Most parents want their children to enjoy a higher standard of living than they had. But when does this loving aspiration cross the line into raising a spoiled brat?
For owners of successful family companies, the dilemma is no small matter. These parents have the ability not only to give their children expensive toys, debt-free schooling and exotic vacations, but also to offer them lucrative jobs—whether or not the kids’ credentials and talents would land them a high-paying position outside the family.
Especially in tough economic times, it’s tempting to rescue your offspring from the frustrations of an arduous job search by creating positions for them in the family firm. But what will be the long-term effect on your business? Those who decide against offering make-work jobs face another quandary: If your children are used to receiving everything they ask for, how will they react when you tell them the company employment policy can’t be altered for their benefit?
Several articles in this edition of Family Business address the topic of next-generation entitlement, and how to teach your children to be responsible stewards of the family’s wealth. Even after the recent economic turmoil, it seems that a growing number of people are confronting these concerns. A Boston Consulting Group study released in June found that the number of millionaire households in the U.S. rose 15% in 2009, to 4.7 million.
Fortune magazine reported in June that America’s two richest men, Bill Gates and Warren Buffett, had met with billionaires and their spouses and asked each ultra-wealthy family to promise at least 50% of its net worth to charity. (In August, Buffett announced that 40 wealthy individuals and families had agreed to do so.) Billionaires can afford to give away half their money and still have enough remaining to ensure their heirs will live comfortably. Yet before the Gates-Buffett meetings, most had not donated nearly that much, Fortune reported. Based on IRS data from 2007, the Fortune report said, the U.S.’s 400 biggest taxpayers had a total adjusted income of $138 billion and took slightly more than $11 billion as a charitable deduction, or about 8%. When you adjust the amount deducted because deductions are limited for very large gifts, Fortune noted, the percentage changes only to 11%—which is just 1% over a tithe.
Of course, most family business owners aren’t worrying about what to do with an extra billion. Even so, they’re hoping to avoid raising an entitled SOB (“son of boss”). At the “Transitions” conference presented by Family Business and Stetson University last April, John O’Brien—co-founder with his wife, Lee Ann Howard, of Howard & O’Brien Associates Inc., an executive search firm in Cleveland—said his young kids are told to divide their $5 allowance in three parts: “some to keep, some to save, and some to give away.” That sounds like a great way to start.