Nepotism Strategic Issues in Family Business 0506 327

Nepotism Strategic Issues in Family Business 0506. 327. 01 Entrepreneurship

nepotism lfrom the Latin word 'nepos', meaning "nephew"

OLD Nepotism l What Anthropologists call the “gift economy” GIFT ECONOMY: A system of noncommercial exchanges that serve to regulate moral relations between individuals, families and groups in a pre-state society.

New Nepotism l American sentiment is a “narrow conception of nepotism as favoritism for the undeserving” l At odds with our public creed of equality and merit. l America lacks a positive statement of nepotism as an ethical activity. l How can nepotism be practiced in a way that does not conflict with democratic values and ideals? Adam Bellow, In Praise of Nepotism, (Anchor Books, 2004, 467)

INHERITANCE of Intergenerational Wealth Primogeniture Ultimo geniture Gavelkind tenure

Legal rules of INHERITANCE Primogeniture l inheritance of the ENTIRE amount of the parent's wealth, estate or office l By the FIRST-BORN l in the absence of children, by collateral relatives, in order of SENIORITY of the collateral line Argument FOR Argument AGAINST l Primogeniture prevents the subdivision of estates and diminishes internal pressures to sell property l led to ill-feeling amongst younger siblings

Legal rules of INHERITANCE Ultimo geniture l Inheritance of the entirety of the parent's estate l By the LAST-BORN - the youngest Argument FOR Argument AGAINST l Retains the integrity of estates l Youngest may not have l Youngest "keeping the hearth", reached age of maturity/ taking care of the parents experience to manage l Eldest are out making their way operations in the world

Legal rules of INHERITANCE Gavelkind tenure l custom of dividing lands among the male heirs l all the sons of a landholder share equally in such lands upon the death of the father Argument FOR Argument AGAINST l Reduces the ability to marshal l Best when there is plenty of resources for large endeavors. property to sustain a number of households l There are few threats that need defending

In Great Business Families Success was a multigenerationa l project l Each dynastic family has a founder l Founder is unique in establishing a complex of habits, attitudes, traditions and ideas that aid the family in its rise. l Personality is main factor in forming family culture. l Indomitable will, raw opportunism, keen sense of how to exploit events and people.

Dynastic families have a Founder l Founder is unique in establishing a complex of habits, attitudes, traditions and ideas that aid the family in its rise. l Personality is main factor in forming family culture. l Indomitable will, raw opportunism, keen sense of how to exploit events and people. l Strong grasp of the distinction between families and strangers. www. bnelsonshoes. com/ www. ncmutuallife. com/ company_history. html

Techniques for starting a dynasty l Start braiding together two families into a single clan – (paternal side dominates / maternal family provides support). l Have many children. l Bild an artificial clan around their family using marriage, adoption, and patronage (god-parents). l Family apprenticeship.

Bill Gates approach l Give away one’s fortune l Leave children a mere $10 million each. l Enough to give them a start in lilfe but not so much that they are left with no impulse to strive.

Objections to Nepotism l Threat to equal opportunity l Rewards Incompetence l Fosters Inefficiency

Nepotism Taboo at publicly traded companies l Corporate-governance watchdogs say hiring family raises questions about whether the best person got the job. l "It creates the appearance of a conflict of interest, " said Nell Minnow, co-founder of the Corporate Library, a research firm in Maine focused on corporate-governance issues.

Resources on Nepotism l The Corporate Library http: //www. thecorporatelibrary. com/ l Society for Human Resource Management http: //www. shrm. org/ Articles l http: //www. sfgate. com/cgibin/article. cgi? file=/chronicle/archive/2004/ 04/04/BUG 675 VJA 81. DTL

Anti-nepotism Policies l Many companies have anti-nepotism policies to avoid problems.