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| Advisors' Forum |
Sibling Rivalry
11/01/2007
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My dad has always tried to treat my brother and me equally. In
our family business, I have worked full time for more than a decade. I am head
of sales and help bring in millions of dollars in revenue. My brother has been
with the firm less than five years, is vice president of human resources and
does not bring in any revenue directly. Yet we are paid equally, have equal
equity and will share the company when our father dies. This doesn’t seem fair.
Shouldn’t our compensation reflect our roles?
The short answer to your question
is, yes. Most parents say they love all their children equally, so they want to
treat them equally.
Unfortunately, siblings usually feel they should be treated
according to their individual contribution levels. Experience shows that while parents are alive to control the compensation issue, it rarely surfaces. But
when the parents are no longer around, the pent-up anger and frustration finally
come into the picture.
Compensation in a family business can prove challenging for all generations, as well as for nonfamily employees. Many business owners engage in
selective merit pay, ignoring the concept that individuals should be paid at
market rates and adjusted for performance—proving once again that blood is
thicker than water.
Family-member employees who make a commitment and meet or
exceed performance expectations should be rewarded, not penalized or held back
by others in the family who are less capable, less motivated and, in some cases,
less productive. All employees should receive compensation based on the role
they play in the business, not based on who they are, their gender, their last
name or their birth order.
Equity in the business is another story. It is reasonable for
parents to transfer or bequeath ownership in the family business on an equal basis to children who are actively involved.
David J. Ciambella, The Rawls Group, Orlando, Fla.
Parents are determined to treat
their children equally, especially in terms of sharing their financial
resources. Compensation of family members in the family-owned business is easily
one of the top 10 hot-button issues. The fair market value of your position, and
your brother’s role, can be evaluated on an objective basis. The results may not
be 100 percent accurate, but they provide rough justice. Almost everyone thinks
they are underpaid.
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