FAMILY BUSINESS COUNCILS— SOUNDING BOARDS FOR COMPANY CRISES


By Phillip M. Perry Personal conflicts and resentments can threaten the profitability


of any family enterprise. So can management initiatives that make sense on paper but violate long-standing family values. A family


council can be a powerful tool for dealing with such issues before they grow into operational disruptions that sap the bottom line.


A fifth-generation family business in Kentucky was facing a crisis. One of its four sibling owners had suddenly announced a pending divorce. Te unexpected event posed a serious threat in the minds of the other brothers: Would a disgruntled ex-spouse be awarded her husband’s ownership shares in the privately held corporation, ushering in an unwelcome business partner to gum up the works?


At first, a solution to the problem seemed straightforward: Te company stockholder agreement required the company to buy back shares from a partner in any divorce proceedings. Alas, formal agreements are one thing and human emotions another. Te divorcing brother sensed resentment on the part of his siblings: Shelling out company funds to purchase his shares might well threaten the company’s growth by hampering its investments in new projects.


It was apparent that failing to resolve this issue would poison the relationship among the brothers, with serious ramifications to the bottom line. What was the solution? We’ll answer that question later in this article.


For the moment, though, our story illustrates a larger problem: Personal conflicts are common and costly occurrences in family businesses.


“Any family business that gets past the first generation starts experiencing an exponential increase in the number of people affected by company operations,” said Sam Brownell, founder of Stratus Business Advisors. “Te organization eventually ends up dealing with a huge family with multiple branches, along with all kinds of potential claims to profits and decision making.”


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Talk It Out


Many family business conflicts can be avoided—or overcome—through the efforts of a “family council”—a small group of related individuals who serve as a collective sounding board when personal issues threaten company operations. Tey differ from management teams and boards of directors, both of which deal with business matters and are ill-suited to handle the kind of family tensions that so often escalate into costly disruptions.


“Family councils can be good venues for airing grievances in a structured way,” said Travis W. Harms, the leader of Mercer Capital’s Family Business Advisory Services Group. “By avoiding toxic back-channel conversations between family members, they can help sidestep issues that can threaten business profits.”


One common source of conflict is the company’s employment policy, which commonly deals with some pretty sensitive issues. Here are some examples: Who among the relatives are entitled to company jobs? What are the criteria for full-time or part-time positions? Does the company create jobs for family members or just wait for positions to become available? Must successful job applicants possess certain characteristics, experiences, or education?


It’s not uncommon for managers to have one set of answers to the above questions, while the parents of a child—maybe residing several states away—will have another. “A family council can be instrumental in resolving potential conflicts as the second and third generation reaches employment age,” said Barbara Dartt, a principal consultant at the Family Business Consulting Group.


TPI Turf News September/October 2025


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