Greg Monday is a family-business lawyer at Reinhart Boerner Van Deuren s.c. in Milwaukee, has taught as an adjunct business law professor at the University of Wisconsin Law School and is the author of The Lawyer’s Guide to Family Business Succession Planning. Crain Currency spoke with Monday about what family offices and family businesses have in common, HBO’s Succession and Monday’s dictum that succession should be seen as a puzzle, not a contest.
Your expertise is in family business, not family offices per se. But there is a lot of thematic overlap, of course.
For clients of mine who sell the business, I encourage them to consider setting up a family office to manage the proceeds. I tell them, “This family office is like your family operating business, but instead of making vacuum cleaners, you’ll be making investments.”
From a family member’s perspective, what’s the appeal of working for the family business?
I had some clients who owned a very successful manufacturing business. We were trying to work out a succession plan — their two children were in relatively low-level positions at the company — and when I asked the parents what they wanted to have happen when the father died, they said: “Sell the business. We don’t see the kids running the business.” So I went to the kids and talked to them about it and said, “I guess when your father dies, you’ll sell the business.”
“No, we don’t want to sell!” they said. They explained that they had great jobs at the company. They got paid a lot of money and came in three days a week. They could take maternity leave for as long as they wanted. “We’d never be able to do this in another job. If Dad dies, we want to hire someone to do a great job as CEO, but we want to continue to work here.” They didn’t want to be entrepreneurs, but they also didn’t want to work for someone else.
You’ve written about how important it is to have conversations when doing succession planning.
A lot of estate plans, each kid gets a third of the stock, a third of this building … and then fighting starts. It may turn out that one of the siblings just wants income. You’re not going to get dividends if you’re a passive shareholder. If income is important to you, we can head off that conflict. You can say: “Hey, the factory the business runs out of is held separately in an LLC and pays rent to the LLC. If you want income, then you should get the building, and we’ll do a long-term lease.” But you wouldn’t know that if you didn’t have the conversation.
Is money always at the root of the conflict?
No. I had a situation where some clients were getting divorced. The ex-wife didn’t want to give up her office, while the ex-husband said, “I can’t run the business all day long with someone who hates me in the next office.” I was brought in to mediate the situation and found out after talking with the ex-wife that the main issue was legacy. This was a smaller community, and she didn’t want to give up her connection with the family name, which meant a lot there. I learned that they also had a giant family foundation with their name on it. I said, “How about this: The ex-husband runs the business but promises to fund up that foundation, and the ex-wife will be the CEO of that foundation.” And it worked out. She didn’t need the money — it was the legacy that was important.
One thing you are passionate about is family governance. Why?
I had a light-bulb moment when I studied the case of a family in India called Reliance Industries. The father died without a will, and this immediately created a fight. What I originally took from this was, “Do your estate planning.” But I decided to watch where the business went over the next years. And there were huge problems — lawsuits, an assassination attempt. But the business kept getting more valuable, even with all this crazy stuff happening! I realized that because some of the stock was publicly traded, they had to follow rules. There were independent board members who took their job seriously. There was formal reporting, transparency, governance.
I started to realize that many families where the business failed after the death of the founder, often those families had done estate planning, but they didn’t have best practices for governance. It had all been the senior owner making promises to this person and that one, and when he died, the thing collapsed. It totally changed my orientation: Let’s forget about your estate planning for now. Let’s get governance in place. What are the rules? What will the governing board look like? How do the board members get chosen?
HBO’s Succession is a popular show on television right now. That family is very dysfunctional, which is great for TV but not for real life. What advice would you give the Roys or a family like them?
Life in a family business should not be a contest, it should be a puzzle. You shouldn’t have a supercharged, macho race to the top, either through influence, bullying or cheating. I know a lot of lawyers who will pick out the most alpha family member from the next generation and stick to that person, knowing that if it comes down to litigation, that person will hire them to litigate.
In Succession, what’s missing is that the owner doesn’t want someone to come in and say, “Hey, there’s something here for everyone.” There are people who have that old-world, survival-of-the-fittest mentality, who believe that anything done by committee would be a mess. But those aren’t my clients. I’m a collaborator; my parents were flower children. So I put it out there to only work with me if you want your family members to treat the family business like a puzzle, not a contest. We will collaborate and sing Kumbaya.
Interview by David Zax, a freelance financial reporter whose work has appeared in Bloomberg CityLab, Entrepreneur Magazine, Fast Company and The New York Times