In this issue
Ernie Silvers was sitting in his office at Egge Machine Co. one day in 2005 when his boss, company owner Bob Egge, walked in. Silvers, who at the time was vice president and general manager, chatted with Egge about the daily operations of the company’s business: making pistons and valves and reselling engine parts.
In my travels around the family business transition landscape, I have come to recognize four landmarks that indicate a succession plan going well. Especially in the third or fourth generations, when the power of the founder’s personality has mellowed and expectations of six-figure salaries have become the norm, it helps to take a look from the 30,000-foot perspective.
I have identified four landmarks of a healthy succession landscape: integrity, innovation, competence and collaboration. The accompanying grid provides a framework for assessment and further discussion.
Estate planning often presents challenges for family business owners as they strive to protect business continuity and provide accessible wealth for their families. The prospect of increasing tax rates, as well as limited credit availability, also place pressures on owners to ensure that their companies and estates have sufficient liquidity to meet their liabilities. The incorporation of life insurance into a business owner’s succession plan can address these concerns, often in a tax-efficient manner.
The recently released Merrill-Capgemini World Wealth Report—conducted by New York-based Merrill Lynch Global Wealth Management, a unit of Bank of America Corporation, in partnership with Capgemini, a Paris-based consulting firm—provides a lot of data and color around the high-net-worth (HNW) and ultra-high-net-worth (UHNW) markets. These insights provide a lens through which the financial community will examine its prior successes and failures and create agendas for future growth.
Many successful family-owned businesses have asked independent directors to join the board, undertaking an active role and sharing the rewards (and risks) of directorship.
How can a family business make best use of an outside director? What can family firms learn from directorship practices in public companies?
Directors’ roles and duties
If your family business survived the economic upheaval of the past few years, congratulations. Your company is likely still standing because of its inherent competencies, long-term strategic decisions and conservative financial management. But it’s not yet time to go back to business as usual, because the economy has not fully recovered.
I was recently approached by the wife of an acquaintance, who told me a very sad story. Her husband, who had inherited the presidency of a third-generation family business and for years had succeeded in building the company, now found himself near bankruptcy. The origin of the problem was a dispute with a former offshore partner who had sourced raw materials for their family’s company. The dispute grew larger and larger and consumed million of dollars in legal fees.
August Charles (A.C.) Tou-douze, who founded Toudouze Market in San Antonio, Texas, back in 1913, would be proud of his family’s success. The market, a cash-and-carry, warehouse-style wholesaler and retailer of more than 6,000 items in 80 food and supply categories, has weathered the Great Depression, competition from giants like Sam’s Club and Costco and the recent economic crisis by sharply focusing on customer service.