Susan Michel has always taught her four kids a consistent lesson: You get what you earn. Susan, 58, has approached succession planning at her financial advisory business, Glen Eagle, with the same philosophy. The kids have watched her grow the Princeton, N.J., firm from a kitchen-table operation into a regional stalwart with $400 million in client assets under advisement. Now, as Susan considers retiring in 10 years or so, she’s empowering them to earn the right to take over, in a process designed to steer control to someone with a passion for the business.
Two years ago, Susan gave her family network a more formal role. Her three sons, daughter, and husband now form a family advisory board that meets regularly with Susan.
Here’s how it works: Each child will receive a percentage of shares of the company, determined by Susan and passed along through revocable trusts. No one will have a majority, Susan says, and the percentages can change anytime at her discretion. In any shareholder decisions, the weight of each child’s vote will be based on the shares they earn with sweat equity today.
The Michels’ arrangement isn’t without shortcomings. The plan certainly creates the possibility for intrafamily feuding over ownership and fair sharing of responsibilities. And if the family hires an outsider as CEO, that could generate further tension.
Still, Susan says, the system creates the meritocracy that she seeks. It’s up to family members to earn more ownership shares by taking on more responsibility or suggesting new ideas. Susan is adamant that she wants a committed entrepreneur in charge. By formalizing her plan, she has given her kids the power to step up or step aside.
Source: Derousseau, Ryan, Dec 27, 2016; http://fortune.com/2016/12/27/glen-eagle-family-business-succession/