Boards of Directors in Family Firms
Corrections or additions?
Raising Capital: What Not to Promise
These articles were published in U.S. 1 Newspaper on May 12, 1999. All rights reserved.
Sell an interest in your company to an unsophisticated
person, and you might get yourself into trouble, says Robert D.
Frawley. He and Randy Harmon will give the free public seminar
on “How to Start a Business” on Wednesday, May 19, at 7 p.m.
at the New Jersey Law Center, off Ryders Lane in New Brunswick. Call
the New Jersey State Bar Foundation at 800-FREE-LAW for reservations.
Frawley, a graduate of Lehigh and Georgetown University Law Center,
is of counsel to Smith Stratton Wise Heher & Brennan, sponsors of
the New Jersey Entrepreneurial Network, and also has a Morristown-based
practice (973-451-1100). He has written his own guide to the legal
aspects of starting a company, and his experience ranges from public
companies to family businesses.
Frawley reported on changes in the “blue sky” securities laws
at the New Jersey Entrepreneurial Network meeting last week, and he
will also discuss this at the bar association workshop. More than
just stocks can qualify as a “security” for legal purposes,
he warns, and these avenues to capital count as securities if you
are dealing with more than a very limited group of people.
If you collect money in return for IOUs or promissory notes.
If you sell or give stock options.If you sell or give interest in an LLC company.You get into trouble, warns Frawley, if you sell a securityto an unsophisticated person and — here is the important part– they lose money. If they make money, obviously, they are happy.Those who got in early on Ponzi schemes were also happy.Don’t take people’s 401k money, says Frawley. Don’t promise short-termresults. Deal honestly with your investors — don’t use their moneyfor your car payment. Do give out news to your investors, even ifit’s bad. Bad news is better than no news.What can count as a fraudulent promise of success on investment inyour company? Any promise of the future which is beyond reasonableexpectation, says Frawley. “Normal exaggeration,” he warns,”can constitute fraud. A good plaintiff’s lawyer can make thatcase.”Randy Harmon, meanwhile, is one of the three small business expertsto give tips to the Association of Internet Professionals on Wednesday,May 12, at 6 p.m. The meeting is free and will be held at the SarnoffCorporation on Fisher Place. Call 609-924-8864 for information.Harmondirects the Technology Help Desk and Incubator, a one-stop gatewayto accessing business and technology information (800-432-1832), andat this seminar he will distribute his just-published business developmentresource directory, with descriptions and contact information forthree dozen organizations ranging from Angel Capital Electronic Network(which can connect investors with entrepreneurs over the Internet)to the Washington Technical Liaison (which helps negotiate federalcontracts).The directory is also available at www.nj.com/smallbusinessAlso speaking: Nat Bender, also of the Technology Help Desk,and Dan Strombom, manager of the incubator known as the TrentonBusiness and Technology Center.Top Of PageManaging WealthIf there is one signal characteristic of the superwealthy,says Brian H. Breuel, it is their willingness to seek help withtheir planning. Breuel writes for both the rich and the rest of usin his book for Bloomberg Press, “Staying Wealthy: Strategiesfor Protecting Your Assets” (1998, $21.95). The adventures ofthe rich can be an object lesson for those less well-endowed.Breuel will be on a panel entitled “Managing Wealth” at MarketFair’sBarnes & Noble on Thursday, May 20, at 7 p.m. Also speaking are StevenGittelson, senior editor at Bloomberg Press, and Dan Rottenberg,author of “The Inheritor’s Handbook.” The event is free; call609-716-1570 for more information.”The vast majority of wealth in this country escapes the federalestate and gift tax,” writes Breuel. “It happens by designand through a dedication to the belief that it is permissible to payas few dollars in taxation as the law allows. In story after story,one finds an enlightened team of professionals dedicated to helpingtheir clients minimize taxes.”Breuel has had all of these team jobs — attorney, financial planner,stockbroker, insurance agent — at various times in his life. Breuelgraduated from the Lawrenceville School and Princeton University (Classof 1966) and earned his law degree at University of Florida. He hasmaster’s degrees in financial services and management and the CLUand CHFC professional insurance