The Code of Conduct for the Privately Held Business

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It seems almost ludicrous that this is a topic that many of us should consider in privately held companies.

When I suggest there may be a need for a “Code of Conduct” I am not talking about a need based on employee behavior, I am talking about the need based on family behavior. The family business is a cornerstone of the US economy. It’s the American way, free enterprise and all that gooey stuff we read about. And, it’s true.

Family owned/privately held organizations, both small and large, with succession issues, family preparation and second and third generation leadership issues often have several family members that hold management positions within the company. Often time’s interaction between family members can create problems for the business. In some extreme cases employees may actually begin to takes sides on a variety of issues based on the particular family member they have elected to support. Sometimes, family issues may exist within the minds of the employees and the actual family members have no idea how their interaction has created the problems.

I have seen brothers be vengeful against brothers in the family business to the point that the business suffers and may risk failure. I have seen family relationships destroyed over business issues, jealousy and even greed. I have listened to distraught fathers try to determine succession within the business when two sons believethey are air apparent to the kingdom and Dad just can’t pick one over the other. I have seen family businesses run by second and third generation family members that demonstrated exceptional competency, vision and skills to continue to grow their business. Then again, I have seen a few empty suits and empty dresses when it comes to running the business as well. I have seen sons that couldn’t wait to get their hands on the business just so they could sell it and escape with a fortune. Then again, I have seen fathers that have elected to sell simply to avoid the family conflict involved in passing the leadership reins down to another family member.

We all have different strengths, different methodologies and different experience in the world of wholesale distribution. These differences will impact our individual approach to any task or project. This can become an area of risk for some of us. We must be conscious of our own unique style. This is especially true when it comes to a family run business. To use a phrase from General Russell Honore when he took over during the Katrina Hurricane crisis, “We can’t afford to get “Stuck on Stupid!” He made that comment to the media when they tried to interrogate him about all the mistakes made during the aftermath of Katrina. As Owners, CEO’s, Presidents or just family share holders, we can not afford to get “Stuck on Stupid” when it comes to running the business. We must put the business needs ahead of our personal needs. It is absolutely essential that you look forward and not back if you are going to continue to grow the business.

I am not suggesting that a “Code of Conduct” will resolve succession issues. That in itself is an entirely new discussion. However, I am saying that a “Code of Conduct” will not only make the succession transition smoother, it can also circumvent any potential problems related to internal family interaction. Additionally, you might want to consider creating a family business doctrine that outlines the values and principles that you want to maintain in the business. The family business is what built this country. There’s no question about that. But, it is not without its problems. If you are the president of a privately held company and you have absolutely no family issues in running the business, you are in the minority. Consider yourself very lucky and commend yourself on how you have been able to run your business and avoid family challenges. If you are one of the majorities of privately held businesses that has experienced family issues you might consider a “Family Code of Conduct”.

Dr. Rick Johnson ( is founder of CEO Strategist LLC. an experienced based firm specializing in strategic leadership . CEO Strategist works in an advisory capacity with company executives in board representation, executive coaching, education and training to make the changes necessary to create competitive advantage. You can contact them by calling 352-750-0868, or visit for more information.

Rick received an MBA from Keller Graduate School in Chicago, Illinois, a Bachelor's degree from Capital University and his PhD in strategic leadership.

Contact E-mail or visit


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