IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog has been provided by Bhaj Townsend of Focus & Sustain (www.focusandsustain.com):
Family Feuds are Not Good Business for Privately Held Companies
Family feuds over family businesses are certainly not a new phenomenon. More spectacular and recent ones include the 600-year-old Gucci family business which culminated in a bitter discord and the eventual sale of 50% of the business to an investment banking firm. Another example is the McCain family where the founding brothers feuded over the next generation succession plan. Power struggles ensued, one brother was forced out, and competing companies were formed with family loyalties divided.
Recently, a story came to my attention about a family owned furniture business. This family feud made business headlines. I’d like to share it with you because it illustrates what can happen when two generations lose their connection and when they don’t have a way to talk about what matters most.
Kumiko Otsuka succeeded her dad in 2009, as head of the family’s high end furniture retail company. Since then she has directed the company towards more mass produced items to compete with Ikea among others. This led to her father’s strong objection. He even accused her of sacrificing the reputation and taking the company brand down market. He successfully ousted her and returned himself to the helm of the company last July.
Unfortunately, this family feud did not end here. The company board decided that Kumiko should continue as CEO. They reinstated her in January 2015.
This past winter, at the annual shareholders meeting, the feud reached its peak. The family showdown, in Japan, known for tightly scripted shareholder meetings, became media fodder, with one broadcaster giving live updates of the meeting. Both Kumiko and her father defended their different strategies regarding the future direction of the company.
As Kumiko put it: “In order to build on the strengths of the past 40 years as a business, we need to implement some reforms to keep up with today’s consumers.”
Her Dad, an 18% shareholder of the company, decided as well to talk to the shareholders assembled at the meeting in support of his own position. He said it was necessary for its reputation to keep the company focused on high quality furniture: “Do not go down market.” he implored. He became emotional as he started complaining about his daughter: “What have I done wrong? If anything, it was in appointing her as CEO six years ago.” He continued on, describing his daughter, the eldest of five, even going so far as to describe her “difficult birth.” Kumiko’s Mom continued to add fuel to the fire, criticizing her daughter, the CEO, which incited another shareholder to yell at her to stop demeaning her own daughter. The parents made their stand, their son, Kumiko’s brother, supported their parents’ position and shareholders voiced their opinions while the media turned a normally private meeting into a public story.
Finally the speeches were done. The emotional net had been cast over the shareholder meeting. It was time for the shareholders to vote for Dad or for Kumiko to move the company forward as its CEO.
The votes were tallied. The family was scowling at each other as the announcement was made: Kumiko prevailed. She retained her position as CEO of the family furniture business.
The debate continued in the press as shareholders wrote comments like this to the papers, radio and other media outlets: “”…your daughter is pretty smart. I think she really cares about the company. I would put an ad in the paper saying you’re sorry, and promise to sell furniture for the best price.” But these were only comments. Reconciliation was not to be. Just recently, Dad defended his accomplishments and continued to criticize his daughter.
This happens every day, all around the world, for so many reasons. Happiness and promise turn into acrimony and bitterness. Don’t let this happen in your family.
If you feel you are facing the threat of great family discord and breakdown, you have to start talking about what truly matters in the business and in the family before it’s too late. When families fight among themselves, there is no winner, only sad memories.
If you have questions about this article or would like support addressing family business succession or estate issues, Bhaj Townsend of Focus & Sustain is available as a resource at (425) 823-0934 or firstname.lastname@example.org
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