In Shakespeare’s play, King Lear, an aging ruler relinquished control to two of his three daughters. The succession failed miserably, destroying his family and destabilizing his kingdom. King Lear shows why few family businesses survive beyond three generations. Understanding Lear’s failure is crucial to avoiding Lear’s fate, whether the family business in question is a monarchy, a media empire, or a hardware store. The conventional wisdom is that Lear gave away his kingdom too soon and left himself vulnerable to predatory heirs. This has been referred to as the ‘King Lear Problem’.
The conventional wisdom is wrong. Lear’s succession plan failed because he waited too long. Like Lear, those who control family businesses are often reluctant to step aside. For example, until he was well into his 90s, Sumner Redstone declared this his succession plan was to never die. The predictable consequence was litigation that engulfed the companies he controlled, including CBS and Viacom. Yet, despite its importance, the question of family-business succession has been neglected by legal scholars. Using King Lear as a framing device, this Article identifies obstacles to succession and shows how legislative initiatives, judicial intervention, and private ordering can facilitate the timely transfer of ownership and control across generations.
Means, Benjamin, Solving the ‘King Lear Problem’ (March 12, 2021).