Family businesses urged:Create succession plan now
CRAFTING an early and effective succession plan is necessary to maintain the sustainability of family businesses, according to a family business consultant.
At the Pandesal Forum of the Kamuning Bakery Café in Quezon City on Wednesday, professor and Wong & Bernstein Advisory Group Executive Director Enrique Soriano 3rd said such a plan should be written into a contract to avoid a “squabble” among family members in case the father, who usually heads the business, dies.
“We subject family business leaders [to an] iron-clad contract,” he said, adding that this should identify the deliverables of the succeeding business head.
“[Lay] a contract, a timeline, so that if the offspring underperform[s], there is an exit plan,” said Soriano, also a business columnist of The Manila Times.
According to him, the successor should be the most deserving and qualified person to lead the business to ensure that it would continue to operate smoothly.
Soriano stressed that the father or business head, after selecting his successor, should be able to equip the latter with enough company shares to have legal control over the business.
“Carelessly passing the baton to an unacceptable leader can also create irritation [and strain] relationship[s] among the siblings,” he said.
“The most deserving should be given the biggest [shares]. So that when he leads the company, there would be no disruptions,” he added.
The children should not be given equal shares, Soriano said, as this would only benefit the undeserving the most.
“Fair is equal, but equal is never fair,” he stressed.
For children with a minority share, they could be rewarded by other means, he said, citing insurance, real estate, jewelry and cash.
Besides the succession plan, Soriano said family businesses should also come up with rules of engagement for family members on tackling employment and ownership policies, among others.
A “tailor-made” family charter or constitution and a legally enforceable and binding shareholder agreement should also be put in place, he added.
An independent director or third-party consultant could be helpful in sorting out family business matters, according to Soriano.
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