CEO parents are usually NOT best suited for making the tough call.

Drew Mendoza
Drew Mendoza

Family firm CEO founders often make really bad decisions when given the opportunity to select their successor.  They’re terrific at running the company, unequaled in closing deals and driving a hard bargain but ask them to name their successor and watch them lose their ability for human reason and corporate leadership.  “After much thought, (I decree that) my successor will be insert-first-name-here

“Much though” is often the son, daughter, niece or nephew s/he thinks will upset as few people as possible or the one with the longest tenure.   No matter – the real kicker is this:  selection of successor CEOs, by all rights, belongs in the sandbox of the Board of Directors.  If the board consists of family and inside managers only, it’s a safe bet they’ll do whatever it is the senior leader – usually parent to many – decides.  No open debate among qualified, experienced business people.  No obvious linkage between next generation shareholder vision, corporate strategic objectives and successor skill sets.  Simply the decree.

Then estate plans are drawn up, control willed to the successor at the death of the second parent to die (if a first to second generation transfer) and, “by golly – I sure handled that well.  No arguments among the kids and no room for arguments later on because control is in the hand of the anointed one”  the founder assures himself.

Nothing could be farther, father, from the truth!  Instead, what may likely happen is the siblings or cousins not given any control will find ways to express their wishes.  They will argue during holiday dinners on matters of compensation and reward.  They will try to gang up on the new CEO.  They may even punish you and your spouse during the waning years of your life by withholding visitation with grandchildren. 

Estate plans and bifurcated stock do not equal family harmony.  Family and shareholder harmony in family enterprise is achieved through robust governance, perceived procedural justice and healthy debate with unbiased input from serious-minded, experienced business people with no stake in the outcome.

And – here’s another reason to abdicate the decision to a more impartial process and jury.  Life is hard enough.  You’ve built a terrific enterprise,  the source of employment and financial security to all those families.  You’ve bested the competition in tough times.  You have earned the right to dodge this bullet and avoid being the source of future family discord.   Over the long haul – you’ll stand a much better chance of being remembered as a great leader and terrific parent.

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