How to prevent family money feuds and how to settle disputes out of court by Wilson Lee Flores

Read the online article written by Mediation advocate Mr. Wilson Lee Flores

Wilson Lee Flores

6/29/20134 min read


How to prevent family money feuds and how to settle disputes out of court by Wilson Lee Flores. (The Philippine Star) | Updated July 29, 2013 - 12:00am

The family is a haven in a heartless world. — Attributed to Christopher Lasch

Family quarrels are bitter things. They don’t go by any rules. — F. Scott Fitzgerald

Often the root cause of many family feuds is conflicts over money. A high-profile family feud in the US was the 2002-2005 conflict among the Pritzkers, Chicago’s wealthiest family which owns diverse businesses including the Hyatt hotel chain. That family feud led to the 2006 breakup of the US$20 billion business empire.

Family Feuds in richest clans of us, South Korea, Europe & Australia

One leading family member is America’s newly appointed Commerce Secretary Penny Pritzker. This brilliant Harvard and Stanford-educated billionaire businesswoman was confirmed by the full Senate on June 25, by a vote of 97 to 1, and was sworn in by President Obama as Secretary on June 26.

On Feb. 1 this year, South Korea’s richest billionaire Samsung boss Lee Kun Hee survived a family feud after a court rejected lawsuits from his kin, with five relatives suing for more Samsung shares including a brother and a sister. The innovative and well-run Samsung is today the world’s biggest maker of mobile phones, TVs and computer-memory chips, surpassing Apple, Inc., Sony Corp. and Panasonic Corp.

In Europe, a sensational and bitter family feud involved the 90-year-old L’Oréal cosmetics heiress Liliane Bettencourt in a ferocious 2010 battle versus her daughter, Françoise Meyer, for control of the family wealth. Bettencourt is the richest woman in the world with an estimated fortune of $30 billion.

In Australia, the world’s fourth richest woman, 58-year-old mining tycoon Gina Rinehart, has a personal fortune of $17 billion. She is locked in a bitter legal battle started by her three children in 2001; the dispute is about control of a US$4 billion trust.

In the Philippines, an example of a family rift due to money issues is that of the Ortigases, who own Greenhills Commercial Center in San Juan City, with two factions allied respectively with business competitors Ayala Land and SM Group.

5 Suggestions on preventing family feuds

Here are some of my suggestions on how to avoid family squabbles:

1. Sell the business or property. If the next generation heirs of an entrepreneur has no interest in running the family business or cannot agree on who should be boss, perhaps it is a win-win solution to just sell the whole company and then split the cash in order to avoid nonstop squabbling. This option is ideal whether for small, medium or big businesses, or even for joint ownership of properties like that of a house.

2. Publicly list the business. The move for public listing or initial public offering (IPO) is a good way to prepare for the future in a multi-generational family business; in case family members disagree, they can get out by selling shares through the stock market and not forever be stuck in the family firm. A listed firm can also be more transparent in terms of good governance, just in case disparate relatives disagree on personal or business issues but still want to be part of the family business.

2. Do estate planning. One way to forestall or prevent a full-blown family squabble over a business or inheritance is for a person to explicitly plan his or her estate planning, and to keep on updating it through time. Consult good lawyers, accountants and other experts.

3. Succession plan. For the continuity and long-term viability of a family business, and also for preserving family harmony, it is good to spell out in writing a clear succession plan and back up this plan with requisite legal documents and stocks or shares to strengthen the successor against challenges.

4. Prenuptial agreement. For marriages, it is fair and pragmatic for well-off couples to go into a prenuptial agreement before their wedding. Donald Trump also always advises entrepreneurs to enter into a pre-nup.

5. Try to separate family and business needs. This is not easy to do, but I have seen and heard countless tales of businesses becoming mediocre or losing efficiency due to unmotivated, unfit, inept or dishonest family members holding certain jobs or positions due mainly to blood ties and not due to qualifications.

What is worse, some of these unfit kin receive salaries, benefits or even perks disproportionate to their work and performance level in the company just because they are relatives.

The ideal to prevent this problem is to institutionalize a policy that relatives who wish to work in the family business should meet the minimum qualification requirements and should also perform up to par, or else they should stay out of the business and just wait for their dividends!

90 free scholarships for would-be ‘mediators’ in family or business feuds

How does a person become a professionally trained “mediator” in out-of-court cases? Leaders of the National Center for Mediation (NCM) and the non-governmental organization called The Conflict Resolution Group Foundation, Inc. (The CoRe) have asked this column to share the good news about their scholarship program for would-be mediators. There are 90 slots for scholarships available nationwide in Metro Manila/Batangas, Iloilo City and Cagayan de Oro. Interested applicants can contact, and [email protected].

Since there are 600,000 pending legal cases in our Philippine courts as of 2010 and court cases can unnecessarily disrupt business operations and escalate in exorbitant costs, eight organizations of the business sector jointly established the National Center for Mediation to promote the pragmatic “out of court” mediation and settlement of disputes. They said this non-profit project is backed by law in Republic Act 9285.

The eight convenor groups behind the NCM are: Philippine Chamber of Commerce and Industry (PCCI), Philippine Exporters Confederation, Inc., Management Association of the Philippines (MAP), Employers Confederation of the Philippines (ECOP), Federation of Filipino Chinese Chambers of Commerce and Industry, Inc. (FFCCCII), Chamber of Commerce of the Philippine Islands, Inc., The Conflict Resolution Group Foundation, and People Management Association of the Philippines.