MADRID–I started writing this article when I was on the plane en route to Dubai last Thursday to grace an international event related to my other vocation as a book author.
After a brief three nights in UAE, I flew back to Manila Sunday midnight and flew to Spain the following day to attend the board meeting of Gruppo Emperador in Madrid.
I sit as independent director of the listed liquor firm.
As most of my readers are probably aware, Emperador acquired Spain’s largest and oldest iconic brand Fundador Pedro Domecq in an “all-cash” deal worth 275 million euros around the same time in November last year, thus it was appropriate for the board to meet in Madrid to plan its global business initiatives for 2017. The Fundador Group is a family owned business that dates back more than three centuries ago.
Sharjah International Book Fair 2016 in UAE
The prestigious fair is the third biggest book fair in the world and is expected to generate more than 1.5 million visitors during its 10-day run, slated to end on Nov. 12.
I was privileged to be one of only 150 book authors handpicked from all over the world to present my two books on family business governance and succession and be a resource speaker, sitting alongside some of New York Times’ international best-selling authors/novelists like Eric Van Lustbader of the thrilling Bourne Identity fame.
It was both an honor and a unique experience as Wong + Bernstein’s continuing efforts in advocating best practices in family-owned enterprises are now beginning to bear fruit. Countries are now slowly realizing the significant contribution of family enterprises to their respective economies.
A family branch in a dilemma
I want to share a common dilemma involving a family business enterprise engaged in logistics and trading. This is a third generation business that I have been actively helping for the last two years. During my monthly sessions with the members of this branch, I would always hear the family patriarch assert, “Our family started the importation of our products, so we sure have to be the ones to decide on whether or not our company should expand on it”.
That statement appears harmless but in reality, it is a red flag and a future source of conflict amongst different branches with common ownership.
The entitlement of the branch laying claim to the business assigned to them during the startup stage can pose serious consequences if rules are not cascaded to the cousins, both active and non-active.
On my end, I took the opportunity of explaining to that branch that the enterprise is still commonly owned by different branches. I also reinforced the notion that corporate governance and stewardship should be the overarching principle that should pervade in the enterprise.
Making the branch patriarch understand his role in the whole organization diffused the tension that was quietly building up.
In retrospect, regardless of the business context, when the concept of the family would be inserted into the argument, divisiveness would start to emerge. This is why the support from non-family business experts would be highly recommended (see my last two articles).
The neutral advice of these professionals coming from their many years of corporate and senior level experience implementing best practices could provide the cousin consortium stage with the needed guidance to set aside their biases and become proactive.
Guideposts are wonderful pillars to start governance
A good starting point for family members would be to collectively ask themselves the following questions:
What goals do we want to set for the next three/five/10 years for their shared assets?
Who are we as a family?
Why do we have to be in business together? And own shares together?
What does the business want to accomplish?
What do we want the enterprise to offer to its stakeholders?
What are the philosophies that define how the business should act in the ownership and management of the business?
When these most basic and purposive issues plus a myriad of other daunting and emotionally charged issues like control, leadership, entitlement, sustainability and stewardship are addressed, then the likelihood of a conflict will be minimized.
On the other hand, ignoring the red flags can eventually result in a conflagration. As a family member reading this article, the choice to do something is really yours.