Lessons from a family feud: Protecting a company legacy

family biz feud

Green Cross, Inc., maker of Green Cross alcohol and cologne, Zonrox bleach, and Greenex Multi-purpose cleaner, has been the object of a tug and pull between its former Chairman Gonzalo Co and his siblings who are now at the company’s helm.

Gonzalo, now 94, insists he founded Gonzalo Laboratories in 1952,  which was incorporated into Green Cross, Inc. in 1970, on recommendation of his brother, Anthony.  In the process, he assigned shares to his siblings only as a formality with the implication these still belonged to him.

Gonzalo’s siblings, however, has a different story.  Gonzalo Laboratories, they say, was put up by their father, Co Ay Tian, as a family business and was named Gonzalo Laboratories only because Gonzalo was the firstborn.

Today, Gonzalo is fighting a legal battle to regain control of the business.

Interviewed by Josiah Go for the Philippine Daily Inquirer, Gonzalo has this to say about preserving a family business’ history and legacy:

“Back in those days, when I was at the helm of Green Cross, I was concerned about running my company and becoming profitable because I had to support my own family and my father’s family. My wife and I had eight children. My parents were aging and my father was no longer earning as much. My siblings were 20 years younger than I was and still studying. I treated them like they were my own children. I put food on the table and sent them to good schools. Later, I took them into my company. I employed them and provided them with big salaries and generous benefits to give them a leg up in life. I shared my profits with them.

“In hindsight, it was a major mistake on my part when I agreed to incorporate my company. In those days, a lot of homegrown enterprises were becoming corporations to avoid 100-percent liability to creditors in case of grave indebtedness or claims arising from a lawsuit. I let myself be persuaded that it was the right move to make, that it would protect my company from threats. I didn’t see that biggest threat was not from outside but from within—from the very people who convinced me to incorporate.

“Incorporation eroded my control of the company. I had to name my parents and siblings as incorporators because my own children were too young to be involved.

“On paper, I assigned shares to my siblings. I did this with implied trust that the shares continued to belong to me and were not actually theirs to own or to wield.

“Because I loved them and trusted them, I did not foresee a need for another paper that should have said they were assigning the shares back to me or that the shares truly belonged to me. That oversight proved to be a very costly mistake.

“Another mistake was the absence of controls. Because I trusted them completely, I let them run the company office while I went out and sold our products. I was a very good salesman and I had rapport with my customers. I loved that part of the business and devoted myself to it. Before I knew it, I had lost control of my business. This happened before my children could join me in my company.

“The major lesson here is to document everything. Even agreements of implied trust should be put in writing so the story will not and cannot change. In this digital age, document those agreements with videos, recordings and photographs, as well. Make sure also that you have original signed documents pertaining to incorporation, registration of trademarks and special agreements among parties involved.

“ Preferably, if you’re the founder, tell your story with photos and other evidence. If possible, do this while you’re still at the helm. If you intend your children to inherit the company, bring them in early and let them learn the ropes while you are still around and still in control. Protect what would be their inheritance.”

“It’s not enough to be profitable. Whenever possible, your own personal values—for example, integrity, industry, loyalty, truthfulness, moral rectitude and faith in God—should become the corporate culture. But that cannot happen if you do not remain in control of the company.

“Titular designations should remain only that—titular. No real power should be given to your nominees if your intention is to remain in charge. If your intention is to spread the workload, then it has to be clear that they are working for you and that they are your employees. For your part, even if you trust them completely, look closely at documents that you are being asked to sign. Read the fine print. With diligence, perhaps you can avoid having to take legal action later on.”

Photo: from bedtimesmagazine.com

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