designations, as well as a securitieslicense. He had his own fee-based financial planning firm, his ownpension company, and now his own brokerage office, an Edward D. Jonesinvestment office at Princeton Shopping Center. He also spent sixyears sailing around the world and writing novels. Recently he wrote”The Complete Idiot’s Guide to Buying Insurance and Annuities”(Alpha Books, published by Macmillan)”It sounds easier to afford this planning on $20 million thanon $1 million,” says Breuel. “However, in many cases, thereis some risk and significant expense involved.”Risk, indeed. He tells of how the Newhouse heirs took an aggressiveposition that paid off well. S.I. Newhouse — who owned theNew Yorker magazine, the Times of Trenton, and the Star Ledger, amongother publications — died in 1979 with an estate of more than$1 billion. “The family business was the largest asset, and theIRS arguing that the control vested in the heirs made the stock evenmore valuable, levied a tax bill of $609 million. The heirs arguedthat the stock was worth much less because the voting shareholderswho were family members would have been reluctant to vote againstthe decedent, but now were more inclined to be independent. This madeall of the minority interests worthless. They litigated the issuein tax court, and in 1990, the court agreed with the taxpayers andsaid the tax due was only $48 million.”Here’s another episode from the lives of the rich and famous: WhenJoseph H. Lauder, founder of the firm named for his wife, Estee,died with a $100 million estate, the IRS and the family valued thestock differently. the IRS claimed the tax due was $89.5 million,but the family said the amount should be $29 million. The court splitthe difference.Tips for the wealthy that might work for the rest of us:Assemble a great team of estate and financial planners earlyin your wealth-accumulation career , an excellent attorney plusfinancial planner and an accountant, for valuing businesses and providinginsurance to prefund the estate tax.Use life insurance to prepay estate taxes with discounteddollars. Buy this insurance before your health fails and you areuninsurable or must pay premium rates. If necessary, pay those rates.”Don’t take rated policies personally; it’s about their willingnessto prefund your tax bill and your willingness to pay their premium.”Don’t be afraid to take a little risk in your estate planning.”Just know what the risk is compared to the potential game. Putyourself in your heirs’ shoes for a moment, and then make your decisionsbased on your comfort level with the possible outcomes.”Consider offshore trusts if you have both asset protectionand non-asset-protection motivations. “This is not an areafor the weak of heart, but it represents a tremendously fertile groundfor estate planning in the decades to come, largely because of theglobalization of our economy and investments.” For this, you need$1 million to invest with foreign investment managers.If you’ve got the million but prefer to be patriotic, consider anAlaskan trust. For that, you don’t need to move to Anchorage.Top Of PageBoards of Directors in Family FirmsWhile members of family firms usually care more aboutthe business, are more committed and are willing to invest more timeand energy into it, family firms have their own unique challenges,says Clayton P. Alderfer, professor and director of the OrganizationalPsychology Program at Rutgers Graduate School of Applied and ProfessionalPsychology. For instance, if the founder director should have retired10 years ago, who is going to tell him that? This is where a boardof directors can help, says Alderfer.While most non-family firms usually have boards, many family firmsdo not, says Alderfer. He will address this problem on Thursday, May20, at 8 a.m. at the Eagleton Institute, New Brunswick. The sessionis sponsored by the Rutgers Family Business Forum, one of two familybusiness-oriented programs offered by universities in New Jersey.