In this issue
The family members of IDEAL Industries Inc. refer to ourselves as the IDEAL family in jest. Ideal isn’t a name that suits our modest family members, and our family interactions at times have been far from “ideal.” It took us years to figure out that when our founder and my great grandfather, J. Walter Becker, chose the name for the business, IDEAL referred to the relationships he hoped to cultivate; it didn’t refer to himself or the business.
I recently met a woman—I’ll call her Gladys — who owns a substantial enterprise that employs several family members and loyal managers. She is extremely proud of her company’s stature in the community and its ability to provide jobs and contributions to philanthropic endeavors. The only problem? The business has been consistently unprofitable. She keeps it afloat by infusing her own money, to the tune of several hundred thousand dollars for each of the past four years.
The opportunities for involvement and information that privately held companies extend to investors who are strangers are rarely extended to shareholders who are relatives. In my experience, few family businesses provide their minority shareholders with even one of three critical protections most investment bankers, venture capitalists and private equity investors insist on before purchasing a minority interest in a privately held company. Majority owners of family businesses often view a family member’s request for even one of these protections to be almost a declaration of war.
As the spinning quarter struck the glass covering the wooden table in the conference room of a suburban law office, a plunking sound disturbed the somber silence reining among the lawyers and the opposing clients—a brother and sister, “Hal” and “Joan”—sitting at opposite sides of the table. That sound was followed by a tinny grinding noise made by the quarter as it rolled on its edge in a meandering fashion until it fell, tails-up, directly in front of Joan. Tails, she loses.
There are many myths about family businesses. One of the most common is that all family companies are led by a family member. In fact, many family-owned companies, including some of the world’s most successful family firms, have non-family CEOs at the helm. Yet some people—even those who are family business owners themselves—find it hard to fathom that this is a viable arrangement.
Company revenues: $400 million (in 2011).
Number of employees: 2,000.
Years with the company: 41.
Generation of family ownership: Third. My grandfather started a home-delivery dairy, and my father took that over in the 1950s.
First job at this company: Running a Stew Leonard’s ice cream parlor. It was a busy summer, and my father asked me if I wanted to run it.
At what age? 17.
A survey of U.S. private company CEOs by tax and advisory services firm PwC found that 80% are adopting elements of a corporate governance strategy. The study—known as PwC’s Trendsetter Barometer—reported the views of 221 chief executives of privately held American businesses; they were surveyed between April 20 and July 18, 2012. CEOs of family-owned businesses were among those queried, though PwC’s report does not separate their responses from those of their non-family counterparts.
The theme of the Transitions West 2012 conference, which took place in November and was sponsored by Family Business and Stetson University, was “Ownership, Management and Entrepreneurship: Building Family Legacies.” Conference sessions focused on three important ways to build for the future: (1) Develop a comprehensive governance plan; (2) Establish a family council to foster collaboration among the extended family; and (3) Teach financial literacy to your next-generation members, and encourage them to be entrepreneurial.
Stuart Marwell, the second-generation chairman and CEO of Curtis Instruments, knows the advantages as well as the drawbacks of operating a family business. He’s also well aware of some of the inherent dangers—and he runs his multinational family enterprise with an eagle eye on all three.