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Nepotism Strategic Issues in Family Business 0506.327.01 Entrepreneurship.

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Presentation on theme: "Nepotism Strategic Issues in Family Business 0506.327.01 Entrepreneurship."— Presentation transcript:

1 Nepotism Strategic Issues in Family Business Entrepreneurship

2 nepotism from the Latin word 'nepos', meaning "nephew"

3 OLD Nepotism What Anthropologists call the gift economy GIFT ECONOMY: A system of noncommercial exchanges that serve to regulate moral relations between individuals, families and groups in a pre-state society.

4 New Nepotism American sentiment is a narrow conception of nepotism as favoritism for the undeserving At odds with our public creed of equality and merit. America lacks a positive statement of nepotism as an ethical activity. How can nepotism be practiced in a way that does not conflict with democratic values and ideals? Adam Bellow, In Praise of Nepotism, (Anchor Books, 2004, 467)

5 INHERITANCE of Intergenerational Wealth Primogeniture Ultimo geniture Gavelkind tenure

6 Legal rules of INHERITANCEINHERITANCE inheritance of the ENTIRE amount of the parent's wealth, estate or office By the FIRST-BORN in the absence of children, by collateral relatives, in order of SENIORITY of the collateral line Argument FOR Primogeniture prevents the subdivision of estates and diminishes internal pressures to sell property Primogeniture Argument AGAINST led to ill-feeling amongst younger siblings

7 Legal rules of INHERITANCEINHERITANCE Inheritance of the entirety of the parent's estate By the LAST-BORN - the youngest Argument FOR Retains the integrity of estates Youngest "keeping the hearth", taking care of the parents Eldest are out making their way in the world Ultimo geniture Argument AGAINST Youngest may not have reached age of maturity/ experience to manage operations

8 Legal rules of INHERITANCEINHERITANCE custom of dividing lands among the male heirs all the sons of a landholder share equally in such lands upon the death of the father Argument FOR Best when there is plenty of property to sustain a number of households There are few threats that need defending Gavelkind tenure Argument AGAINST Reduces the ability to marshal resources for large endeavors.

9 In Great Business Families Each dynastic family has a founder Founder is unique in establishing a complex of habits, attitudes, traditions and ideas that aid the family in its rise. Personality is main factor in forming family culture. Indomitable will, raw opportunism, keen sense of how to exploit events and people. Success was a multigenerationa l project

10 Dynastic families have a Founder Founder is unique in establishing a complex of habits, attitudes, traditions and ideas that aid the family in its rise. Personality is main factor in forming family culture. Indomitable will, raw opportunism, keen sense of how to exploit events and people. Strong grasp of the distinction between families and strangers. company_history.html

11 Techniques for starting a dynasty Start braiding together two families into a single clan – (paternal side dominates / maternal family provides support). Have many children. Bild an artificial clan around their family using marriage, adoption, and patronage (god-parents). Family apprenticeship.

12 Bill Gates approach Give away ones fortune Leave children a mere $10 million each. Enough to give them a start in lilfe but not so much that they are left with no impulse to strive.

13 Objections to Nepotism Threat to equal opportunity Rewards Incompetence Fosters Inefficiency

14 Nepotism Taboo at publicly traded companies Corporate-governance watchdogs say hiring family raises questions about whether the best person got the job. "It creates the appearance of a conflict of interest," said Nell Minnow, co-founder of the Corporate Library, a research firm in Maine focused on corporate-governance issues.

15 Resources on Nepotism The Corporate Library Society for Human Resource Management Articles bin/article.cgi?file=/chronicle/archive/2004/ 04/04/BUG675VJA81.DTL

16 Anti-nepotism Policies Many companies have anti-nepotism policies to avoid problems.


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