(Fairleigh Dickinson has a curriculum for family businesses at itsRothman Institute of Entrepreneurial Studies.) Cost for the May 20session is $45. Call 732-445-7504.The board of directors is a group of people above the CEO who setthe policy for the whole organization, says Alderfer. Their responsibilitiesinclude evaluating the performance of the CEO and finding a replacementwhen a CEO retires.The session will address the responsibilities of boards, characteristicsof effective boards, what factors aid and impede the development ofeffective boards, and the special opportunities and challenges thatface boards of family firms. Session participants will also be assistedto take constructive steps in forming effective boards for their firms.”Problems between family members should not become business problems,”says Alderfer. Maintaining the family dynamics in a family firm isvery crucial. For this reason, family representation on the boardshould be minimal, like 25 percent, and definitely not a majority,says Alderfer. “What is good for the family may not be good forthe business and what is bad for the family is also bad for the business.”A group of people from different professions with no vested interestswill be able to provide an objective perspective.Top Of PageFamily Business AwardYour favorite Mom and Pop business can win an award.Nominations are now being accepted for the Seventh Annual New JerseyFamily Business of the Year program administered by the George RothmanInstitute of Entrepreneurial Studies at Fairleigh Dickinson University.Any New Jersey-based family business which now includes, or has included,more than one generation, and whose policies and business practiceshave had a positive impact on business and the community, is eligiblefor nomination.Companies can be nominated in one of two categories: family businesseswith annual sales/revenues up to $10 million and those with sales/revenuesover $10 million. Deadline for nominations is May 28. Call the RothmanInstitute at 973-443-8842.Other sponsors are New Jersey Monthly magazine, PNC Bank, HorizonBlue Cross Blue Shield of New Jersey, McCarter & English LLP, PricewaterhouseCoopers LLP, PSE&G, and DKB Partners.Semifinalists, finalists, and winners in each category will be honoredat a luncheon at the DoubleTree Hotel in Somerset on October 5. Winnerswill be eligible for the National Family Business of the Year Competition.Top Of PageTWIN AwardsEight women have been named recipients of the PrincetonYWCA’s TWIN Award: Deborah Aldredge of Merrill Lynch; LeonaBrenner-Gati,of Janssen Research Foundation; Maria Harrisonof Covance; Mara Isaacs of McCarter Theater; Christine Lokhammerof PNC Bank; Connie Mercer of HomeFront; Dorothea CoccoliPalsho of Dow Jones; and Anne VanLent of Sarnoff Corporation.The award ceremony and dinner will be Thursday, May 20, at the PrincetonMarriott at 5:30 p.m. Cost for dinner and the event is $85. Call 609-497-2104.The Tribute to Women and Industry (TWIN) program was established nationallyby the YWCA in 1975 and adopted by the YWCA Princeton in 1984. Theselection process takes into account academic achievement, professionalresponsibility, community service, demonstrated leadership, mentoringof others, ability to communicate ideas, special projects or accomplishments,and contribution to the bottom line.As manager of financial consultant training at Merrill Lynch,Aldredge, a resident of Flemington, is responsible for support of19,000 professionals in over 600 offices nationwide.Brenner-Gati, M.D., vice president and global head of projectmanagement at Janssen Research Foundation, is responsible for worldwidedevelopment planning of research. She lives in Princeton Junction.Harrison, director of operations in drug management systemsat Covance Inc. manages a staff in Brussels, London and Princetonthat handles the logistics for clinical drug trials. Harrison livesin Holland, Pennsylvania.Isaacs, a resident of Princeton, and resident producer at McCarter,is responsible for selecting plays and directors, casting, and hiringartistic teams for the theater’s five-play season.Lokhammer, also a Princeton resident, is vice president andmanager of PNC Bank’s Nassau Street office. She is responsible forloans and deposits, business development, and customer service. Shealso chairs a committee in the Princeton PNC community that provides75 charities and organizations with financial support.As the executive director and founder of HomeFront, Mercer headsthe eight-year-old agency that coordinates 800 volunteers to providefood, clothing, counseling, and recreational activities to the homeless.She lives in Lawrenceville.Palsho, president of Dow Jones Interactive Publishing, leadsa 600-person worldwide organization striving to become the world’sleading publisher of electronic business news and information (U.S.1, February 3). She is a resident of Princeton.VanLent, vice president of ventures at Sarnoff Corporation,uses her science background and communication skills to explain complextechnologies to investors (U.S. 1, February 3). She lives in Augustain Sussex County.Top Of PageSmall Business PersonThe regional Small Business Administration has selectedJanet Lasley, president and owner