise solutions that can be tailored to specific industries and business requirements for every major line of indirect tax, including sales and consumer use, value added and payroll.

Headquartered in King of Prussia, Pa., and with offices worldwide, Vertex is a privately held company co-owned by three second-generation siblings and employs over 1,000 professionals.

Ray Westphal founded Vertex in 1978. His wife, Antoinette, who passed away from breast cancer in 2004, was the first employee. In its early years, the company sold paper copies of sales tax directories and manuals, including information on the country’s many tax jurisdictions, rates and rules.

In honor of its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

 

The three sibling co-owners — Jeff Westphal, Stevie Westphal Thompson and Amanda Westphal Radcliffe — purchased their father’s interest in the company in 2000, when all were in their 30s. At the time of the purchase, their father was principally devoted to spending time with their mother, who helped to found breast­can­­cer.org, a non-profit that is still one of four supported by the Vertex Corporate Philanthropy Program.

The ownership may have shifted down a generation, but the commitment to build upon the strong values on which the company was founded and the desire to grow it exponentially remain. Ray and Antoinette continue to be the inspiration for the company’s ongoing spirit of devotion to its values, vision and mission.

Before 2000, the board consisted of Ray and Antoinette Westphal, their three children and the corporate attorney. After assuming ownership, the second-generation partners recruited independent directors with public, large-cap experience to their private, mid-cap company, offering market-value-based compensation. The Westphal siblings agree the independent board was vital to their successful transition to co-ownership of the company.

All three siblings have worked at Vertex in various roles, including sales, marketing, finance and customer service. Jeff, who joined the company in 1988, became president in 1996 and then CEO in 2000. During his tenure, Jeff oversaw tenfold growth of the company, creating new divisions and service offerings while expanding the business globally. He led the initiative to add cloud-based tax processing solutions for smaller corporations and helped lay the foundation for the company’s tax data management offering.

Having helped to establish Vertex as an industry leader, and realizing that 20 years at the helm was fast approaching, Jeff recognized that it was time for new leadership with the right skills and strengths to take the company to the next level and offer sustainable long-term industry domination as a fully globalized corporation.

While Stevie continued to guide the board in the role of chair, Amanda led the succession planning process, working closely with the original independent directors. A global executive search and consulting firm was selected to advise the board along a carefully staged five-year process to cultivate, select and support not only a successor, but also a thorough company leadership elevation and mentorship program.

David DeStefano, who joined Vertex as vice president of finance in 1999 and later became chief financial officer and executive vice president, was announced as Jeff’s successor in late 2015. After a year of gradual transition, he assumed full responsibility in the fall of 2016.

While the Westphals aren’t involved with the daily operations of the company, Vertex continues to be family-owned and professionally run. DeStefano’s commitment to the people-centered culture and emphasis on the core values of respect and fun were key factors in his selection, along with his strong financial acumen, leadership ability and competitive drive for performance.

Today, the Westphal siblings concentrate on corporate and family business governance, devoting much time to both. They serve together on the board along with four independent directors. The five non-family board members, including DeStefano, can outvote the three family directors on board decisions.

The siblings say the best thing they did for their partnership, company and family was to develop an independent board. The board meets five times a year and maintains public company fiduciary standards. It includes very active audit, compensation, and nominating and governance committees, chaired by independent directors. The directors played a key role in mentoring DeStefano, as well as over a dozen other senior executives at the company. And, most importantly, the independent board ensures that deliberations are objectively focused on the business.

In 2008, the three sibling families formed a family council, whimsically named KAFCA (Kick-Ass Family Council Assembly). KAFCA participation is voluntary and includes all willing family members. There are two assemblies per year, with other meetings conducted among various subcommittees, including a private call each month for third-generation members who share in ownership now through trusts. In addition to company and industry education, skill development and various family business governance projects, a formal family employment policy has been developed, and some members of the third generation are considering the possibility of applying to the firm for employment.

At 57, 56 and 51, the Westphal siblings continue to position the company for long-term industry leadership, while patiently supporting the development of the next generation as competent future stewards of the business. The partners are proud to sustain a company that serves their customers with mission-critical enabling technology and provides Vertex colleagues with an extraordinary workplace that supports communities, causes and families in fulfilling ways. 

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Founded in 1952 by Bob Sheetz as a single dairy store, Sheetz, based in 

Altoona, Pa., now operates more than 590 stores across six states and generates annual sales of over $7 billion. The company has more than 19,500 employees.

There were eight siblings in Bob’s generation, with 27 years separating the eldest and youngest. Today there are 107 family members, 12 of whom work for the family business or serve on the board.

