Lisa Cukier, co-chair of the Private Client Group at Burns & Levinson, will be leading a free webinar, "Inside Out: Family Business Risk Management," for family office professionals on May 26, 2021at 12:00 noon ET. Cukier will be joined by guest speakers principal Caleb White and senior manager Katelyn Husereau from CFAR. The webinar is part of an ongoing series sponsored by Burns & Levinson called “The Business of Family” which was created to help family offices better safeguard and serve their clients. Cukier shares a preview in this Q&A.
Q. Family businesses have issues that come up that other companies don’t have to deal with. What are some of the most common problems that typically arise?
Cukier: Having multiple generations participate in a family business brings a vibrancy of ideas, solidarity, profound connection, and shared purpose that is hard to replicate in a non-family enterprise. On the other hand, the interconnectedness of familial relations and business relations can create hurdles unknown to other companies. In a family enterprise, the older generation may view the company as its “child” and may be resistant to having the younger generations change the way things are done. Younger generation family members may feel frustrated in being held back or marginalized from career or personal goals that transcend the bounds of the family business. Family strife in any of these situations can be extremely distracting and can derail productivity and injure the business.
Q. What causes the power dynamics to shift in a family business?
Cukier: Family roles, norms and values, and the family mission creates a structure for stabilizing power within the family. Destabilizing forces such as market fluctuations, unanticipated adverse business events and incomplete or erroneous decision-making can impact the sturdiness of a family business and adversely shift family power dynamics. As a result of the pandemic, we are presently experiencing a vastly larger death rate than birth rate in 2020/2021, which impacts power dynamics within enterprising families.
If the family does not have a stabilizing governance guided by its mission and the right blend of advisors, then times of business destabilization can set the stage for sibling rivalries to emerge over power and position in the family and in the family enterprise. Worse, a declining patriarch or matriarch could become vulnerable to financial exploitation and undue influence perpetrated by a third party bad actor who is trying to benefit herself or himself with the assets of the declining family member. It is in this framework that the older generation could be taken advantage of and swayed to make dispositions of wealth or transfers of power.
Q. Every company needs to do succession planning, but it seems especially hard for family businesses given the diverse family dynamics involved. How do you get over the hurdles and put strong succession plans in place?
Cukier: Having trust and estate counsel, family advisory counsel and corporate counsel working continuously and in tandem with the family business creates a forward planning environment for succession. When families do not undertake periodic and recurring estate planning and succession planning efforts, then the younger generation can get left holding the bag if the patriarch or matriarch begins to experience mental capacity decline or diminished capacity. A strong estate plan, business succession plan, and strong fiduciaries and advisors can make all the difference. Succession planning is never undertaken alone.
Q. Everyone knows how hard it is to talk to our families about difficult subjects. What tips do you have for initiating difficult conversations in a family business setting?
Cukier: Difficult conversations require diplomacy and honesty but should never be “personal” and hit below the belt. The conversation should be devoid of blame, shame and trust/mistrust content. The pandemic showed us that certain events in life – that we often cannot anticipate or prevent – press like a harsh force upon relationships, both familial and business, through no fault of any person. There is a delicateness to relationships, and relationships often buckle and bend under the pressure of these unexpected impactful events. The best we can do is to plan in advance to minimize risk. That is what my family office advisory services are about. I protect precious relationships within enterprising families.
Q. Are family businesses more or less resilient than other businesses and do they have an advantages or disadvantage as the world starts opening up post-pandemic?
Cukier: Family businesses are only as resilient as the family members and family governance. The benefit that family businesses have, above and beyond other businesses, is an innate and profound shared mission and value toward accommodation to ensure the survival of each member, as contrasted to other businesses which are driven by bottom line concerns often irrespective of employees. Family business is personal.
Q. Without naming any names, what are some of the most challenging family business issues you’ve dealt with over the past year or two?
Cukier: By and far, the most challenging issue that I am managing right now is the recent decompensation and diminished mental capacity of the patriarch of a family business. He planned for and created the structure for succession but with his present deficits and incapacities – personality traits that were once adaptive are now maladaptive in an exaggerated way – he now refuses to permit his family to assist him and to rise to the position he put in place for them. Consequentially, his refusal to relinquish decision-making had led to precarious business decisions being made that are negatively impacting the business. I am working with his family members to rectify the situation through a blend of conservatorship, guardianship, trusteeship, family advisory guidance, and corporate guidance.
Lisa Cukier is Co-Chair of the Private Client Group at the law firm of Burns & Levinson in Boston. She concentrates her practice on family law, family office advisory services, estate and trust matters, guardianship/conservatorship, and blended family planning, and has many years of experience helping clients through challenging family law situations. She frequently serves as a private adjudicator and mediator. She can be reached at email@example.com.