"Carl, this has gotten way out of hand!" Elaine Martino exclaimed to her husband Carl. "That was your doctor on the phone. He said that with all the stress and conflict going on at the factory, you are not to go back to work until further notice. He's afraid that your diabetes could lead to shock or a stroke. Carl, what are we going to do?"
Things had been going from bad to worse for Carl Martino, age 64. He and his younger brother Frank, age 59, are equal owners of a small, moderately successful, niche manufacturing company, Biker's Best, which assembles bicycle seats for most of the name brand European racing bikes. For many years as the business grew, the two brothers got along fine. But more recently, the relationship between the two has soured and major decisions are not being made due to the brothers' inability to agree on anything. At one point, the company's truck drivers walked off the job because Carl and Frank could not agree on a raise in wages. Equipment is being allowed to deteriorate without replacement or repairs being made.
Perhaps the biggest problem, however, is the open hostility between Carl and his nephew, Frank Jr, age 28. Frank Jr repeatedly criticises Carl in front of employees, calling him "senile", and has even told some customers that Carl no longer works at the company. However, Carl is no angel either and refused to sign Frank Jr's paycheck for a US$20/week raise; Frank Jr then filed a wage claim with the Department of Labour.
On more than one occasion, these incidents have led to fist fights at the company between Carl and Frank Jr, and even between Carl and his brother. At a Board of Directors' meeting, Frank once made a formal motion that: "Carl is not fit to eat with pigs."
Carl recently approached his brother about retiring and being bought out, citing his own advancing age and ill health. This seems to make sense to Carl since Frank Jr is active in the business, while Carl's children have careers outside the company. Frank is interested but noncommittal, questioning whether he or the company can afford it.
"Carl, how can we get your brother to be fair to you when the two of you can barely talk to each other any more?" Elaine asks with growing frustration. "Do you think I should finally bury my pride and call Frank's wife? After all, she is my sister."
How might Carl and Frank resolve their differences?
Communication issues are a common problem in many life scenarios. Undelivered communication is at the heart of many family conflicts and it appears that is what is happening in this case.
The fact that the two brothers cannot agree on anything to the point that it affects the day-to-day management of the business and the relationship between family members indicates that there is a need to address some rooted issues. People arrive at this point after they have held back from truly communicating with each other. The hurt, pain or the feeling of being undervalued, if not properly talked through, transforms into issues of control, power struggle and the ego's desire to be right!
It is clear that the brothers have disagreements that cannot be handled in the 'normal' way. Things have got out of hand. The first step would be finding a way to get the brothers to properly talk to each other. The two sisters can initiate this: they have to find a way to get the two brothers together, ideally by involving a professional advisor (be it a mediator, family business advisor, consultant psychologist or a coach).
The aim is to create a safe and open environment for the brothers to express their true feelings, desires and needs. It is a gradual process, starting with each of the brothers, slowly involving Frank Jr if necessary and, depending on the progression, the two sisters.
There are some communication principles that the brothers have to recognise and implement:
- Acceptance of personal views, opinions, values;
- Balancing emotional upsets;
- Relearning to trust;
- Balancing the power struggle; and
- Effective communication – what we say and what we do not say is equally important.
Communication is a built-up vocabulary of words and sentences. It is important how we deliver it but equally important is how the person hears it (ie, perceived interpretation).
The brothers must to go beyond their current disagreements and find a way to talk to each other. It seems that Carl has to take responsibility for the process. He is the one that wants to leave the business, given his health issues and his children's lack of interest in the business. He has more at stake and he has his wife's willingness to do something about it.
Frank Jr must recognise that he is the younger generation, and therefore needs to learn and show some respect for his uncle. Once the brothers overcome their anger and are able to talk to each other, they have to find a way, accepted by both, for Frank to buy Carl's share in the business. After all, Frank's son appears to be the successor.
Dr Ronit Lami is Director of Affluenza and Wealth Advisory Practice at the Allenbridge Group Plc. A Chartered Psychologist and a member of a family business, she specialises in the impact of wealth and family business on people's lives.
There is an obvious communication problem here. The challenge is to identify the original source and work through the layers to rebuild trust, respect and family feelings. It is important to realise that this is a family system issue rather than a business system problem. This helps to find the starting point for further investigation.
This case is too hot for intermediation or other legal representation by a lawyer. I would work with, or refer the work to, a clinical-based therapist or a psychologist with family business experience. Although the solution may involve a purchase and sale of interests in the business among family members and other business and technical matters, this engagement is going nowhere without initial input from a family system specialist.
Separate interviews with family members and immediate family units are the apparent next steps. Facts and revelations will guide the course of action from there. I do not perceive any obvious saints or troublemakers here as an initial response. The lack of cooperation and eventual stalemate between two equal owners who are brothers is no surprise. Frank Jr's blatant lack of respect for Carl in the workplace is a serious matter, but he may be acting in such a manner to bring much-needed attention to the building crisis. The issues between the sisters/spouses add additional spice and complexity to the tangled web.
Perhaps Carl's children can serve as catalysts for opening communications within the family; this is likely to result in Carl's retirement from the company and a total or partial buy-out of his interest in the company. An ESOP (employee stock ownership plan) may be a good answer. Perhaps a combination of cash, an instalment note and a possible retained minority interest for Carl might resolve the conflict after the path of communication is open. Of course, price will be an issue, but a trained professional could convince Carl and Frank not to be greedy. The stakes on both sides of the family are simply too high for failure.
It is likely both family groups will need independent legal counsel and the selection process will be important to the eventual outcome of the case. Process-oriented lawyers with experience in the resolution of family and family business issues are needed. Identify the family secret issue(s), start a process of communication, and buy Carl out of the company. Who knows – perhaps Carl and Frank will continue to fight with each other as a part of their family culture, but with some brotherly love thrown in at the end of the day (or at least at family weddings, funerals and holiday gatherings). And, importantly, the business will not be at risk.
Joe M Goodman, JD, LLM, CPA is a principal in the law firm of Stokes Bartholomew Evans & Petree, PA in Nashville and Memphis, Tennessee, USA.