This is the age old issue amongst family members that can tear a family apart.  It can start with Thanksgiving, carving out the perceived “best” pieces of the turkey and giving which child gets the best pieces.  Is the allocation based on age, entitlement or engagement?  A couple of key decision where this issue may be operative within your business/enterprise:

– allocation of the equity shares of the company

– who will run the business?

How to overcome this and perceived favouritism?  Don’t play favourites.  The last thing that you wish the perception to be is that you have favourites, particularly amongst your children.  Healthy conflict is acceptable but you do not want an all out fight.  This is not a gladiatorial battle where one child could be pitted against another to see who remains standing.

A key part of succession is to have an orderly transition of your business from your generation to the next generation.  In light of this, at some point, you have to make a decision on the above points.  Some of the most controversial is the allocation of the equity of the company.  This allocation all depends on your philosophy.  Some believe that just by being in the family, one would be entitled to equity in the company.  On the other hand, others believe that only those active in the business should have equity in the business.  Both points of view are acceptable.  What is your point of view?

Here is an article for further reflection on does fair mean equal? Link to article

This is probably the most important step of all..

A key part of this process is the communication that goes along with the allocation that you decide upon.  Make sure that you communicate your rationale of how you are dividing the equity and who will run your business, even if that includes non-family members, to your children in light of your beliefs.

Learn, think, apply!