By Prof. Enrique Soriano
As we commemorate the week of love, it is fitting to reflect not just on romantic love but on the profound love that binds families together. For family business founders, love is often demonstrated through sacrifice, long-term vision, and the desire to secure a prosperous future for their children. However, in the absence of careful governance, love alone is not enough to preserve harmony and success. The well-intentioned but often problematic practice of equal division of shares among heirs can become a source of conflict, weakening both family ties and business sustainability.
This is why transitioning from defining roles and responsibilities to establishing concrete governance structures is essential. Beyond ownership, true love in a family business is about ensuring clarity, fairness, and a shared commitment to continuity.
Share Transfer Policies: A Measure of Love and Stability
One of the most significant risks in family businesses arises from unclear or poorly structured share transfer policies. If left ambiguous, the process of inheritance and ownership transfer can lead to sibling rivalries, power struggles, and even the eventual downfall of the business.
To prevent these challenges, family businesses must establish transparent, well-defined policies governing:
- Who can receive shares and under what circumstances.
- The qualifications for ownership, ensuring that only those capable and committed to the business inherit a stake.
- Mechanisms for selling, gifting, or transferring shares, preventing disputes that could fracture both the business and family relationships.
By creating these clear guidelines, families demonstrate love through foresight and responsibility, ensuring that business ownership remains with individuals who are both competent and dedicated.
Qualifications for Ownership: Entrusting the Right Stewards
In many cases, founders work tirelessly to build their business only to pass it down to heirs who may not be ready—or willing—to take on the responsibility. Without proper safeguards, ownership can end up in the hands of those who lack the vision, values, or capabilities needed to sustain the business. Instead of assuming that inheritance equals qualification, families should establish a structured process for ownership, which may include:
- Prior experience within the business.
- Demonstrated leadership capabilities.
- Alignment with the family’s long-term vision and values.
- A formal training or mentorship program to prepare successors.
Conflict Resolution: Love Through Harmony and Fairness
Even the most united families experience conflicts, and when wealth and business control are involved, emotions can run high. Disagreements over ownership, management, and strategic decisions are common. If these disputes are not managed properly, they can escalate into deep resentment, irreparable family fractures, and the potential collapse of the business.
A well-defined conflict resolution mechanism is a necessary safeguard, ensuring that family members:
- Resolve disagreements constructively through open dialogue and mediation.
- Follow a structured process for settling disputes without compromising business operations.
- Adhere to shared family values and long-term goals when making decisions.
Fostering Communication: The Foundation of a Lasting Legacy
At the heart of every successful family business is effective communication. A lack of communication breeds misunderstandings, assumptions, and eventual conflict. Founders must foster a culture of openness, transparency, and collaboration to ensure that future generations remain aligned.
- Regular family meetings serve as platforms for discussing business performance, succession plans, and governance updates.
- Structured communication forums, such as a Family Council, can formalize discussions, ensuring that all voices are heard.
- Inclusivity in decision-making fosters trust and encourages commitment to shared goals.
When communication is prioritized, love is not just expressed in words—but in actions that promote unity and shared purpose.
The Greatest Love Is a Thoughtful Legacy
For founders and family business leaders, the greatest act of love is not just passing down wealth, but ensuring a lasting, conflict-free legacy.
By establishing clear governance structures, thoughtful share transfer policies, conflict resolution mechanisms, and open communication, families can preserve not just their business but the love that holds them together.
***
Join Us for an Exclusive Real Estate Masterclass!
I am thrilled to invite all stakeholders in the real estate industry—practitioners, developers, brokers, bankers, and investors—to our highly anticipated Zoom event, “Navigating Uncertainties in the Real Estate Industry,” happening on Tuesday, February 25, from 10:00 AM to 12:00 NN.
Together with my good friend Claro Cordero, Head of Research at global real estate firm Cushman & Wakefield, we will explore key market trends, effective risk management strategies, and insights on how to thrive in an ever-evolving real estate landscape.
This exclusive paid event is open to the public and designed to provide invaluable knowledge—whether you’re a seasoned industry leader or just starting your real estate journey. Expect actionable insights that will help you stay ahead of the curve and navigate market uncertainties with confidence.
Limited slots available! Secure your spot today by contacting the event organizer at +63 917 898 1493 (Maica). Don’t miss this opportunity to gain expert perspectives and elevate your real estate success!
