Much business media attention in the United States focuses on corporations and small to medium-sized firms that are independent or publicly owned. Yet according to various estimates, family-owned and operated businesses make up 80 to 90 percent of all business enterprises in North America. They count for 60 percent of all employment in the United States and 65 percent of all wages paid.
So many family businesses are small in size—service firms, retail shops, restaurants, franchises, home-based enterprises, small manufacturing firms and even charitable foundations. Yet among the companies listed on the Standard & Poor’s 500 Index, nearly one-third of them are classified as family businesses. We all can think of family-owned firms here in central Illinois that have been very successful—and still are tightly-controlled by key family members.
The most well-known family businesses in America are the corporations owned by the Pritzker family members. Nicholas Pritzker came to the United States in 1881 and began the businesses that excelled in success. In 1999, Jay Pritzker, Nicholas’s grandson, began a struggle among the 11 heirs to the businesses which may cause its breakup. Various cousins created a secret agreement to carve up the fortune. One of the cousins, aspiring actress Liesel Pritzker, claimed in a lawsuit that her trust funds had been stripped of $1 billion—and she wanted it all back.
While family-owned and operated businesses may not be as giant or prominent, they can cause a lot of grief—and some real ethical problems. Family-owned and operated businesses certainly bring people in from the outside to work and to advise. Much more often, however, such businesses are operated by and employ husbands and wives, children and stepchildren, brothers and sisters, parents, aunts and uncles and cousins. The network can be rather extensive, and family members can share in the wealth and well-being of the business, or its struggles.
Thomas Stanley and William Danko, in their popular book The Millionaire Next Door, note that most hidden millionaires are in family-owned businesses. Many have children involved in the business operations. By the third generation, family members may want to cash out. Sometimes the senior family members do not want to share power or control, causing children and grandchildren to break away and start competing businesses. Others want to start a surf shop in Hawaii or open a weird restaurant far away from family and friends. Or, like Paris Hilton—heiress of the Hilton Hotels fortune—they want to do nothing else but play all the time.
More than any other type of business, the family-owned enterprise can present serious and highly personal ethical challenges. The values and practices of the business are more directly dependent on personal or family values and commitments. So if the business founder’s personal ethics leave something to be desired, that person stamps the business values, whether they know it or not. Some people are fair and firm in their ethical stance, so the family upholds certain standards in business operations. Other people are selfish, covetous or sneaky, and they play family members off of one another or treat non-family members unfairly.
Money also can be a powerful ethical dynamic in the family- owned business. Money by itself is amoral. Personal values, however, direct the role of money towards positive or negative effects and outcomes. The first generation and even the next one can set money aside for business development, retirement and the education of children and grandchildren. But money can become a powerful force in life for those who did not sacrifice to earn it. It can also feed addictions and a wasteful, selfish spirit.
So, just as publicly-owned, larger businesses strive to develop ethical practices and good returns for shareholders, family-owned firms need to rise to the challenges presented by success. While many of us may not know someone like Donald “You’re Fired!” Trump, we have read about his many adventures in business and personal life.
One piece of his life that should be imitated, however, is the incorporation of his children Don Jr., Ivanka and Eric as “apprentices” into his business. In the family-owned business, they will have to earn their living, not receive it. And that may be the best trait in the ethics of family business—everyone has to earn his or her own way, honestly, fairly and in a blend of values and entrepreneurship. IBI