In June of this year, Davis Wright Tremaine LLP hosted its fourth annual Farm to Label summit in Portland, Oregon. One of the programs of the day was a panel mediated by DWT’s Drew Steen on the role of a non-family member executive in a family enterprise.
Appointing a non-family member executive can be the step that takes a family business to the next level, but it must be done with care.
It is a balance that requires full buy-in from the family as well as clear communication with the non-family member executive. Those executives that thrive in this role tend to fall back on a few fundamental principles.
First, they educate the family on the important differences between ownership and management. A good non-family member executive will be the first to clarify that he or she does not own the business. This “family first” attitude can go a long way towards alleviating any lingering concerns within the family. But the executive also has to impress upon the family that ownership does not automatically make one suited to manage a business.
Second, they exercise patience with the family. Family dynamics are unique in each family, but it is fair to say that they are almost always personal dynamics, not business dynamics. And a family enterprise brings with it the dynamic of the family, whether intentionally or not. As an outsider, the non-family member executive must be patient with these internal politics. One of the great assets of a non-family member executive, however, is their ability to lead without any family bias or taint. At their best, a non-family member executive can be the universally respected voice when interpersonal differences create friction within the business.
On November 7, 2016, Davis Wright Tremaine is going to give more attention to this dynamic topic. At the quarterly Family Business Legacy event, Joe Weinstein will moderate a panel of three non-family member chief executive officers of family owned businesses. Each will tell how he or she navigates these waters and how they put the principles noted above into practice. We encourage all family business owners and executives to join us.
Keith Baldwin is a business transactions and securities lawyer with a forty year history of serving clients’ legal needs. Keith focuses his practice on business relationships, including mergers and acquisitions, agreements among owner-entrepreneurs, and best practices for corporate governance. Keith can be reached via email at [email protected] or directly at 425.646.6133.
Drew Steen is a business transactions attorney at Davis Wright Tremaine, LLP. He represents both buy-side and sell-side clients in mergers and acquisitions, venture capital investments, joint ventures, equity co-investments and restructurings. He also serves as regular corporate counsel for several closely-held and family-owned companies. Drew can be reached via email at [email protected] or directly at 206.757.8081.