Charlie is President of XYZ Brothers Mfg, Inc. He receives an annual compensation package of $2M + an owner’s dividend of $200K/year.
John is his younger brother, and works outside of the business as a musician. He receives an owner’s dividend of $200K/year.
Setting: Their Dad has hired a family advisor to work with his two sons to prepare them as heirs of the inevitable wealth transition. The advisor poses the following questions during their second session.
“Today we are going to talk a bit about the ‘nuts and bolts’ of the business ‘transitioning’ from your Dad to each of you as owners. Assume that your Dad has passed away quite suddenly, and that you are now working with his estate attorney to begin to sort out the transition. Your Dad has left the company to both of you as equal owners. Here are some questions I want us to begin to talk through today:
Should the business be retained, merged or sold?
Should everything remain the same — in which case, Charlie continues to run the company earning $2,000,000/year plus his divided of $200,000/year. John will continue to receive his dividend of $200,000/year.
John began to get visibly upset. He blurts out “I can’t talk about this now” and runs out of the room. Charlie is stunned. The Family Advisor suggests they take a break…..
Case Study Questions
What do you think caused John to run out of the room?
What do you think John’s point of view regarding the questions posed by the family advisor? As an owner? As a family member?
What do you think Charlie’s point of view regarding the questions posed by the family advisor? As an employee? As an owner? As a family member?
Have you heard about the importance of succession planning for family owned businesses? Do you know how that applies to your family business? This segment describes how succession often occurs in family owned businesses and why you may want to start thinking about it.
Do you wonder why it is important to begin the succession process in your family even though it won’t happen for many years into the future ? Does it make a difference if I know what is going to happen but your heir and other stakeholders do not? This segment helps lay out the aspects of succession in family owned businesses and how it can affect many, if not all, of the family business stakeholders.
Do you know how your children will react to your ideas/plan for succession? Have you communicated the plan to them? This case study is an example of two heirs (adult children) learning about a possible succession plan of their father’s and their reaction to the information.
Have you begun your succession planning? Do you even know where to begin? This online quiz is a mix of standard succession planning possibilities. We cover what is and what may be a common misperception.
Case studies are descriptive scenarios that help people think through an idea or concept while applying concepts to the example provided. This Reston case study would be great for a sibling partnership or cousin consortium group. This specific case study allows the participants to consider a scenario about family business management succession while considering how […]