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| Advisors' Forum |
Sibling Rivalry
11/01/2007
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Egregious disparities arise from time to time. In some cases,
Dad insists that his daughter work part time in order to spend more time at home
raising his grandchildren. Meanwhile, he will continue to pay full compensation.
This invariably creates dissension within the family, as well as with nonfamily
members who begrudge the obvious disparities. In this example, Dad needs to face
the fact that he is making a gift—regardless of what he wants to call it—for
business and IRS-reporting purposes. He needs to assist the stay-at-home
daughter in another way.
Fortunately, you seem resigned to accept equal ownership of the
company with your brother, regardless of length of service and value of
employment contributions. This is correct on your part; the distribution of
ownership equity is wholly independent of compensation issues.
A candid discussion with Dad is appropriate. Do not try to
argue your greater worth to the company when compared to your brother. That is
not your responsibility. Request an independent analysis of compensation
policies. Integrate them into the greater strategic plan of successorship that
is currently underway in your family business.
Joe M. Goodman, Adams and Reese, Nashville
It is common in family businesses
for parents to strain to treat their offspring equally. The general goal that
family firms strive toward is for offspring working in the business to receive
equal shares of equity in the firm, but that each should be paid according to
his or her economic value to the firm. Determining this usually involves
professional assistance and/or survey information from outside the family.
To remain competitive, a family business must be run as a
business. In most industries and companies, top sales positions usually pay more
than HR positions. That normally occurs through a variable component of the
compensation for sales staff based on sales goals and their achievement.
Bonuses at the end of the year for reaching company goals may
be split equally among the family in family firms, but it is more appropriate to
divvy up the total bonus with an equal percentage increase of each person’s
compensation.
Tom Juenemann, Institute for Family-Owned Business, Portland,
Maine
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