MANY people think that a life of luxury and ease is the most desirable human state, and that the person who has the most money at the end of their life somehow “wins but author and business owner Marshall Paisner offers a better perspective.” As business owners, are we doing future generations any good by leaving them large sums of money?” Even Microsoft founder Bill Gates joined the fray when he said of his children: “They are never going to be poorly off. Our kids will receive a great education and some money, but they’ll go out and have their own careers.” Bill and Melinda Gates are giving their three kids “a minuscule portion” of their estimated US$115 billion fortune. “It will mean they have to find their own way. It’s not a favor to kids to have them have huge sums of wealth. It distorts anything they might do.” And a 2018 Harvard Business School study of more than 4,000 millionaires proves that inherited wealth can distort values. It showed that “controlling for total wealth, millionaires who have earned their wealth are moderately happier than those who inherited it.” Clearly the worst kind of millionaire is someone who inherited the wealth from his parents and nobody could have expressed it better than the late sixth Duke of Westminster who saw his wealth as a burden he could not relinquish. “Given the choice, I would rather not have been born wealthy, but I never think of giving it up. I can’t sell it. It doesn’t belong to me,” he said.
Paisner continued, “Like most parents, we want our children to have the best of everything and when given the opportunity, I would certainly not deny them the luxuries my hard work can buy them. But I think that giving them the luxuries without the chance to earn them themselves is denying them something far more valuable than material goods: the opportunity to live the life that I have lived and continue to enjoy. And that is the life that business ownership has made possible for me—a life built in my pride of accomplishments, a strong work ethic, a family tradition of fairness, concern for employees and giving back to the community.”
Being a strong advocate for governance, business continuity and wealth preservation, let me share the eleven principles that every business leader must pursue regardless of the size of their business:
1. Before the planned exit of the business leader, he or she must set forward a powerful family and business vision agreed and embraced by every family member
2. That vision must be complemented by a very strong sense of shared values espoused early
3. Succession planning and successor development programs must be formalized as early as 10 years before the planned transition
4. While the business leader is still active, he or she must initiate an alignment program of all active family members. This will minimize the risk of entitlement, sibling rivalry and power struggle in the next generation
5. Investing on human and intellectual assets is a must especially for blood members who are planning to join the business
6. The creation of a code of understanding/conduct/charter/owners agreement to institutionalize control, seamless transfer of ownership and impose accountability on erring family members
7. The creation of a family council or forum specifically to resolve family and business conflicts
8. Emphasize the inherent virtue of the next generation’s stewardship role as opposed to ownership
9. Stewardship and leadership transition is a process and must be initiated based on timing, readiness and maturity of the next generation leaders
10. Handing down inheritance requires a delicate balance between competence, tax efficiency and legal ownership. It should never be handed down carelessly and on a whim to the offspring lest it will be abused
11. Successor must be the most qualified family member and does not necessarily have to be the eldest son. If a family member is not qualified, tapping an outside non-family leader as a transitional leader is strongly recommended.