Sunday, July 3, 2011

Family Businesses and Divorce

In my last post, I gathered information about the surprising, not commonly mentioned connection of the toll divorce could take on our endangered environment today. Now, I read an article by Bernardo Villegas talking about the connection of family and business stability. Here’s what it says.

“Divorce is not only a moral plague. It is a social and economic cancer to society.” Pretty strong words to flavor an introductory paragraph. But that is not all. The article goes on to say there is another sphere in society in which broken marriages can threaten the common good and that is the importance of family-controlled corporations in most European and Asian countries. What corporations? Well, we all know the Ayala Corporation is mostly run by the Zobel de Ayala’s, and there’s the Sy’s of SM Corporation. When Bernardo Villegas was a visiting professor at the IESE Business School, its experts told him that family breakups are jeopardizing the very future of some of the large corporations in Europe. Legal squabbles among the family owners and their in-laws can actually destroy industrial peace within a business corporation.

Villegas cited an August 2010 article from the Financial Times by Geoffrey Owen, giving him another reason why divorce should not be introduced into the Philippines. It may destabilize the economy by destroying industrial peace in many of family-controlled companies in the nation. As Owen wrote, “family-controlled corporations are still predominant in emerging markets like the Philippines.”

“Part of the rationale behind family-controlled business organizations is that they make up for missing or underdeveloped economic institutions. Where public capital markets are insignificant or even non-existent, business owners are forced to finance themselves internally and to invest surplus funds in other businesses they can control directly. The ease of decision-making in these key result areas of a family business can be easily derailed by messy legal suits usually associated with divorce litigation. Where the legal system is unreliable and trust in commercial relationships is lacking, owners can cut risk by placing family members in key positions. They can also develop an internal labor market. Groups let talented people move between businesses without relying on an external job market rife with fraudulent certifications. It is said that the best business school in such a country might well be the dinner table of a powerful business family.”

“There are more important reasons to object to legalizing divorce in the Philippines. The threat to business stability, however, can be added to the myriads of social, economic, and cultural harm that can come to our country if we allow valid marriage contracts to be broken. I hope that the President's objection to divorce will include the prohibition to remarry. It is in fact the introduction of strangers to the original family that can cause chaos in a family enterprise. “

Source: http://www.mb.com.ph/articles/277383/family-and-business-stability

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