of Lasley Construction ofRocky Hill, as the SBA Small Business Person of the Year. She willbe honored at the New Jersey Conference for Small Business on Thursday,May 13, at the Brunswick Hotel in East Brunswick at 11 a.m. The keynotespeaker is Warren G. Little, chairman of the U.S. Chamber ofCommerce. Call 973-645-6064.Lasley Construction began as a one-person operation in 1985 and hasgrown to employ 23 people and handle 30 to 50 construction projectsper year. Lasley just recently started another business — TheKitchen Company — which designs and builds kitchens and distributescabinetry. Last year, Lasley was honored with the Princeton YWCA TWINAward and was named Small Business Person of the Year by the PrincetonChamber of Commerce.Top Of PageThe Future & Its EnemiesLearning better ways to do things, whether in businessor the rest of life, depends on a trial and error process with outcomesthat are often unpredictable, writes Virginia Postrel, journalistand author of “The Future and Its Enemies: The Growing ConflictOver Creativity, Enterprise, and Progress” (December 1998, FreePress, $25).The foundation of entrepreneurship, innovation and experimentation,Postrel writes, is under constant attack by those who prefer stabilityand control to the challenges and promises of a dynamic, open-endedfuture. She will speak at the next meeting of the Venture Associationof New Jersey on Tuesday, May 18, at 11:30 a.m. at the Westin in Morristown.Cost: $55. Call 973-631-5680.Postrel has been credited with launching a national debate on change.A graduate of Princeton, Class of 1982, she is the editor of the California-basedReason magazine and a columnist for Forbes and its high-tech companionmagazine Forbes ASAP.Top Of PageTelegroupsFor working women too pressed for time to make it toa networking meeting, Central Jersey Women’s Network (CJWN) has thesolution. Telegroups. Groups meet by phone on a teleconference bridgeline and chat for an hour, sharing experiences and resources and supportingeach other.CJWN currently runs two telegroups. The “Working Moms Telegroup,”led by Natalie Gahrmann, working mother and personal life coach,meets on the second Wednesday of each month from 9 to 9:55 p.m. The”Women’s Work Telegroup,” led by Carol Gerrish, professionalcertified coach, meets on the first Wednesday of each month from 1to 1:55 p.m.Advance registration is required. Call 732-424-8413 for the WorkingMoms Telegroup and 732-438-1468 for the Women’s Work Telegroup. Thegroup is free but participants incur normal phone charges.Top Of PageE-commerce WorkshopsScranton ECRC will present two E-commerce workshops– “Business Opportunities Through E-commerce” and “BusinessOn The Internet” — on Monday, May 17 at the Mercer CountyCommunity College and on June 15 at the Raritan Valley Community College.These free sessions will provide information on how to start doingbusiness with the federal government via E-commerce and ideas fortransitioning your everyday business activities to the Internet. Call800-575-3272 or E-mail elizabeth.zygmunt@uofs.edu to reserve yourseat.Hands-on training is also available at the Trenton Business and TechnologyCenter on July 14, July 28, August 11, and August 25. Basic Internetskills, Home Page Development, and Advanced Home Page Developmentwill be covered in two sessions at 9 a.m. and 1 p.m. on the firstthree dates respectively, and a Business Opportunities Lab and Lecturewill be offered at 9 a.m. on August 25.Top Of PageJob Opportunity FairHuman resources professionals from more than 100 NewJersey businesses will be present at the Middlesex County Job OpportunityFair and Career Exploration Day at Middlesex County College on Thursday,May 13, at the Physical Education Center from 9 a.m. to noon. Theevent is free. Call 732-906-4653.Those seeking entry, mid-level, and management positions will be ableto network with potential employers, gather information about a varietyof companies, and set appointments for interviews. The fair has partneredwith the Middlesex County Regional Chamber of Commerce’s Expo ’99to increase the number and variety of companies registering for thefair this year.Top Of PageCorporate CommunicationSeton Hall University offers evening and weekend classesleading to a masters in Corporate and Public Communication. The degreecovers effective writing and interpersonal communication, presentation,and web page design. The program can be combined with other market-responsivedegree options.Courses include Writing for the Media, Cross Gender Communication,Cross Cultural Issues, Events Management, and Writing and