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Pervin Family Business Advisors

Profile of Aron Pervin

All in the Family, Even After the Marriage Ends

The Globe and Mail – Monday, December 19, 2005 – Page B9

Divorcing the boss's offspring no longer kiss of career death, Gordon Pitts writes

Lili Schad figures the breakup of her marriage to John Galt did him a favour.

The marital split lifted the weight of being a Schad family member off the shoulders of Mr. Galt, who at the time in the late 1980s, was a talented young engineer in her father, Robert Schad's, company.

Ms. Schad believes that Mr. Galt's liberation from in-law status propelled him up the ladder at Husky Injection Molding Systems Ltd., the Bolton, Ont.-based plastics technology company founded by her father 52 years ago.

Earlier this year, Mr. Schad, 77, retired and passed the CEO's job to Mr. Galt, who is 45. "He wasn't family, he was safe," says Ms. Schad, now a filmmaker in Vancouver, who heartily approves of her ex-husband's appointment.

She also believes the divorce pre-empted her father's concerns about being seen as favouring his in-law.

Marrying the boss's son or daughter used to be considered the express route to the corner office, particularly in family companies.

But it's no longer so clear-cut. Family favouritism is out of favour. Any signs of in-laws occupying senior roles can be a red flag to boards, investors and often to CEOs themselves -- who, like Mr. Schad, might want to appear above suspicion on the nepotism front.

Thus, divorce is no longer a career kiss of death, as further evidenced by the case of Don Walker, ex-husband of Belinda Stronach.

A decade after his divorce from Ms. Stronach, Mr. Walker was promoted this year to co-CEO of Magna International Inc., the auto parts giant controlled by her father, Frank.

As for Mr. Schad, he agrees that Mr. Galt probably wouldn't have got the CEO job if he had remained his son-in-law. In fact, he probably wouldn't still be with the company, Mr. Schad says.

Meanwhile, non-divorced sons- and daughters-in-law often find working in a family business to be a kind of limbo. They are not family members in blood or ownership, but they are often treated that way by the outside world.

"You're in the family, but you're not -- especially in estate planning," says Aron Pervin, a family business adviser in Toronto, who sometimes wonders why in-laws take on this ambiguous role when they could be charting an independent career course in another company.

Certainly, marrying into a family business can help grease the route to the top but, even if the in-law is a credible candidate, the appearance of favouritism can backfire.

Such is the case of Hank Swartout, the respected builder and chairman of oil field services giant Precision Drilling Corp., whose son-in-law Gene Stahl was elevated this year to the role of president and chief operating officer of the company as it was converted to an income trust.

That set off a storm of protest after the Precision board set aside its conduct and ethics code regarding conflict of interest so that Mr. Stahl, a nine-year Precision employee who was running a relatively small division, could take on his big new job.

The protest was led by the Ontario Teachers Pension Plan, which complained that the family relationship between Mr. Swartout and Mr. Stahl was not disclosed in the information circular. Teachers also opposed the conversion because of big payouts to the management team.

Mr. Swartout defended the appointment, telling analysts that Mr. Stahl has the backing of ordinary workers who wanted a president appointed from inside. "Everybody looked toward Gene for leadership," he said. (Mr. Swartout did not respond to a telephone inquiry about the succession.)

Of course, rank-and-file workers rarely sound off about family members, except privately around the water cooler.

Yet families can muster up arguments for promoting daughters-in-law or, much more frequently, sons-in-law. For families losing their entrepreneurial drive, it is one way to inject new blood into the management ranks without losing the family presence in the company.

Of course, it might be even more invigorating if the family steps back entirely and lets non-family professional managers run things.

Mr. Pervin says that it is essential that the family maintain a clear separation between ownership and management functions. That makes it more transparent in compensating, promoting and, if necessary, firing family members, including in-laws.

The argument in favour of in-laws gets a boost from the career of Laurent Beaudoin, chairman of Bombardier Inc., probably the most successful son-in-law in Canadian business.

An accountant by training, he married Claire, the daughter of snowmobile pioneer Joseph-Armand Bombardier, and joined the small family company at the age of 25.

Mr. Beaudoin quickly became a favourite of his father-in-law, who sensed more drive to run the company than was apparent in his own children. Mr. Beaudoin assumed the top job following Mr. Bombardier's death.

He led Bombardier Inc.'s diversification into rail and aerospace sectors, which allowed the company to be a worldwide success story -- although that story has been tarnished by the dumping of star recruit Paul Tellier, and Mr. Beaudoin's late-career re-emergence as CEO in a bid to recapture past glory.

The Bombardier case suggests that hard-driving entrepreneurs often bond better with their sons-in-law than their own offspring, who almost inevitably disappoint. Or the children are intent on forging their own identities separate from the company.

Consider the career of Ms. Stronach, who, after serving as CEO of her father's company, struck out on her own as a politician. Meanwhile, Mr. Walker, an engineer, toiled away in a Magna spinoff making car interiors.

Ms. Schad says that her former husband was able to connect with her father on a different level -- at the mindset of the engineer.

Meanwhile, she gained rapport with another side of Mr. Schad, as an unconventional thinker. Her father is excited about her current project, establishing an African orphanage.

The entrepreneur actively discouraged his children from working in the company, she says. While Lili became a filmmaker, son Mark runs a machine shop in Vancouver and another daughter, Katherine Willow, is a naturopathic doctor. Mr. Schad has a fourth child, a young son, from his second marriage.

But Ms. Schad feels that Mr. Galt's short span as son-in-law brought him to her father's attention, thus planting the seed in Mr. Schad's mind that this was a rising talent. Ms. Schad says that her father seemed disappointed when the two divorced, but Mr. Galt was quickly groomed for bigger things.

Ms. Schad, now remarried with children, as is Mr. Galt, says she has no doubt her ex-husband was the best choice for CEO. "Husky is my dad's baby," she says.

"He's not going to put someone into Husky who is not right."


Among tales of sons-in-law in senior roles:

Walt Disney's death elevated son-in-law, Ron Miller, to the presidency at Walt Disney Co. in the early 1980s. But his Mickey Mouse leadership led to a boardroom coup that brought in Michael Eisner.

Ted Rogers employs son-in-law David Purdy as a vice-president of Rogers Communications Inc., but daughter Lisa's husband shouldn't aspire to the CEO's job -- not when Ted's son, Edward, and well-regarded Nadir Mohamed are in the race.

Ken Rowe, boss of Halifax-based IMP Group International Inc., counts among his executive team both daughter Julie Gossen, who runs CanJet Airlines, and ex-son-in-law, David Gossen, an aerospace executive vice-president.

Alberto Contina and Alberto Alcocer were sons-in-law of Spanish construction titan Ernesto Koplowitz, who built Fomento de Construcciones y Contratas. When Ernesto died in 1992, the two Albertos inherited the reins but ran around with other women. Esther and Alica Koplowitz dumped the hubbies and became Spain's most powerful women.

New York Yankees owner George Steinbrenner says that son-in-law Steve Swindal -- who, along with Mr. Steinbrenner's own sons, is a Yankees general partner -- is his successor. Does anyone really believe the lovable tyrant will stick to this plan?

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