After writing about a subject related to in-laws for three consecutive weeks, I decided to collate specific emails coming from concerned business owners going through rough patches with their in-laws. Since share ownership is on the line, it was appropriate for me to add an actual case study coming from these emails.
Inheritance of shares by an in-law can be mired in a difficult situation that requires careful collaboration, management and action by the family. It is important for them to work together, communicate openly, and take decisive action when necessary to protect the business’s future and ensure that it remains a source of pride and success for future generations.
I’ll start by sharing this particular email from a concerned matriarch. “Dear Sir, the family business that was established by my late husband is at risk of changing ownership all because my eldest son is a henpeck. His wife is assigned to finance and administration and controls the shots. Sadly, my son just follows her. Even the relatives of his wife are already working in our family business and my son as president can’t do anything about it. Even major decisions require his wife’s approval. I am 76 years old and already retired after handing over the business to my two sons more than six years ago. With so many problems in business caused by my daughter-in-law, my other son is pressuring me to decide before it’s too late. I have been reading your columns regularly and I have finally decided to share my concern. Can you help us, please? I don’t know what to do anymore.”
I am unsure what the matriarch’s role was as she did not mention if she was still the chairperson or an active member of their Board assuming it is a corporation. Nonetheless, please see my reply to her frantic request for intervention.
Urgent family meeting
“In such a scenario, you and the family members need to take several steps to address the issues and ensure the future success of the business. The first step is to gather family members and discuss openly the current state of your son as president. Is he still capable of making decisions without the wife’s interference? Is he qualified to continue as president? Does he need intervention and counseling to address the wife’s domineering nature? Should the family confront the wife if the husband cannot handle her? These are usually initiated by the family if they are capable of talking about sensitive issues. Otherwise, it pays to invest in a qualified third-party facilitator.
Board and ownership intervention
If there are no clear decisions and mandates related to the first step, the next option is to pursue revisiting ownership laws and the best way is to check if the business is a corporation. There is a world of difference between a single proprietorship, partnership and corporation. Let us assume it is a corporation and therefore by operation of law, it has shareholders that elect representatives to sit on the Board. We usually refer to these representatives as directors and there are many types. The most common are usually classified as family and nonfamily directors. Typically, nonfamily directors can be elected as nominees and or independent directors and they all sit on the board clothed with the same rights. They are also empowered by law to set policies, approve budgets and evaluate the senior management team on how they are running the day-to-day operations of the business.
In the case of your henpecked son and his domineering wife, it is important to determine whether they have the necessary knowledge and experience to manage the business effectively. If the performance of the business has been bad since they assumed management and their presence continues to create problems in the organization, your shareholders represented by the Board of Directors may need to consider other options, such as hiring professional managers to replace your son and his wife, reorient them, and in the extreme, buying back the shares that have been passed on to them. By the way, do you already have family agreements like a constitution and a legally enforceable shareholders agreement?”
To be continued...