An illustrated image of a figure in a business suit, clinging to a giant chess piece in the shape of a king and passing a relay baton to a younger figure in a business suit, who is holding onto a giant pawn.

Rule of succession: Transferring ownership of family firms is rarely a simple case of passing the baton

If ever there were a parable for how not to manage a family succession, it was drafted by a playwright born just 15 miles from Warwick Business School.

In King Lear, William Shakespeare’s ageing monarch announces his succession plan publicly and impulsively. Without consultation, he divides his kingdom according to a flattery contest between his three daughters.

Predictably, the plan collapses under the weight of its own emotional naivety: the sisters turn on one another, the realm collapses, and Lear descends into madness.

The business world has long treated the play as an unofficial case study. Strip away the crowns and castles, and the drama captures – with uncomfortable accuracy – the pitfalls that arise when family dynamics and poor governance collide.

These pitfalls – resulting from the inescapable spill-over between family life and commercial life – are the central premise of an in-depth study I carried out with Susan Lanz, from Aston University, Gary Burke, from the University of Bristol, and Kajsa Haag, from Jönköping International Business School. Together we explored how life events can shape the timing and nature of intrafamily ownership transfers.

Drawing on life-course theory, which emphasises the importance of lifespan, timing, interconnected lives and human agency, we found that shifts in family life led to three distinct types of ownership transfer: symbolic, protectionist, and rebalancing.

The great wealth transfer

Marriages, divorces, births and retirements - as well as family conflicts – are all likely to influence the course of a family business.

It is not just about company leadership either. While management succession has been extensively studied, ownership transfer – the mechanism by which a business can continue over generations – remains comparatively unexamined. Many small firms still assume that ownership and CEO succession must transfer together, even though the two processes are quite distinct and often unfold on different timelines.

Demographics make this oversight even more pressing. In the UK alone, an estimated £5.5 trillion in assets is expected to pass to the next generation by 2047; in the US, the estimate is $72.6 trillion by 2045. The largest intergenerational wealth transfer in modern history is under way, much of it embedded in family enterprises.

With these staggering figures in mind, we conducted in-depth interviews with 27 family business owners in the UK about their life stories.

The resulting transcripts with business leaders from varying industries and generations revealed processes far more complex than the familiar metaphor of ‘passing the baton’.

At the heart of these processes were the symbolic, protectionist and rebalancing types of ownership transfer.

Taken together, these transfer models offer a window on effective approaches to succession planning – a lens through which other entrepreneurs and family business leaders can assess their plans.

Symbolic transfers: signalling the future

Symbolic transfers occur early, often when children are born or first join the business. They involve minority stakes that carry little formal power but serve as gestures of inclusion – a way of signalling that the next generation has a place in the firm’s future.

Edward, one of our interviewees, became a shareholder as a child. “We have been shareholders for years; we all own 10 per cent,” he said.

“We were given it in the mid-90s, but it was held in Trust, and then when we turned 25, it became our own personal shares, but they are B shares, so they don’t give the owner the same rights as A shares.”

Symbolic ownership transfers are often labyrinthine tales, complicated by sibling relations, parent-child relationships, unequal involvement as well as traditional beliefs about gender. Yet they are seen by many business owners as essential vehicles to bring family members ‘into the fold’ and build attachment to the family firm.

In other words, they are strategically useful. They allow families to treat ownership as a separate process from management succession, avoiding the assumption that ownership and leadership must always transfer together.

They also encourage families to let life events inform ownership planning. Recognising and planning around life shifts such as retirement, illness, marriage or children coming of age helps to avoid abrupt handovers, while remaining adaptive to unexpected events.

Protectionist transfers: guarding the gates

Protectionist transfers are reactive. Triggered by events such as divorce, illness or death, they aim to lock certain family members into preferred ownership configurations while locking other family members out.

Frederick, another interviewee, described a policy to protect against unwanted new owners. “We’ve a policy that the Board must approve or not approve new shareholders,” he said.

“So, in the event of someone becoming deceased, the Board can say, ‘No, we’re not prepared for those shares to be transferred through inheritance to their descendants’. And the company will end up buying them back.”

These mechanisms reflect a defensive instinct – to protect the business from the unpredictability of changing family structures – but also a pragmatic one. Family businesses that plan ownership separately from leadership often use protective structures such as trusts, share classes or buy-back clauses to maintain control and avoid future disputes.

Rebalancing transfers: correcting the past

Rebalancing ownership transfers address perceived inequities – financial or emotional – that have accumulated over time. They often arise when generational attitudes shift or when contributions diverge.

In one case, women had long been excluded from ownership until fourth-generation brothers chose to transfer shares to their sisters.

In another, Perry and his brother bought out a sibling who married and stepped away from the business: “So, then my eldest sister got married, and she decided that she was leaving and didn’t participate in the business, so along the way my brother and I bought my sister’s shares out.”

Rebalancing transfers can be powerful tools for correcting past wrongs and biases, unintentional developments or changed aspirations, and can be key to enabling both family harmony and family business longevity.

They also benefit from reflection on family histories and future life plans. When families share their stories openly, they can clarify intentions, surface assumptions and support more thoughtful ownership decisions. 

A framework for good succession planning

All in all, our research underscores a simple truth: ownership succession is not a single event but a series of decisions shaped by evolving family lives.

It is dynamic, emotional and deeply contextual. It involves family narratives, cultural norms, perceptions of personal identity but also of wider family bonds, as well as an awareness of all the turning points that alter the direction of people’s lives.

Where King Lear erred was not merely in dividing up the family business, ie his kingdom, unwisely, but in ignoring these living realities of family. Unlike Shakespeare’s tragic patriarch, modern family businesses have the benefit of research that shows how life events shape ownership – and how careful, adaptive planning can prevent unwanted drama.

The stakes are high. Many family firms struggle to transfer ownership even to the second generation, let alone the third.

But when family business owners plan ownership and leadership separately, adapt to life events, and use symbolic, protectionist, and rebalancing transfers, they are better able to preserve both the business and the family relationships involved.

Further reading:

How to build a resilient organisation

The risks of being a powerful leader - and how to avoid them

Are CEOs influenced by their spouse?

How middle managers help companies to change strategy when leaders clash

 

Omid Omidvar is an Associate Professor of Organisation and Work and teaches Organisational Behaviour on the Full-time MBA. He also lectures on Leading and Managing Change on the MSc Management and Leadership on the Undergraduate programmes.

Develop the strategic agility, resilience, and creative problem-solving skills to thrive in a rapidly changing world with the four-day Executive Education programme The Strategic Mindset of Leadership at WBS London at The Shard.

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