Summary Chapter 3 1 The Ownership Challenge Adwitiya A.

D 12221020

Maintaning relationship between family members in Family Own Bussiness (FOB) becomes difficult nowadays. This challenge like misunderstanding, disagreement about compensation, different opinion about strategic plan, financial result is not just dynamic issue but indirectly cause of ownership issue. Ownership in FOB based on asset, much more they controlled the company. But they still spread their money into others (investment) to avoid dependence ito something that they dont understand and trust. If there is some issue in the company, shareholder meeting is a good moment to educate owners about responsibilities and company expectation about the shareholder. Shareholder Priorities Shareholder usually want a minimum risk on their investment high return in devidend. They used to use parameter on EBITDA for financial score, otherside sometimes socioemotional like reputation and phylantropic is more important than devidend. Manager more concerned on market share, growth, and profitability. Family shareholder need to understand about the number on financial report in order to prevent hamper controlling the business. Responsibilities of Shareholder to Company Shareholder have the following responsibility : 1) Define and then demand reasonable return on shareholder equity or invested assets. Just fulfilling employee goals and expectation than profitability still not fair to shareholder for their investment. Owners have to be management in the front. Shareholder need to helping BOD to set strategy that meets the need of the owners with engaged to communicate with nonfamily BOD to challenge their job and participating 2) Provide the values and priciple of doing business and ensure they remain instilled in the company. Family owned and family controlled is not more better in value driven and creation. The value arised when the process in finding their bearings and principle. The value passed down to next generation as ownership responsibility (legacy).

Summary Chapter 3 2 The Ownership Challenge Adwitiya A. D 12221020

3) Define the owning family strategy and communicate owning family priorities. Shareholder in FOB has a responsibility to communicate the family strategy and priorities to BOD. Provide feedback and give direction for target acheivement. Sometimes, family constitutions in develop innovation strategy can boost company performance. Low profit to grab market share in first short run. Give acces to political and social networks Profit needed to provide devidend and fund family obligation Making company look pretty financially Maintain company liquidation with selling assets The Role of the Board Characteristic and identity of family remains reflect to the company, if there is something change, the composition of the board has to change. Overlapping between ownership and management healthy, competitive advantages can be exploited and the traditional agency costs faced by nonfamily firms are mitigated. Information, Communication and Education - Shareholders Trust comes from information, reliability and predictability, accessibility, shared golas, emotional bonds, sense of fairness and transparency. These generate confidance in understanding the people and the situation the company is in. Ownership Structure Ownership transfer policies - equally or expectations of equality by family members are likely to promote an impasse to the detriment of continued agility and competitiveness. Distributing voting shares equally among shareholders often erodes a next generation ownermanager ability to lead. Successors need to manage the business with ample capacity to lead. Unlike ownership, the authority to lead is earned rather than inherited. However transferring ownership without an eye toward corporate control makes it more difficult for successors to acquire the authority to lead. Ownership Structure and Classes of Stock Ownership structures do not transfer well across generations, one approach to this challange is to redesign the capital or ownership structure of the company by recapitalizing its stock.

Summary Chapter 3 3 The Ownership Challenge Adwitiya A. D 12221020

Buy Sell Agreements Legal agreements between shareholders and the company, which used by family business owners to facilitate an orderly exchange of stock in the corporation for cash. A buy-sell agreement is often as vehicle through which family shareholders can realize value from their highly illiquid and unmarketable wealth-company stock.