Bob retired at age 48 in 1983, after the company had opened its 100th store. He turned the reins over to his brother Steve, who had joined him as a partner in 1961. Steve served as CEO until 1995, when he moved up to chairman to make room for Bob’s son Stan.

In honor of its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

 

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

 

The family worked with a consultant to make significant governance changes in 2013. That year, Stan’s cousin Joe became CEO, Stan took over as chairman of the company and Steve became chair of a newly formed family council.  In 2018, Joe’s brother, Travis, became the first COO in Sheetz history and also was named as the company’s new president.

The family council’s many roles include assisting with communications between the business and the family, developing and maintaining family unity and commitment, educating individuals about the role of family members and shareholders, formulating family policies, preventing or resolving conflicts within the family and building support across the family for the company’s direction and success.

Through the family council, family members have come together to participate in philanthropic activities that benefit Make-A-Wish, Special Olympics and other organizations.

Also in 2013, Sheetz revamped its board to include independent directors. The shareholder agreement was updated, and the bylaws were revised. The company recapitalized, and a voting trust was created to control most of the shares. In addition to the family shareholders, some former non-family executives own stock, and 7.5% of the shares are owned by employees through an ESOP.

The Sheetz family has created a family charter and a family employment policy. The family holds retreats and has developed a sophisticated family education program for family members from ages 5 to 25+, including those who have married into the family. Age-appropriate opportunities for learning and participation are offered in a variety of subject areas: entrepreneurship, investment and financial competence; interpersonal/family communication skills; the family; governance; the business; and community involvement.

Family values are emphasized in family retreats, family council meetings, family education sessions and everyday conversations. 

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Seattle-based Port Blakely grows and markets renewable forest products around the globe, owning and managing working forests in Washington state, Oregon and New Zealand. The company supplies customers in the United States and exports to international markets, largely in Asia. The business has been owned by the Eddy family since 1903. Today, the family consists of approximately 140 members, about 85 of whom are company shareholders. Port Blakely has a majority-inde­pendent board of directors.

In 2000, as the family approached a century owning the business, then-CEO James Warjone became concerned about the family’s decreased connection to and engagement in the company. Low attendance at the annual family meeting was an early warning sign, and he sought to rally the family. They responded, agreeing to bring in a family business consultant and convening a task force to explore family governance issues and opportunities. 

The task force evolved into a provisional family council and then was formally established as the Eddy Family Council in 2002. Fourth-generation family member René Ancinas was the first family council president. Ancinas then joined the company as an employee in 2005. He later became chief operating officer and is currently chairman and CEO.

As an early key step, the provisional council began developing a family constitution in 2001. This was a lengthy, intensive process that involved much discussion and debate. The constitution was finalized and adopted by the family in 2006. It contains the family’s statement of its mission, vision and values, and the policies and procedures that govern the family assembly (the full family) as well as the family council.

To celebrate its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

Communication has been an important role of the Eddy Family Council from the beginning. One of the council’s initial goals was “de-mything the family myths.” The council’s efforts over the years have resulted in a smoother process of nominating and electing family directors, increased trust in company management among the family, and strengthened connections among family members and owners across branches and generations.

Family council members are elected to three-year terms and may serve a second term. Each year, three members rotate off the council and are replaced by three new members. The company’s director of human resources attends family council meetings to provide continuity, coaching and support.

A family education program was developed under the guidance of the family council and with the efforts of several members with professional backgrounds in education and family governance. Curriculum topics include lessons on the family — vision and values, history, innovation and success, etc. — and Port Blakely’s operations, as well as business finance and wealth management.

For younger family members, the Eddy Academy, an annual camp-like program geared toward children ages 14 and under, was developed. It introduces them to Port Blakely and what it means to be part of a family-owned company. Eddy Academy includes business lessons modeled after Junior Achievement activities as well as opportunities to get to know their cousins better. A “graduation” ceremony is held for family members when they turn 15. Members of the fifth generation are currently at this stage. Each graduate is matched with a family mentor, who helps further their Port Blakely education, accompanying the young person to family meetings.

College-age family members are invited to participate in a paid internship program that offers exposure to the business as well as work experience. Educational programming on financial topics and tours of company facilities are available to adult family members.

The company has been recognized for these efforts and hopes to be a model for other family-owned businesses. The family governance journey continues, as the work is never done. It simply evolves along with the family and the business.  

