How to manage divorce

By Mark Green, Stephen McClure

Fourteen EU countries agreed to a new pact last week that allows spouses of different nationalities to choose the applicable rules to their own divorce, write Mark Green and Stephen McClure. 

This follows recent high-profile cases including the expensive separation settlement of Italy's prime minister Silvio Berlusconi and the daily drama of Frank & Jamie McCourt ? owners of Major League Baseball's premiere franchise Los Angeles Dodgers.

It is clear that divorce is becoming more commonplace. When a couple separates and divorces, one or both can become the target of negative publicity as a tactic to gain from the other.

A spouse on the outside may feel hard-done-by due to one-sided prenuptial agreements, undervalued business assets and a clan-like family support on the other side. This can cause the outside spouse to turn to the only leverage they have; attempting to damage the public image, reputation and legacy so valued by many business families.

Personal conversations, emotionally driven replies and accusations that are made public can produce a spiral of "interesting reading" with many willing media conduits.

Many business families have their net worth tied up in the business and the business strategy depends upon it staying there. A divorce of a significant family shareholder often means a need to liquefy assets to settle with a spouse, affecting the overall ownership configuration.

The sale of shares in sibling owned businesses may even mean that no shares are left for a segment of the family; the children of the divorcing couple. This can significantly disrupt the dynamics of the family as some will inevitably not benefit from the family legacy.

In addition to the unwanted publicity and image issues associated with public tactics of a divorcing spouse and the potential for unwanted recapitalisations, business families engaged in succession planning face issues with the divorcing couple's children.

The children, and perhaps even their sympathetic cousins, may rebel against the senior generation in which the divorce is occurring. Seeking to find their way when their structure is shattered, the children are often not tolerant of the business continuity processes. They may demonstrate their rebellion by not showing up at family council meetings or playing upon the emotions of their parents to advance their entitlement expectations. Manifestations may be direct challenges to the family employment policy, not meeting their potential in school, or disruptiveness, aggressiveness and underperformance in a business role. 

Spouses at odds with each other must, in the best of circumstances, be parents and manage the impact on their children during the dispute.

Is a business family in a position to help? Yes the family can step in and help the children of the divorcing couple to cope, listen, offer perspective and get them additional support if needed. Aunts, uncles, grandparents and cousins can get closer and reinforce or reignite the supportive structure of the broader family around the needs of the children. Families are ideal for this.

An extended business family can also step in and directly or indirectly mediate the divorce by encouraging less emotional reactions to negotiation tactics, while also helping to manage publicity. Keeping an open line of communication between the divorcing spouses can also assist in minimising the destructiveness.

Helping the divorcing family member to see the potential for damage (he or she has more to lose in a nasty public fight) is a natural role for influential family members. Families should ask: "Who do we have in our family who can talk to each divorcing party and help reduce the collateral damage of a deal?"

Finally, the broader family must consider the long-term impact of the divorce. It is not just a matter of one family member raising capital to settle with their spouse, selling shares can mean a segment of the family becomes more distant. Business families are uniquely qualified to find a fair arrangement that is beyond a business transaction, such as making an extra effort to keep the door open for the divorcing parent's children to acquire ownership in the future, for the long-term purpose of achieving a connected business family in the next generation.

In the middle of an emotional fight, calling upon the wisdom, the resources and perspective of the broader business family is one of the biggest benefits of being in a family.

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