Business in the time of broken families

Rajiv Agarwal | Updated on January 20, 2018 Published on April 12, 2016


The young do not stick in a relationship when it’s not working. This complicates legacy matters

Recently, a high profile couple belonging to two business families was in the news — there were getting a divorce within two years of having been married.

Such divorces are common today and do not cause raised eyebrows in society. This raises the question: What has changed? And what are the implications for business families in these new circumstances?

Some of the changes taking place have been put down to the high levels of education, high degree of independence, the breakup of the joint family structure and arranged marriage system, low levels of tolerance, and changing attitudes.

Today, more women are educated than ever before. They get professional degrees and some move into senior corporate positions.

Independent women

This has led to women becoming more independent, and thus increasingly starting to take charge of their own lives. I also see this reflected in the increasing university enrolments every year.

Women have a desire to contribute and make a difference to their families. This coupled with the exposure of the real world outside the family has helped women think independently for themselves.

In fact, most business families have realised that the daughters’ education is the best asset they can bestow upon them and are actively encouraging them to attain the highest educational qualifications possible.

Stories of startups getting funded or bought out or women doing extremely well are some examples of an inner urge which is best echoed by the phrase, often heard with the next-generation. “There is so much opportunity out there, why am I wasting my time here?”

YOLO! (You Only Live Once) is the new mantra driving this generation and they seem to have just got started.

Independent thinking daughters increasingly prefer to choose their own husbands, not depending on the family for arranged marriages.

Society is gradually coming around to accepting the reduced misery of separation over the prolonged pain of a non-working relationship. The reduced stigma attached to divorces and the quick re-marriage possibilities have also helped.

The consequent impact of these changes in society could be the continuing family responsibility for the daughter post-marriage, and potential risk to family reputations and assets.

Families need to provide for these possibilities.

The traditional view held that the daughter becomes a family member of her family that she marries into.

Recent legal amendments have given equal status to daughters in wealth distribution, but this still may not be widely practised. Families have to consider that divorces could result in the daughter to having to become dependent on her family of origin.

Business implications

This could also have implications for the family business. Should the daughter join the family business? Or should a separate independent business venture be created, or funded? How do you ensure her economic security?

Traditional relationships now have to also consider, to name a few, separated joint-custody kids, live-in relationships, offspring from prior marriages, and LGBT relationships.

All of these possible realities will have to considered and accommodated in the traditional family structures.

Business families face the additional risk of family reputations being affected in case of any personal problems which are fought in courts. This could also result in a constant public gaze on a personal issues, which could cause, besides personal anguish, considerable uncertainty in the family business.

Claims could be made on family assets and businesses. One method is for families to expel the next-gen, to protect them from being dragged into courts and thus endangering the entire family wealth. But this will always be an area of concern and families need to consider possible solutions to ring fence their assets.

Marriage break-ups can affect any business family. So, it may make sense to examine the implications for business families.

Realignment of wealth: The culture within traditional families of encouraging women to remain focused on the family by marriage will have to be reconsidered.

The possible consequences of a marriage breaking up, whether it is re-marriage, or providing for the separated daughter in the family of origin, would have implications for family relationships and the business.

There is also the question of the role, if any, the now-single daughter would play in the existing family business. This could become complex with the presence of other male siblings.

Most women would prefer to be independent and not be a burden, and hence a family structure may have to be created to support this.

Pre-nups and wealth protection: Though pre-nuptial agreements are not yet legal in India, they are quite common in the West.

There are reports on efforts being made to make these legal. In case of heirs, who may have married outside the family’s wishes, there is a constant fear of the family wealth being affected, should a marriage not work out. If the son-in-law is working in the family business, then any separation could be tricky.

Though one cannot predict the outcome of marriages, families could protect themselves by considering making a family agreement, which lays down the rule for the entire family for all existing and future family members.

This is a very sensitive issue, and must be handled only with the help of legal, taxation and family business experts.

Most families would desire to handle this in the most discreet and smooth manner. This also helps to remove any feelings of resentment.

Estate planning: Complex relationships will force us to redefine who exactly is a family member. The question of whether a son-in-law is a family member or not is enough to awaken vehement and passionate opinions in some families.

The added complexity of children from prior marriages would need the family to be more inclusive.

Our society has encouraged adoption and almost-family members in the past, but such recognition should be reflected in wealth allocations.

The only way a business family can ensure long- term survival of both the family and the business, is to have an inclusive but clearly defined structure documenting the roles, responsibilities and privileges of each member.

Businesses can, and usually do, survive a round of restructuring which may reflect the changing times.

With families, it is a different exercise altogether. But, given the right help and intentions, there are ample cases of families that have managed to get this right, too.

The question is, are we as families, ready to consider taking the first steps towards attitudinal change to provide for our next-gen?

The writer is with the SP Jain Institute of Management & Research. The views are personal

Published on April 12, 2016

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