In this issue
The spectrum of family businesses includes countless small dealers, franchisees, anddistributors who depend for their livelihoods on contractual arrangements with a large manufacturer.Fast-food outlets, soda bottlers, automobile dealerships, furniture distributors — these are just a fewof the industries in which small, independent firms, many of them operated by families, benefit fromformal ties with big corporations.
No question about it, a lot of my attitude toward money stems from growing up during a prettyhardscrabble time in our country's history: the Great Depression. And this heartland area we come fromout here — Missouri, Oklahoma, Kansas, Arkansas — was hard hit during that Dust Bowl era.
When family businesses seek to recruit an outside, nonfamily CEO to run the company, theyusually have to offer a compensation package that promises to build the individual's net worth. In theeuphoria of a hiring decision, often the first thing the family gives away is equity in thebusiness.
Our firm has consistently advised against offering ownership as a hiring incentive. Giving away equitynot only dilutes family control, it can create weighty problems later on if the manager is notretained.