How have corporate scandals affected governance in family businesses?
They’ve highlighted the fact that you can have independent outsiders on your board and that doesn’t guarantee good corporate governance. For years we’ve been hearing that family businesses should put independent outsiders on their board. But corporate governance means outlining goals and strategies, and holding boards accountable for those goals and strategies. What other issues are affecting family businesses? One of the really difficult challenges is dealing with the ever-changing tax laws and the implications for ownership transfer. The tax changes that President Bush put in lowered the dividend tax rate as well as the estate tax. There’s an estate tax exemption that’s been increased from $675,000 a couple of years ago to $3.5 million in 2007. Then in 2008 there’s no estate tax. Then in 2009 it goes back to what it was before. So if you die in 2008, there are no estate taxes. If you die on Jan. 1, 2009, it’s back to the tax laws from the late 1990s. What’s your advice on succession?
