THEY are referred to as children of wealthy parents who have lots of money set aside for them and often feel entitled. Everything they spend is paid for by their trust fund.
When you think of trust fund babies, you immediately think of socialite Paris Hilton, the celebrity great granddaughter of Conrad Hilton, the founder of Hilton Hotels.
In a Wikipedia article, critics and admirers have said that Hilton is “famous for being famous,” a celebrity not because of talent or work, but through inherited wealth and lifestyle.
I was in Singapore last week for my regular family governance work and was introduced to a business owner who narrated how his unprepared, ill-equipped eldest child mismanaged and almost caused the downfall of their 40-year-old business.
As the old man was talking to me and a colleague, he was shaking, groping for words and trying to make some sense out of the irreversible damage inflicted by the son’s entitlement. It was heartbreaking to learn that the assets were dissipated because of the son’s faulty judgements and his self-fulfilling prophecy that he should not be made accountable for his actions.
I finally got to meet the western-educated son over lunch, and as expected, he was cocky, abrasive and showed no traces of remorse for his failed actions. No doubt, he was, pun intended, an SOB (son of the business owner).
To conclude our lunch, I told him that he will no longer report to his father but to a functioning board comprising three members (his father included) and two independent directors. And that in my next session, a full audit report must be submitted to the board for review. Lastly, the son will also transmit all his initiatives and henceforth will strictly follow corporate governance policies.
To regain investor and creditor confidence, the son will also be required to sign an employment agreement that will monitor his performance based on financial metrics and qualitative variables.
Non-compliance of these rules and targets will result in his replacement by a non-family CEO within 12 months. He was still stunned with disbelief when I excused myself to catch a flight back to Manila.
The term trust fund baby is more of a stereotype for entitled kids who love to party but don’t even know the value of hard work. Having entitled and confused children in the family business is fraught with danger. When they are made to join the family business and there are no rules defining their participation, entry and exit, you would typically expect these children to act like spoiled brats and bully their way by demanding power without accountability.
Consultant Rick Johnson correctly stated that “an attitude of entitlement that is displayed openly can create major challenges for even the most successful family business.” This attitude is often displayed by the family member’s work ethic expecting every employee to “live to work” and give of themselves unconditionally while Junior takes off every Friday afternoon or goes on extended vacations.
Johnson further expounds that these children often manage with an autocratic style with little empathy for employees and leaving the impression that they can do whatever they want because they will run the company someday.
What Johnson highlighted is a very common sight among family members working in successful family businesses in Asia and the next generation “owner mentality” is causing a lot of sleepless nights for parents, founders and business owners.
The fear and paranoia are real as the sense of entitlement feeds into the child’s last name as a birthright then degenerates into a mindset of an owner mentality.
To be continued.