In the first few days of this year, 2021, I received the news that one of my clients had died – it made me sad – we had worked together for many years, I built for him a family office which had stood the test of time and we had consolidated his empire into one structure which was robust and strong.
His situation was not dissimilar to another client of mine who I will call Fred, and for whom I had set up a similar family office which was also robust and strong. But both of these clients had been slow to fully implement the good governance systems I had recommended because neither wanted to choose to whom to give the reins of power, the eldest child or current wife!
Both were founders of businesses which are household names, both had wives who they had worked with in running the business and both had children from a previous relationship who were involved in the busines, but neither wanted to bite the bullet and hand over to the next generation; a decision the current wife disapproved of!!!
Fred had married his childhood sweetheart, an attractive, long suffering woman who devoted her life to her three children while Fred worked on his business. In due course Fred and his wife became distant she was involved in her family and he in the business.
In due course, he found he had more in common with his Personal Assistant who I will call Julia rather than his then wife.
Julia made Fred feel successful, and he enjoyed her company on business trips. She knew all his concerns and the challenges he faced everyday as well as all the people he had to work with; some he liked and some he did not. Julia was also clever and manipulative, she made herself useful by directing her short temper, at people he did not like and was unafraid to litigate against them on his behalf.
As might be expected, Julia eventually persuaded Fred to divorce his wife, marry her and build a family of their own. She liked the trappings of wealth and encouraged Fred to buy a company jet and to engage a chauffeur to take her shopping and the children to school
Fred bought his eldest son, Jack into the business much against the ‘better judgement’ of Julia. He was a good hardworking boy and was keen to learn about the business following his MBA from Harvard but even though he was a talented protégé Fred did not want to upset his wife and pass the reins over to Jack.
I was brought in by Fred to set up a family office and to consolidate his business empire into one structure with a robust and strong governance. It did however have one major weakness, the decision as to who should be on the family office board after the death of Fred was left to Julia not Jack. This was put in place long before Jack came into the business. The change to appoint Jack had been drafted and was ready to sign, but Fred had simply not got around to signing the documents, for fear of a massive dispute with Julia.
Soon after the funeral, Julia used her powers to remove the family office board and to appoint a new board of acolytes with herself as Chairman.
She awarded herself an astonishingly high salary and the exclusive use of the business jet and yacht which she said she needed as the Chairperson. Jack voiced his disapproval, but his voice was drowned out by the board appointed by Julia.
The press had a field day, roundly criticising the new management and Julia in particular – she was deaf to their criticisms which saw as being leaked by Jack
It was not long after Fred’s death that the performance of the business went into freefall; Julia blamed Jack for his failure to ‘fill the shoes of his father’.
Eventually, exasperated by the high-handed approach of his mother-in law and inability to run the business properly Jack started legal proceedings, to oust her from the board and to reinstate what he understood was the wishes of his father.
As the various sides of the family engaged in combat the value of the business continued to slump and fall.
After several years, the family was fully divided; unable to have any civil conversation without lawyers involved. Exhausted by litigation and its cost – the family finally agreed to mediate. Julia took over one side of the business and Jack the other, the company was split.
It soon became clear thereafter that Julia was unable to run her side of the business which she eventually sold to an independent third party. Jack would dearly have loved to have bought it but Julia did not want to sell to Jack. Nevertheless, she sold the business at a record low valuation and when Jack eventually bought it back, he was able to turn it around and the share valuation once again rocketed. Julia remained bitter
From my experience of working with successful families the commercially sensible decision is not always the one which is taken, because personal and emotional issues come into play. This is why everyone who works with successful families needs to have access to the best private client professionals across a range of disciplines to recommend other professionals as and when the circumstances demand. This is why I formed Caroline’s Club; a private client professional network keen to be of better service to their clients.
I am not a litigator or mediator, but on occasions my client may need their services and if I do not have the necessary skills and experience – I know of someone in Caroline’s Club who has
If you would like to promote your services and skills to our network of private client professionals and join our Culture of Care click here to find out more and if you would like to join Caroline’s Club simply register here