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John W. Eiting, along with three partners, founded the business in 1915 as the Cummings Machine Company in Minster, Ohio. It began as a manufacturer of concrete mixers, mining cars and locomotives. The company underwent several name changes and entered the medical equipment market via an acquisition in 1967. In 1969, third-generation leader James A. (Jim) Eiting moved the medical division to Versailles, Ohio, and renamed the company Midmark Corporation.

Today Midmark, controlled by the Eiting family, is a global manufacturer and supplier of healthcare products and equipment and diagnostic software. It’s now headquartered in Dayton, Ohio, but maintains production and administrative offices in Versailles, a town of about 2,600 people.

In the late 1990s, fourth-generation member Anne Eiting Klamar was a practicing physician in Urbana, Ohio, about an hour away from Versailles. She had served on Midmark’s board since 1993 and became the company’s part-time medical director in 1998. During this time, the company was confronting some challenges.

To celebrate its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

A brother of Anne’s who had been expected to succeed their father had left the company; he later passed away. An outside president had been appointed after Jim Eiting retired in 1995, but the non-family executive didn’t meet the company’s needs, and Jim returned to the presidency in 1999. The board told him Midmark might have to be sold.

At a board meeting in 2000, the board asked Anne to leave the room. When she returned, she was informed — to her surprise — that the board had chosen her to be the next president. Although Anne had been involved with the company, she had no other business experience. The board mentored her and helped her grow into the role.

Anne was named CEO in 2003. Under her leadership, Midmark experienced significant growth and international expansion. Anne’s siblings also work at the company: Her brother, Mitch Eiting, is manager of global community relations and president of the Midmark Foundation, and her sister, Polly Grow, works in caseworker customer service.

When Anne decided to step down as CEO, she felt it was essential to find a successor who would perpetuate the family and company values. John Baumann, who had joined Midmark’s board in 2009 and was named board chair in 2013, became CEO in 2016. Anne assumed the role of board chair; she and Baumann switched roles.

While Anne was running the business, family governance was fairly straightforward. Because her siblings worked at the company, they were aware of key business developments, and they trusted Anne as Midmark’s leader.

Two years before Baumann took over as CEO, the Eitings engaged a consultant and began working to strengthen their governance. They formed a G4 family council and developed shared values, mission and vision statements — an effort that was more complex than they expected — as well as a family charter and shareholder agreement. The family also took a governance course together at the Kellogg School.

When Baumann took the reins, he asked the family for answers to questions they hadn’t considered before, such as how much debt they would be comfortable taking on. This required them to delve even more deeply into governance in order to create an Eiting family shareholder group statement of risk.

While the Eiting family holds the largest block of shares in Midmark, there are additional shareholders outside the family. In 2016, Midmark changed from a C corporation to an S corporation. The number of shareholders has been reduced from 144 to 66, and efforts are ongoing to repatriate shares held by non-family members.

The fifth-generation members are being raised to become successful and thoughtful shareholders and stewards of the company, with no expectation that any of them would run the business. An associate director program has been established to teach them about board service.

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Founder Elisha D. Smith acquired a small, struggling pail factory in Menasha, Wis., in 1852. Over time, he and his descendants transformed their woodenware offerings to keep up with changing markets. The company began producing corrugated boxes in 1927 and added plastic pallets in 1955. Today, Menasha Corporation, based in Neenah, Wis., is a corrugated- and plastic-packaging manufacturer and a supply-chain solutions provider with two operating companies.

Menasha Packaging manufactures corrugated packaging and retail merchandising packaging and displays. It also provides pack-out and fulfillment services. ORBIS Corporation manufactures reusable plastic containers and pallets. ORBIS also tracks, retrieves and cleans reusable packaging as it moves through customers’ supply chains.

The enterprise employs more than 6,000 people worldwide and generates annual revenues of more than $2 billion. There are about 135 shareholders in the fourth, fifth and sixth generations, and 265 family members.

To celebrate its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

Beginning in the late 1990s, the business struggled to reverse its declining performance. Concerned shareholders had no organized forum for engaging with the company or connecting with one another, aside from the annual shareholder meeting and a cookout picnic.

In December 2001, a small group of fifth-generation family members met to discuss how to improve communication within their generation. Step by step, family members began to define a path forward — with a second, larger discussion session in May 2002 and, a few months later, a delegation of family members attending a family business governance program at Kellogg School of Management. In 2003, with the company’s support, the extended Smith family held its first family weekend. It featured an eye-opening presentation by a noted family business consultant.

At its second family gathering a year later, the Smith family endorsed the recommendation of a family task force to establish the Smith Family Council. The first members of the family council were elected on the spot.

