These aging entrepreneurs are shuffling ever-closer to the day when they must hand the reins of their companies over to the next generation (who are now in their 50s and 60s). This is a profound change with far-reaching business and personal implications for these individuals. Even so, many have not given it much thought. Indeed, 55 percent of family business CEOs aged 61 or older, who say they expect to retire within the next four years, have not yet established a succession plan, according to a 2003 survey by MassMutual Financial Group and the Raymond Institute.

My Company, Myself
Business founders often say they want to keep their “favorite child” in the family, and for good reason. Those who have sold the fruit of a life’s work to a private investor or on the stock market usually come to regret doing so, according to a study that The Economist magazine conducted in the late 1990s. After a lifetime of business-building, many entrepreneurs feel a keen loss of identity, prestige and influence when they sell their firm; this is aggravated by the realization that they need to find another flag around which to rally their family. (It is much more difficult to engender a child’s loyalty to a swollen bank account than it is to a company that reflects the family’s values and accomplishments.)

Entrepreneurs also seem to have an intuitive understanding of the fact (which is borne out by statistics) that keeping family control over a business is one of the best ways to ensure it carries on as an independent entity, thus preserving its founder’s legacy.

The founder’s reluctance to settle on a succession plan may be simply a gambit to avoid becoming a lame duck, or it may have deeper psychological underpinnings—perhaps difficulty acknowledging one’s own mortality. He may also dislike the idea of losing his influence over his children.

Members of the second generation who work in family businesses bear a double burden. They must wait until the founder leaves the stage before getting their own chance to shine, even if that means deferring that moment until they are in late middle age. They also chafe under the constant scrutiny of a parent for decades longer than those who eschew a career in their family business. Worst of all, shorn of the opportunity to excel within the business, they may fail to establish themselves as capable and trustworthy managers in their parents’ eyes. This puts the first generation in a painful bind: leave the family firm to someone they perceive as incompetent (or at least uninspiring), or abandon it to a stranger.

Even so, battles between the first and second generations can provide the heat in which strong companies are forged. Mars, the country’s second-largest candy manufacturer, suffered a serious rift when its founder, Frank Mars, fell out with his son, Forrest, over a series of business decisions. Forrest stormed off to launch his own confection company in London; it became very successful. When the father and son reconciled in the mid-1960s, their merged company was stronger than ever. By the time Forrest died (at the age of 95 in 1999), he was the 30th richest man in the country, according to Forbes, and had left his own three children a thriving business.