Boxing In Court: A Game The Whole Family Can Play
I recently spoke to a group of US billionaires. Virtually everyone in the room was the beneficiary of a third, fourth or even fifth generation family business. One fellow in particular, a wise old guy, told me that his family shareholder agreement made family harmony mandatory. Mandatory happiness – his wry smile told me everything.
At the center of the greatest family wars are almost always great family businesses. The unraveling of wealth and relationships begins when the founder, or at the very least, the controlling shareholder, dies. This is when sibling rivalry often elevates itself to an Olympic sport.
The average guy in the street is at a loss to understand how wealthy and über-wealthy families manage to mangle their businesses when they seem to have so much going for them. Surely good planning implemented by top-notch lawyers, clever accountants, clairvoyant financial planners and award-winning psychotherapists should keep wealth protected.
The answer is that successful business owners are often themselves the glue that keeps the family together. They use the power of their will (that would be the paper will) and the subtle threat of disinheritance to drive family harmony.
And so when the controlling shareholder of a business dies, the gloves come off. All that suppressed anger, the regret and the sense of entitlement gush to the surface. Family patriarchs and matriarchs, who have used their fiduciary powers to control other family members in an unhealthy way, pave the way for litigation.
Where there is oppressive one-way control in a family there is seldom conversation. There may be lots of talking, but little true conversation, trust or respect.
The Waxmans: heavyweight champions of the family business meltdown
There have been bigger family fortunes squandered over sibling rivalry than that of the Waxmans, there just aren’t too many where emotion eclipses rational behavior in such a calamitous way.
This is a story that pitted two brothers and their families against each other in a war that culminated in the courts in 2002. Underlying this conflict, however, was more than money and personal enmity. There was a clash of personalities.
The story began in 1911 when Isaac Waxman arrived in Canada from his native Poland and started a scrap-metal business. The story ends with his two sons allegedly squandering more than $10 million in legal fees and more than 200 days battling in open court fighting over the business. One brother, Morris, emerged victorious, receiving damages from his brother exceeding $50 million. The loser is a family name forever synonymous with pathetic rage, vitriol and mean spiritedness.
Family: you can’t pick ’em. That’s what makes them so whacky
One of the great wonders of the world is how children can be born to the same parents, be raised in the same home and yet have profoundly different views of the world.
Parents who encourage risk taking, who insist on children finding their way in the world independent of family control, who talk openly about the importance of family trumping wealth, paradoxically protect their wealth.
Something in the Waxman home long ago set the stage for what transpired. Sadly, the Waxmans did leave a legacy – a chilling reminder that open court is a ghoulish place to practice family business succession planning.
Do you know a family business that’s about to become a full contact sport?