One of the council’s first projects was to survey family shareholders about a broad range of topics. The survey, executed in cooperation with Menasha and guided by a consultant, provided a robust portrait of the family shareholders’ goals and concerns.

As the family implemented its governance system, the company’s board and management pared Menasha’s portfolio of businesses and worked to improve corporate governance. The board was trimmed in size, and it adopted governance principles to match best practices of larger, public companies. A long-time family director took over as board chair. With the family council now providing a structured voice for the family’s half-dozen branches, the number of family directors was halved to three.

The family council took on an advisory role in selecting the corporate CEO, family members serving on the corporate board, and the board of Menasha Corporation Foundation, which is funded by the family business.

In its early years the council had its hands full building a foundation for the long term. It drafted governing documents: the council’s statement of purpose, then bylaws and eventually core statements of the family’s vision, values and commitment to best practices in engagement, education, connection and governance.

The council has continued to plan and stage the annual family gathering, which today stretches over three days in June. In a typical year it includes a plant tour, dinners together, the annual shareholder meeting and the morning-long family assembly.

The assembly offers the council a chance to report on its work and the family a chance to present its suggestions and concerns. Often, another business-owning family is invited to tell its story. Some years Smith family members will break into discussion groups and report back ideas for how to strengthen the family enterprise.

Once inclined to cluster with their own branch in such a setting, family members today are connecting across those boundaries with second and third cousins who have become good friends.

The council has broadened the scope of its year-round work. It established private sites on social media platforms and built out an online family tree that traces family lines back into the 1500s. Twice a year the council publishes a colorful magazine-format newsletter that includes updates on family births, college graduations and recent marriages; articles about family and company history; and in-depth interviews with individual family members.

The council has encouraged family members to work as interns at Menasha and to join the company as full-time employees. Council service provides family members an opportunity to develop their leadership abilities. Two council chairs have gone on to serve as corporate directors.

The council connects the family’s baby-boomer fifth generation with emerging leaders in the sixth generation. From its inception, the council has included a sixth-generation family member, and several years ago the council had its first sixth-generation chair.

The sixth generation has stepped up in other ways, setting up its own philanthropic “NxG Fund.” Launched with seed money from the corporate foundation and supported today with contributions from family members, the fund seeks to help disadvantaged youth in communities where Smith family members reside.

Meanwhile, Menasha Corporation is prospering. Between 2011 and 2016, sales, profits and the value of the company’s stock ­doubled.

At age 15, the Smith Family Council faces a new set of challenges: How to recruit new talent to the council, and how to ensure the council’s work remains compelling. How to build a more collaborative relationship with Menasha’s board and business leaders — and gain the financial support to expand its impact. And how to help guide the transition of generational leadership from the fifth generation to the sixth so the legacy of the Smith family’s business enterprise remains intact for decades to come.

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With headquarters in Salem, N.J., where it’s been since 1915, Mannington Mills Inc. manufactures a diverse line of commercial and residential flooring. It employs about 2,700 associates worldwide and has operations in six states as well as the United Kingdom.

Mannington makes residential and commercial sheet vinyl, LVT (luxury vinyl), laminate and hardwood flooring as well as commercial carpet and rubber. Its business is structured in three divisions: Mannington Residential, based at its headquarters location in Salem; Mannington Commercial, based in Calhoun, Ga.; and Amtico International, based in Coventry, England.

Having endured two devastating fires early in its history, the Great Depression and the more recent Great Recession, Mannington has rebounded time and again thanks to innovation, determination and the ability to adapt quickly to changing market conditions. It is currently ranked fifth by annual revenue among U.S. flooring manufacturers, right behind such household names as Armstrong, Shaw and Mohawk — companies with which Mannington regularly competes, and often wins.

To celebrate its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Menasha Corporation

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

The company was founded by John B. Campbell, a Scottish immigrant who with his sons Neil and Kenneth on Dec. 28, 1915, bought an oilcloth manufacturing company. Later, John B. “Johnny” Campbell II, grandson of the founder, ushered the company into the modern age by introducing 12-foot rotogravure printed sheet flooring and launching into the commercial flooring realm.

Today, Mannington is led by fourth-generation member Keith Campbell, who serves as chairman of the board. Under his leadership, the company has grown dramatically. It has expanded into two new product categories, LVT and rubber, and reached new parts of the world through its acquisition of Amtico International in 2012. Four fifth-generation members have joined the company in various positions. In total, there are 105 family members, about a third of whom are shareholders.

The company’s management philosophy states it is “family-owned, yet professionally managed.” Since 1968, the company has had a non-family CEO, and since 1976 it has had an independent board of directors. Outisde directors constitute three-quarters of Mannington’s board.

