Releasing the Prisoners - Part I
Sam has one son who is in his first year at a nearby teachers' college and an older daughter just about to enter graduate school. His oldest child, a son, is a graduate engineer working for a local architectural firm. Sam is proud of the fact that he's a self-made man, but he wants to work so that his kids can have a better chance at an education than he had.
Sam doesn't have the energy he used to have, at least not on the job. He has a lot of time and energy to give to his kids and to working around the house on weekends. He also gets in a lot of trout fishing whenever he can. But it's just that his job gets him down a lot more than it used to. Because the company has just gone through a couple of years of unprecedented growth, his responsibilities and the complexity of his job have almost doubled. In fact, he came down with his first ulcer a couple of years ago.
He has appreciated the pay increases that came along with the increasing pressures, particularly now with two kids in college. But he hasn't been sleeping well lately and he's increased his smoking to three packs a day. Sam really can't put his finger on the reason, but lately he's been dreading coming in to work. It might have something to do with the founder's son, who has been working with Sam lately as the founder goes more and more into his semi-retirement. Sam thinks the kid is too impatient sometimes, and that he really doesn't understand the history of the company and how some of the systems evolved. Sam is beginning to think he's going to have some problems getting along with the kid, who's even started talking about bringing in an outside accounting firm to help "straighten out the books."
Sam doesn't think about his situation this way, but he's a prisoner. He's a prisoner to his limited experience. He's a prisoner to the formal training he never got on the job. He's a prisoner to his age and to the comfortable salary he's grown used to, but knows he could never get anywhere else. He's also a prisoner to the years he's spent under the command of a powerful, autocratic, irascible and erratic entrepreneur and the fact that he's adjusted his personality and his work style to the founder's needs and expectations.
Sam isn't the only person in this kind of situation. There are, in fact, probably more prisoners in family-owned businesses in this country than there are in all the jails, courthouses and penitentiaries. These corporate inmates aren't behind bars or walls; they are not confined physically. But they are just as surely held against their will, in a situation that's neither good for them nor for the company.
The Prisoner RosterThere are the Sams, the long-term employees who are under-talented, misused and very much overpaid. These prisoners have few marketable skills and a personal debt structure that forbids any consideration of their quitting and makes the thought of firing them almost seem sadistic.
There are the sons-in-law who came to work for their wives' fathers because it seemed like the only way to immediately make sure their wives continued to live in the style to which they'd become accustomed under Daddy. It isn't stated this way, of course. Dad probably stated it as: "Why not? We could sure use you." Often, these young men had entirely different plans for their careers, but they leave pre-med, or teaching, or a job at a major corporation to join a family-owned business and a world they probably didn't expect.
Often, they decide to join their fathers-in-law - and are hired - for many of the right reasons. There's the challenge of working for a growing, closely held company and the potential of being able to take over the top job someday.
The founder sees a bright young man who's personable enough and potentially useful. He also sees an excellent way to make sure his baby is taken care of the way only he can.
The poor son-in-law starts out, however, with two significant strikes against him. First of all, his salary is more dowry than it is compensation, a fact he won't be able to ignore for too long. Secondly, he sleeping with his boss's little girl, a fact the founder won't be able to ignore for long. Sons-in-law tend to stay vice-presidents.
Cells Made of SharesA whole category of prisoners are the other relatives and those who have been given minority blocks of stock on the pretense or silent understanding that those shares will someday be worth a great deal. Minority participation in a family-owned business can be a legitimate participation, an investment, for those who actually have an active involvement in the management and direction of the business. Their reward is in the form of salary and a participation in the equity growth is a potent symbol of their contribution.
But for non-involved minority owners, there is no salary. Because of the tax laws and the fact that the growing business needs all of the pre-tax cash it can get its hands on, there are seldom, if ever, any dividends. Because there is no market for a minority share in such a business, the poor minority owner can't even sell his or her shares to convert them into some kind of useable wealth. The only potential market is the present majority owners who may or may not see a reason to buy, at a price that may or may not be "fair."
This situation is almost guaranteed to encourage the minority owners to see their interest in harassing the management, criticizing decisions, lobbying for dividends, opposing corporate investments and generally formenting trouble. This creates a completely different category of prisoners, the managing owners who have to face this cadre of restless malcontents. If the managing owners are lucky enough to hold the majority of the shares, all they have to face is their sense of responsibility to the other shareholders and a lot of harassment. If, as often happens, the family management doesn't hold a controlling interest in the company, the business begins to resemble a prison riot.