Entitled family members can undermine business success, Part 1

IN A RECENT one- on- one conversa t i on with Franco Soberano, senior executive vice president and chief operating officer and the next-generation successor of Cebu Landmasters, Inc., a publicly listed real estate company in the Philippines, I was deeply moved by his emphasis on stewardship.

Franco shared how their founder, affectionately known as Boss Joe, instilled in them the importance of stewardship as a guiding principle for the family business’ future. His words underscored their commitment to ensuring the company’s long-term sustainability and success through responsible leadership and forwardthinking governance.

Franco’s perspective highlights t he t ransformative power of stewardship i n family- owned businesses, shifting focus from mere ownership to nurturing and preserving the business for future generations. This mindset not only safeguards the company’s legacy but also cultivates a culture of excellence and professionalism.

Franco’s words serve as a powerful reminder of the value of stewardship in family-owned businesses. It’s a mindset shift from mere ownership to a dedication to nurturing and preserving the business for future generations – a commitment that both ensures the company’s enduring legacy and fosters a culture of excellence and professionalism. While the Soberano Stewardship model sets a commendable example, today’s article sheds light on a contrasting scenario where entitlement prevails, threatening the very fabric of the business. It’s a tale where an entitled son, thrust into a leadership position without clear rules or guidance, nearly brings a once-dominant business to its knees.

A Story of Entitlement

In the world of family- owned enterprises, the menace of entitled family members disrupting business operations is alarmingly prevalent. During a recent governance trip abroad, I had a sobering encounter with a founder whose narrative painted a vivid picture of the dangers posed by familial entitlement to business stability. As the founder recounted the challenges posed by his entitled son, it became painfully evident that the family’s business was teetering on the brink of collapse. The son’s cavalier attitude and reluctance to shoulder responsibility had plunged the company into a state of disarray, leaving his father grappling with the aftermath of his actions. During a subsequent meeting with the son, it became abundantly clear that his priorities lay elsewhere, as evidenced by his irregular attendance at the office and penchant for prioritizing personal ventures over the family business. Despite drawing a salary, he displayed a remarkable indifference to the company’s welfare, opting instead to pursue endeavors that served his own interests. To address this alarming situation and char t a course t oward recovery, the father desperately sought intervention as it became imperative to implement stringent governance measures to restore order and accountability within the organization. Having gone through this situation countless times, I proposed the immediate establishment of a working board comprising independent directors or Board advisors tasked with overseeing the company’s affairs and holding family members accountable for their conduct. In addition to governance reforms, i t was essential to i nstitute clear performance metrics and benchmarks to gauge the effectiveness of family members’ contributions to the business. Non- compliance with these standards would carry repercussions, potentially including the removal of family members from key roles in favor of nonfamily executives better equipped to steer the company toward success. Actions of Family Members that Can Contribute to Business Decline Lack of Focus: The son’s lack of focus was glaringly evident in his irregular attendance at the office and his preoccupation with personal ventures. Instead of dedicating himself fully to the company’s affairs, he often prioritized his personal interests over his professional responsibilities.

This i nconsistency i n his presence and attention undermined his effectiveness as a leader and impeded the smooth functioning of the business. By neglecting his duties within the company, he failed to provide the necessary guidance and direction, ultimately compromising the organization’s success. (To be continued)

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