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Taking Your Eye Off The Ball: Feuding Family Businesses

We are, according to numerous pundits, in something of a ‘golden age’ of entrepreneurial spirit. Recent research has suggested that the number of active, vibrant businesses in the UK rose seven per cent in the last year. The same study detailed how every single region of the country was home to companies which had grown their turnover considerably.

Among the reasons for this success is the family factor. Family businesses, both big and small, contribute an estimated one-quarter of the UK’s total GDP. Such a performance rightly conjures up images of efficient, robust enterprise weathering continued economic uncertainty. However, some family businesses have an added, troubling dimension. They can be undone by the very blood ties which helped forge and sustain them.

That was brought to mind when reading of a business-related row between Arsenal’s World Cup-winning midfielder, Mesut Ozil, and his father. It seems that Ozil Senior took such umbrage at being sacked from the player’s marketing company that he sued his son for nearly half a million pounds. As competitive through the courts as on the pitch, the German international hit back, demanding the repayment of an £800,000 loan.

The dispute, we learn, has now been settled. Even though it will not dent Mesut’s footballing reputation, it will no doubt have had an effect on his company’s bank balance and, of course, relations with his dad. Both aspects mean it is not untypical of many cases that I and my colleagues have had to deal with over the years.

In my opinion, many such issues are nothing to do with business at all but come down to domestic frictions. As a result, it can sometimes be difficult for us to get to the real heart of the matter and separate straight mismanagement from family turmoil.

Succession or inheritance provides a frequent flashpoint. Is it right, for instance, that an eldest son or daughter takes the reins as Managing Director just because they’re first in line? Does the size of a shareholding bequeathed by a company founder fairly reflect the work a beneficiary put in to make the firm grow?

Likewise, relatively innocuous differences of opinion over things such as missing a family christening can spill over into the boardroom and destabilise business operations.

There are those who believe that bringing in an outsider with a proven track record and an objective eye can be a solution to such problems. Whilst that may work for some, I reckon that it might also have the potential to make things worse, creating deeper resentment among those who feel that ‘the top job’ is their birthright.

Resolving matters is not always easy. Instances which I have handled illustrate how long, commercially-distracting litigation can be ended by a simple – albeit possibly delicate – conversation.

As lawyers, we can mediate and so help provide the sort of environment to make sure those discussions are constructive affairs. It is usually better for mediation to be attempted as early as possible because court proceedings will only lead to more bitterness within the family.

It is not as though issues which can create tension in family businesses have not been confronted and overcome in successful similar ventures. Think of the Murdoch media dynasty, those behind the Sainsbury’s and IKEA retail chains or the German automotive giant BMW. Succession can mean all-‘round satisfaction if dealt with well.

Perhaps, when considering involving family members, it is worth remembering an old saying: “Family is family but work is work”. Employment of a relative should have as sound a business logic for it as for any other new recruit and not just be because they’re looking for a job.

There are dangers to allowing sentiment or compassion to get in the way of commerce and, as Mesut Ozil might agree, you should always keep your eye on the ball.

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