In-laws or outlaws?

“The trouble in family businesses only starts when the in-laws enter the family.” If I had an ounce of gold for every time someone said that to me, my stash would rival the inventory in Fort Knox. Founders, in particular, seem to believe that their offspring are perfectly attuned to each other and in exquisite harmony until the entry of that necessary evil—a family business spouse. The parents’ usual desire is for the child to marry someone from a similar background as in comparable family business experience. They hope that the spouses will then totally understand the need for them to be excluded from family meetings or not be privy to the family’s financial information and plans. It is almost impossible in today’s world for any parent to dictate their children’s choices of mates, try as they might. Indeed, even if the spouse comes from another family business, there is no guarantee that the families operate in similar fashion or that any spouse is willing to be kept in the dark as to his/her own financial future or those of the children of these unions.

The angst is real and business families need to decide how they will treat with the new members of their family. First off, there must be recognition and acceptance that in-laws are part of the family. A family business owner was told to bring his family to a meeting and he actually asked if that included his wife. That attitude is not as outrageous or, indeed, as uncommon as it reads. Business families are notoriously private and fearful of “strangers” entering the fold and gleaning knowledge about their innermost operations. Spouses are not, however, merely conduits for the next generation. While they may cause some disruption at times, they have the potential for contributing to the family’s overall aims. To begin with, spouses are part of the parenting team that prepares the next generation for ownership of the business. They are the first line of defence in the protection and dissemination of family values. As in all families, spouses need to be inducted into a family and learn the sacred cows of their spouse’s family.

Two critical questions
In business families, there are additional considerations as to the initiation of spouses. In particular, there are two critical questions that those families must answer. And, as in all of the family charter policies, these are best resolved before the issue becomes pressing. The first question is whether or not in-laws should be allowed to work in the business. There are those who believe that this is a recipe for disaster since in-laws may be reporting to another family member (not the spouse) and any normal employer-employee contact could lead to disagreements and disciplining actions. Then, says the family business owner, there goes my family harmony at Sunday lunch. There are also the usual complications of a couple working together. And it is almost impossible to fire a blood family member, why add more to the fray?  Other business families feel that a talented in-law who has the interest of the business at heart ought not to be excluded from employment in the family business. Moreover, the business can be sufficiently professionalised with entrenched human resource policies that are evenly and equally applied to family and non-family members alike. To their minds, this would negate concerns about Sunday lunch.

The business does what it does, and the family proceeds as usual. This is very much an individual family decision and it is not one that my clients make lightly, even though they usually give me their answer fairly quickly. Often, it is based on family history, observation of other business families and, yes, even fear of unknown consequences. This is one of the most emotive family business issues and one of the first to be tackled when deciding upon a family employment plan. The second question that exercises the collective is the transfer of shares to a spouse—either via divorce, gift, sale or death. Pre-nuptial legal agreements are the stuff of movies and American law, but are not legally binding in T&T. Family business owners become very agitated at the thought that “some son-in-law will come here and tell my son how to run the business.” I am constantly pointing out that it could also be some daughter-in-law, but gender bias holds strong in our family businesses. My experience to date is that most shareholders prefer to have only descendants hold shares and make some other arrangements for the welfare of their spouses. It is a ticklish point and one that could well cause contention within a marriage, if not carefully explored and handled. Shareholders must think deeply about the issue, consider all possibilities and be able to effectively communicate their thought process.

 
Two CEOs
I always remind clients that a spouse is the other CEO of the business—the chief emotional officer, as per family business lexicon. The spouses are responsible for producing and shaping the next generation and their input is not to be discounted. Nor is the influence of pillow talk on the other CEO—the chief executive officer. But these are not the only reasons to be inclusive of the in-laws. They are part of the family, whether they own shares or work in the business or not. Inclusiveness will serve the family far more than any deliberate exclusion. And even if some spouses work in the business, there are others who have a career outside of the business. I am not advocating that in-laws be uniformly allowed to own shares or work in the business. That is very much an individual family decision and it is not one that my clients make lightly, even though they usually give me their answer fairly quickly. The challenge is to include the in-laws as part of the family and the family business. This need not mean a family annual general meeting in which the financials are disseminated and discussed, although that is an option. Another opportunity is a regular family forum to educate the entire family, including spouses and children above a prescribed age, about business, the family business, family dynamics, and a host of other topics.
In my practice, those families who implement such meetings frequently are more likely to reduce incidences of “outlaw” behaviour among in-laws.

Dr Annette Rahael is a family
business adviser and can be reached at: annetterahael@gmail.com