Coming to grips with ethics - ethical guidelines for family businesses

Nation's Business, Jan, 1992 by Sharon Nelton

When any new field of endeavor or enterprise comes into being, sooner or later those involved in it must face up to the question: What should our ethical guidelines be? So it is with family-business consultants.

I was asked to organize a session on ethics for the recent annual conference of the Family Firm Institute, held in Avon, Colo. For me, it was a learning experience, and I gained some insight into the seriousness with which many consultants take their ethical responsibilities toward family business.

The Family Firm Institute is made up of professionals from many disciplines who have turned their attention to family-business consulting. They come from such fields as law, accounting, family therapy, banking, psychology, finance, and higher education--most of which have their own codes of ethics. It is not necessarily easy to superimpose new and possibly conflicting ethical guidelines on top of a code that governs you in your "profession of origin," as one conference attendee called it.

Gerald Le Van, a lawyer by training, is a case in point. Writing in the fall 1991 issue of Private Business Advisor, a quarterly newsletter put out by the U.S. Trust Company of New York, Le Van calls attention to lawyers' difficulties in adequately serving family business under the terms of legal ethics and practice. The legal word focuses on individuals, not families, he says. "Every individual is constitutionally entitled to an advocate to protect himself or herself from all other individuals as adversaries.

"Too often the family is trapped in lawsuits because family members become enmeshed in a legal system that by implication assumes all human relationships ultimately will fail," he writes.

Le Van, who has a family-business consulting practice in Asheville, N.C., says he looks forward to the day "when lawyers are permitted by their ethical rules to function as 'whole-family' estate planners and mediators."

At our session at the Family Firm Institute conference, Francois de Visscher spoke of the need to avoid not only conflicts of interest but even the appearance of conflict of interest. As president of his own financial-consulting firm in Stamford, Conn., de Visscher is well aware of the pitfalls of financial advisers encouraging clients to make decisions and deals that benefit the advisers' companies financially.

Panelist Mike Henning, an Effingham, Ill., family-business consultant, shared the "code of conduct" he had drawn up for himself. Included were his commitment to disclosing fees in advance, preserving clients' confidentiality, and offering only those services he is competent to provide.

Family-business consultants must wrestle with questions such as: Who is the client--the person who hires you, the whole family, or the business itself? When is your work with a client complete? And what do you do if you learn your client is unethical?

Family-business consulting is still in its formative stages, and it may be years before practitioners in this field agree on what its ethics should be. But they're thinking hard about the issues. Most of the family-business consultants I know want to serve their clients with integrity and are sincere in their search for guidelines and tools that will help them do that.