Fourth-generation member Carolyn Campbell Brown chairs the five-member family council, which was created in 2014. As family council chair, she also serves on Mannington’s board. The family council’s role is to preserve the family’s business legacy, promote cohesiveness, foster communication and awareness, and support the “patient capital” provided by the shareholder base. Its governance has strengthened and engaged the family owners in the business through its thoughtful and decisive actions in the past five years.

• A formal family employment policy was implemented, which outlined stringent education, work experience, age and other requirements for lineal family members; established need requirements for the business; and set internship guidelines for the wider family.

• The shareholder group is due to double within a decade, so legal and estate planning advisers helped frame a new policy. The Campbell family now has a shareholder policy with strong lineal ownership provisions that covers all classes of stock and details how each class can be gifted. 

• Family members are expected to do estate planning. Large shareholders’ gifting plans and estate tax plans reduce the need for large liquidation outlays by the company when these shareholders pass away. The family council brings in experts to hold seminars on estate planning and serve as a resource.

• The family council communicates frequently with the family assembly. Keith sends periodic letters to the shareholders. The council holds biannual meetings, choosing locations near one of Mannington’s manufacturing plants. It also produces a quarterly family newsletter, “Campbell Connection,” which includes messages from Keith and Carolyn, key new product developments, updates on family members’ activities and news from the board.

• The council also focuses on education. With many in the fifth and sixth generations coming of age, the future success of the council and the company rests with the younger generations.

• Philanthropic endeavors offer opportunities for the family to engage in their communities. Whether individually or as a group, members are encouraged to be involved in whatever stirs their passion. At the family meeting in Chattanooga, Tenn., this past July, children as young as 5 spent time at community-based organizations like the YMCA preparing meals; the Chambliss Center for Children assembling packs of school supplies; and the American Red Cross distributing hygiene care kits.

Mannington’s tenure as a family-owned company is a testament to the approach to management the Campbells adopted in the 1960s and have stuck with ever since. Family owners and professional managers collaborate to run a warm, friendly and successful company under a focused set of values: Care, Do the Right Thing, Work Hard/Play Hard, and Control Our Own Destiny. “Companies have to change to survive and thrive, but you can’t change who you are,” Keith says. “Changes in business should not change the values. The values are sacred; your personality has to remain.”

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MacLean-Fogg, founded in 1925 in Mundelein, Ill., as a manufacturer of nuts and bolts, primarily for railroad cars, now makes engineered components for the electrical, telecommunications and automotive industries. The company, which generates $1 billion in annual revenues, operates 23 factories around the world.

MacLean-Fogg has two main businesses: MacLean-Fogg Power Systems, which serves the electric utility, telecom and civil markets, and MacLean-Fogg Component Solutions, which serves the automotive and heavy truck industries.

To celebrate its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

Third-generation chairman Barry MacLean bought out the shares of his late older brother, John A. MacLean III, and his middle brother, David, who still serves on the board. Barry’s five children have been shareholders for years, but Barry has held the majority of the voting shares. The G4s are now taking on more responsibility, and the family is in the midst of multiple transitions.

Barry’s son, Duncan MacLean, became CEO in 2017. He has brought a new leadership style and a culture shift to the business, based in part on his experience working in Germany from 1999 to 2003. Under Duncan’s leadership, the company is investing in technology and implementing what he calls “modern ways of thinking.”

MacLean-Fogg is preparing to refresh its board by bringing on directors with the skillsets to support Duncan and his strategy for the business. The board currently consists of four family directors and seven independent directors. A governance committee, formed in 2018, is assessing how the board might evolve. The committee also meets with the fourth-generation shareholders twice a year to provide a bridge between the family and the business — an element that had previously been lacking.

The family office, established about 10 years ago to support Barry, is changing to support all six shareholders and other family members. Fourth-generation member Gillian MacLean Growdon took over in 2016 as executive vice president of shareholder relations and head of the family office. She oversees family estate planning, tax planning, financial planning, shareholder education and family gatherings and retreats. In consultation with Barry, she also oversees the family’s investments outside MacLean-Fogg.

Gillian is in the process of separating the family office from the operating company while ensuring communication and transparency. The family has begun to convene family assembly meetings.

The fourth generation is focusing on preparing for the G5s to become shareholders. There are 12 fifth-generation members. Two of the older G5s have participated in company internships. The family has begun educating them on legacy, stewardship and the family values.

Fourth-generation member Adrian Jay serves as president of the MacLean Family Foundation, which is also undergoing a transition as it evolves into a full grantmaking foundation. 

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