What are the reasons to have a business succession plan?
Anyone who has raised a business from the ground up understands the importance of keeping it in safe – and competent – hands, which is precisely why so many small business owners fear the day they must ultimately pass the reins to their successor. However, as today’s story points out, holding on to control for too long can ultimately result in an unceremonious ouster by the governing board – or, worse, an adversarial takeover by concerned family members via a guardianship petition.
In neighboring California, media mogul Sumner Redstone has been at the helm of Viacom since the mid-1980’s – followed by a takeover of CBS in 2000, when he was already approaching 80 years old. Now, the 92-year old is facing a takeover of his own as loved ones recently filed a petition challenging Redstone’s mental capacity, describing him as a “living ghost” and urging the court to appoint a guardian over Redstone to ensure he did not harm himself physically or financially.
In the wake of this filing, executives at both CBS and Viacom made the difficult, awkward, and necessary decision to essentially force Redstone out of the control booth, resulting in a gentleman’s agreement between Redstone and the respective CEO’s of both companies. As a result, Redstone agreed to step down, allowing Les Moonves and Phillippe Dauman to assume the roles of executive chairmen of CBS and Viacom, respectively.
In the case of Mr. Redstone, increasing shareholder pressure and the threat of humiliating mental competency litigation ultimately triggered a rational response by the ailing chairman – who had once proclaimed he did not need to succession plan as he was going to live forever. In reality, however, implementing a proper plan for the transition of a business is an essential part of running a successful operation – and should not be left to the last minute when competency is questionable.
If you need help with business succession planning or have any questions regarding establishing an estate plan in Nevada, you should engage the services of a qualified estate planning attorney.