Ethical Issues Can Play a Part in Family Business Succession Plans

A small-business owner seeks insight on how to reconcile ethical issues in the law business with the religious beliefs of his planned successors, who are also his sons.

Two executives, a father and a son, look over some paperwork together.
(Image credit: Getty Images)

The HBO comedy-drama Succession has been a powerful impetus for family-owned businesses across America to get them to consider who will take over upon the death or retirement of the owner. That issue is the basis of today’s story, which began with an email from “Robin” about how ethical issues in the law business could affect his company’s succession plans.

Robin wrote, “Mr. Beaver, I am president of our family-owned market research/marketing firm. At some time, I want to pass the reins to our twin sons, both recent college graduates who were in a prelaw program and seem pretty jazzed on becoming lawyers. They told us about how great becoming a lawyer would be, describing lectures from their teachers and guest speakers who were lawyers that painted a rosy picture of the legal profession. As we need frequent consultation with legal counsel, I made them this offer: ‘I will pay for your legal education. After passing the bar, get some experience working in a law firm that handles our kinds of cases, and then become our company lawyers, and when I retire, you take over.’ They agreed, but then I raised an issue they had not thought of.

“We are a very religious family. Could they survive in an environment where lawyers, in general, have a poor reputation for ethical behavior? I have read your articles for years, notably several about highly dishonest behavior — padded bills, faked invoices — and would appreciate your insight.”

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Few Saints Hold Bar Cards

It is no secret that the law business has a poor reputation. Note that I did not say “the legal profession.” Many writers feel that law ceased being a profession when the U.S. Supreme Court declared lawyer advertising legal in 1977 (opens in new tab).

What followed was a spike in applications to enter law school, leading to our nationwide glut of lawyers and what we see daily on television: a never-ending parade of attorneys after your personal injury case.

But a possible answer to Robin’s question — could his boys survive in the law’s environment? — came from a lengthy phone call I received from “Darren,” also a longtime reader, who taught prelaw courses at a well-known Midwest university for years. (I vetted Darren using a variety of research tools, so his call was legit.)

Darren Decided, ‘Why Not?’ and Became a Lawyer Himself

“I ran our prelaw program for many years,” Darren said, “and had a great relationship with local law firms, who sent lawyers to speak with our students. They always presented the most positive view imaginable of the profession. For years, I’ve read your column and admit not believing the stories of bill padding, inventing billable hours and other ethical and illegal violations brought to your attention by law clerks and recently admitted attorneys. I just thought they were the product of disgruntled employees, but no more, Mr. Beaver.”

Then Darren told a painful history of what he learned about law firm reality. His comments match those of other disillusioned prelaw teachers who became lawyers I have spoken with over the years.

“I studied law at night, passed the bar the first time and was hired — part time — by one of the firms that had sent me guest speakers. In the first two weeks, I saw the same things that you had written about! I dug out your articles — you were so right! And then a couple of my former students who worked at this firm for about a year said, ‘Prof, let’s have dinner and talk.’”

‘This Is Playing Havoc With My Conscience’

They went to a restaurant out of town. “And these two young ladies were close to tears describing what was expected of them,” Darren said.

“We are required to bill clients over 2,000 hours a year — meaning you worked on client cases, which is impossible. If I spent one hour on a client’s case, I was told to write down three — and it went on like that!” one of the women said, according to Darren. She added, “This is playing havoc with my conscience and marriage! But I have over $150,000 in student loans to repay! I’m trapped working over 80 hours a week here!”

And the other former student?

Darren said, “She showed me billing sheets of her court appearances for multiple clients on the same calendar call.” He added that she explained, “I was told to bill each client for the entire time I spent in court — two hours — instead of a fraction, as is legally required, and that is theft.”

‘We Can Wear Them Down and Settle for Pennies on the Dollar’

Darren went on to say, “I saw a file where we represented a commodity buyer who repeatedly stiffed several farmers over many years. Our client owed the money — there was no justification for refusing to pay. So, I asked a senior partner about it, and his reply was, ‘We do what our clients tell us to do. So we delay, delay and run up the bill for the farmers, and eventually they settle for cents on the dollar.’ 

“With a big smile — making this sound like a joke — I said, ‘So, just like Nuremberg, I was just following orders.’ He laughed and said, ‘How else can we keep the lights on? Listen, Darren, right and wrong, basic morality doesn’t matter in this business.’”

Can Someone with High Ethical and Religious Values Survive in Law?

Darren remained at the firm for six months, “To observe as much as possible that I could bring into the classroom — to give my students an honest dose of the downside to law. During that time, I was in the company of more depressed and unhappy people I’ve ever met — all of them lawyers.” 

We concluded our interview with his recommendation for Robin’s sons:

“This occupation easily corrupts your moral compass. If honesty, integrity and keeping your hands and spirit clean matter, I would tell his boys to do their own research into these critical issues.”

A good place to start is the excellent website Above the Law (opens in new tab)

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com (opens in new tab).

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab).

H. Dennis Beaver, Esq.
Attorney at Law, Author of "You and the Law"

After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, "You and the Law (opens in new tab)." Through his column he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."