Editingfrom the Technical Perspective. A summer session begins June 1 andthe fall session begins September 1. Call 973-761-9490 or visit https://www.shu.edu/depts/gradcomm.Top Of PageSave on CommutingIf your employer signs up for the new transit benefits,you can pay for your transportation costs with pre-tax money. NJ Transitwill tell about his plan in a seminar entitled “Improving Employer’sBottom Line while Improving Employees’ Morale” on Tuesday, May18, at 8:30 a.m., at NJTPA, 1 Newark Center, 17th Floor, Raymond Boulevard,in Newark. Among the speakers are Mark Daniele of McCarter &English in Newark and Patricia Farrell of William M. MercerConsulting at the Carnegie Center. Call 973-491-7108.Thanks to new federal TEA-21 legislation, the NJ Transit BusinessPass allows nearly every kind of company — including public agencies,non-profit organizations, and government entities — to set upa payroll plan for deducting up to $65 per month from a worker’s pre-taxsalary. This money goes to pre-purchase public transportation costs,and no cost is incurred by the employer.Top Of PageInterlibrary Loan SystemSoon, with one online search, you will be able to accessthe state’s public, academic, and school libraries. Soon, says JohnH. Livingstone, state librarian, New Jersey will have the firststatewide electronic interlibrary loan system. By the end of thisyear 180 of the state’s 312 public libraries will be online, and theentire system is expected to be operational in two years.The New Jersey State Library has entered into a contract with AmeritechLibrary Services to allow simultaneous searches of the major libraries’book collections and provide library patrons with quick access tobooks not available locally. “This will insure a fast, efficientway to make New Jersey’s vast library resources available to all ourresidents,” says Livingstone.Earlier this year the library, affiliated with Thomas Edison StateCollege, made INFORME, the Spanish language magazine database, availablein its public libraries.Top Of PageCorporate AngelsThe Geraldine R. Dodge Foundation has awardeda $60,000 grant to Newgrange, a school and educational outreach centerfor people with learning disabilities, to fund teacher training programsfor charter schools. The training will help teachers to reconsidertheir students’ capabilities and re-envision the classroom environmentas one which facilitates teaching to diverse needs, styles, and cognitivestrengths. Call Newgrange at 609-924-6204.The Lawrenceville School has issued a $50,000 grant towardsMain Street Project’s “Century Campaign,” to raise $600,000for parking enhancements and streetscape improvements for the Villageof Lawrenceville. Designed by Clarke Caton Hintz and the MainStreet Design Committee, parking enhancements encompass a completeredesign and landscaping of the parking lots behind the stores alongMain Street (Route 206). Call the Main Street Project at 609-219-9300.The Mercer County Arena will accept 10 to 15 interns persemester from Rider University’s department of communication for video,public relations, and multimedia work. “This exciting and innovativepartnership is a win-win situation for everyone,” says RobertPrunetti, Mercer County executive. “It allows us to tap the creativeminds of our students trained in public relations and the latest videoand multimedia technology to create work products such as videos andscoreboard messages that will be used at events. At the same time,these students will receive real life experience that will benefitthem tremendously in the workplace after graduation.” The state-of-the-art,multipurpose arena will open this fall.DeVry Institute will be hosting the Educator Institute,a forum for meaningful dialogue between educators and the businesscommunity, open to secondary level educators — teachers, administrators,and guidance counselors. 30 educators will be selected by the Chamberof Commerce to represent a cross-section of Mercer County. The institutewill be held from June 28 to July 2.The United States Environmental Protection Agency and theNational Science Foundation has awarded a $750,000 grant for wetlandsresearch to the Stony Brook-Millstone Watershed Association. “Thisgrant will help take the Watershed Association into the next century,”says Congressman Rush Holt, former chairman of the association.”The creation of the Stony Brook Millstone Association markedthe beginning of a new era — an era in which local residents wouldchange the way they perceived their natural resources and their connectionsto them.”Next StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
