The Funeral Was Just the Beginning: Why Mediation of Family Business Disputes is About Restoring Trust

Business disputes begin with a disagreement. But when a Family business is involved, the dispute frequently begins with a funeral.

When siblings inherit an operating company, they may also inherit a set of roles created by a deceased parent who can’t clarify their intent. One or two of them may have worked in the business for decades. While others didn’t. The parent who kept that arrangement tolerable is now gone, and the estate documents, often drafted years in the past, have handed a live business to people who no longer agree on what it is.

The sibling inside the business sees their life's work under attack. They took the risk, missed their kids' games, work side-by-side with the parent to keep the place afloat in lean times. The equity on the balance sheet doesn't fully capture their contribution. They also see siblings who "show up once a year" and expect a check.

The sibling outside sees something different. They were pushed out, or never invited in, or chose a different life and were quietly punished for it. They watch the inside sibling draw a salary, control information, sign the checks, and set their own income. From that chair, "I've earned it" sounds like a claim to take the lion’s share.

Both stories can be true. That's what makes resolving these disputes in mediation hard but not impossible.

It’s important to separate the money from the meaning, at least in the early sessions. Unlike a courtroom, mediation allows the emotional account to be stated out loud. Having someone listen and empathize can be essential to moving past the hurt and toward resolution.  

The key to resolution is often found in helping the parties distinguish between “fair” and “equal.” They are not synonyms. A sibling who built the business and a sibling who didn't both deserve what is “fair.”  They may not deserve what is “equal.” Trust is often the primary roadblock to this understanding.

The sibling running the business is afraid that opening the books will lead to litigating every decision while the sibling on the outside is certain that anything less than unfettered access is an indication of fraud and self-dealing. Resolution may be as simple as an agreed protective order or as complex (and expensive) as hiring a third-party forensic auditor. But a mediation that results in a framework to rebuild trust is a success, even if some of the underlying disputes remain.   

Families can survive bad business deals. They often don't survive the belief that a sibling cheated them. Or that their hard work and career doesn’t matter. A mediation that puts family members on track to regain lost trust can not only preserve the business but the family too.