In Section One of this Family Business Wiki Master Class teleconference, Francois de Visscher describes the challenges of balancing the capital, liquidity and control needs of a family enterprise.  He notes that successful multi-generational families-in-business pursue sustainable growth strategies for the business while also nurturing the family's patient capital.

 

In Section Two, François describes a variety of capital and liquidity solutions available to family enterprises.  Section Three is devoted to "Families Investing in Families" -- family offices serving as the "patient investor of choice" for family businesses.  (Click here to access recordings of this Master Class.)

 

It is estimated that over 90% of all businesses in the Arab world are family-owned and/or family-run. Many of these businesses have shown remarkable leadership and achievements over many generations. It is quite common in family business literature to take the similarities between family firms across the world and use them to create theories. While I do agree that due to their very nature business families are bound to come across the same obstacles, notwithstanding their countries of origin, I also maintain that we cannot apply theories derived from one cultural setting to another without taking into consideration certain particularities. In short, I think there are 6 things that you should know about Arab family businesses.  (Read more from Ramia M. El Agamy and add comments.)

 

Much ink has been spilled in the financial press recently over the bad finances of Europe's periphery, and of Greece in particular. The country's level of debt appears like an unsolvable problem. It resembles another apparently unsolvable issue, which is described in the country's mythology.

 

The issue relates to a peasant farmer named Gordias, who became king of Phrygia after the event was predicted by an oracle. Gordias' ox cart, on which he was travelling to Phrygia when the town's population proclaimed him king, became a symbol. It was subsequently placed in the centre of the acropolis, yoked to a pole with a large knot, with no end to it: the Gordian knot. The tale says that whom ever managed to untie the knot would become king of Asia, which Alexander the Great did, by a straight and brutal sabre cut.

 

While too much indebtedness, such as Greece's, may be considered as a Gordian knot, exceptional levels of wealth often become extremely difficult to manage in a way that satisfies all members of a family as well. Hence wealth sometimes becomes a Gordian knot too. For wealthy families, untying such a knot translates into matching financial objectives and creating an appropriate structure.  (Read more from Gregoire Imfeld and add comments.)

 

In this video interview, Pascale Michaud notes that family enterprise governance is often approached as a process of creating structures and sytems, such as a family council or family constitution.  These structures might be too large for some family enterprises, and may be implemented in a mechanical fashion -- especially if the development of the structures is being driven more by a family business advisor than by the family itself. 

 

As an alternative, Pascale suggests that a family enterprise consider starting with a simple project which can provide leadership opportunities for all members of the family.  A community service project, for example, can provide opportunities for a family to learn skills, learn about the family code of conduct, learn about each other, and see their family values in a new light.  Engaging in this kind of activity can make it easier to then think through potential governance strutures, and can increase the likelihood that the governance structures will be sustainable.  (Click here to see the video).

Interpreneurship. A word coined by Ernesto Poza, author of Family Business (Cengage, 2009), now in its third edition. Poza felt a special label was needed to identify those who were not just inheriting ownership or management positions in their families' enterprises, but who were being prepared to join as intergenerational entrepreneurs, leading the ventures to further success. What steps can be taken to develop the next generation of family entrepreneurs? What mistakes do families need to avoid in raising these successors?
 
Poza's notion of the interpreneur reflects what successful executives of firms of all sizes and ownership forms have learned in recent years. It is no longer sufficient for an organization to be well administered. To survive in a globally competitive environment, businesses must seek new opportunities. They must adjust to changes occurring around them and innovate to survive and prosper. This begs the question of whether the senior family business leaders are fostering entrepreneurial mindsets in the succeeding generation. Here are four actions that can contribute to this.  (Read more from Frank Hoy and add comments.) 

In this video interview, Ann Kinkade, the President of Family Enterprise USA (FEUSA), indicates that FEUSA seeks to become America's most credible voice regarding family businesses, and to positively influence policy makers who affect family business. FEUSA will accomplish this vision by:

Coast Citrus Distributors is one of the largest and most successful wholesale distributorships of fresh fruits and vegetables in the U.S.  The company did more than $300 million worth of business last year.

In an effort to strengthen itself, the company sold a 49 percent stock interest in 1989 to a public company, hoping for synergy and growth because of their common interest. The hoped-for benefits, however, never materialized.

 

But the Alvarez family didn't have the resources to buy their partner out. All of the family shares were owned by founders Roberto and Margarita Alvarez, who at the time were both in their 80s. The couple had never done succession planning and their retirement plan didn't make any provision for their shares of the corporation. In 2009, Freeland (the current CEO) suggested setting up an ESOP as a way to resolve all these problems at once.

 

The ESOP was used to buy back all of the stock held by the 49 percent partner, plus about half of the stock held by Roberto and Margarita - giving the couple the cash to achieve important personal goals. As an added kicker, through the ESOP they were able to keep all the proceeds without having to pay the usual capital gains tax. The price for the stock sale was set on the basis of an independent business appraiser hired by Coast Citrus. An ESOP is a special kind of employee retirement plan that buys company stock which it then holds for the company's employees as retirement savings assets. Thus, as a result of the ESOP's purchase of the stock, the employees at Coast Citrus became owners of 70 percent of the company's outstanding stock, with the remaining 30% still owned by the Alvarez family. This enabled Roberto and Margarita to feel satisfied that they had taken care of their "extended family" - their employees.  (Read more from Martin Staubus and add comments.)

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