A question we are commonly asked is whether family members, in
particular the next generation, should be involved in the family
Some families choose to have a blanket rule that no family
members can work in their business; they leave the 'non-family
professionals' to it so as to avoid potential for conflict and
ensure meritocracy. I have known one mother to say "No way are
my children working in the business. It took their father, my
husband, away from the family and his life revolved around
At the other end of the spectrum, some families take the view
that "As our name is above the door, all family members are
entitled to a job in the business; it's their birth
right." Within this category, some would say that family
members are only entitled to a job commensurate with their level of
ability, whilst the ultimate extreme is where a family member is
given the CEO role even if they're not the best person for
There are many options in between these two extremes. I have
worked with families with a rule that gives preference to family
candidates, if they are equally as qualified as any
non-family candidate going for the same position. Others decide
that family members must have at least, say, five years' work
experience in a relevant industry before being eligible to join the
business – not always easy if your surname matches the
competitor's biggest rival!
Other factors – remuneration, reporting lines and other
elements of the family enterprise
Once the family has agreed on their policy regarding family
employment, there are other factors to consider. For example, it
may have been decided that family members are allowed to work in
the business, but at what level of remuneration?
It is sometimes suggested that because family employees are
family, they should be paid more than the market rate to recognise
their choice to work on behalf of the family in the business as
opposed to elsewhere. However, recognising the differences between
the rights, responsibilities and privileges of ownership and
management is important and we would not recommend blurring the
boundary between economic benefit received because of ownership and
that received because of management.
Alongside remuneration, another factor to consider is reporting.
Who should family members working in the business report to?
Reporting into 'Dad' can make it difficult to have open
conversations, but reporting into non-family members comes with its
own difficulties – appraisers may feel obliged to treat you
differently if you're the 'boss's daughter', and
may feel uncomfortable giving honest feedback. A solution to this
is ensuring that there is sufficient dialogue about these risks
between all parties: family members need to understand that they
will be treated equitably, and non-family members should feel able
to treat family members as their peers.
Other stakeholders – investors, employees
Finally, it is important to consider how other stakeholders are
likely to perceive the family's involvement in the enterprise.
Does having family members working in an executive capacity within
the enterprise show that the family are intrinsically involved with
and committed to the business for the long term, or does it show
that decisions might be being made for the wrong reasons? Might
this encourage future employees to work in this
'family-values-orientated' business, or might they fear
that it is not run as professionally as a listed business? Managing
perceptions and communications is very important here.
Each family is different and will have their own reasons for
wanting, or not wanting, family members to work in the family
enterprise - there is no right or wrong answer.
What is important is that the family agree and articulate a set
of clear protocols, so that others simply 'follow the
rules'. Creating these rules is best done as early as possible,
before the need to make a decision on family employment
arises. Consider them at a later date, at the point at which an
individual becomes involved, and the decisions become (or are
perceived to be) far more personal.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
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