Dividend Policy in Perspective

Dividends Play an Important Role in Rewarding Shareholders, but Must be Viewed in the Broader
Context of the Varying Liquidity Needs of Shareholders and their Vision of the Company’s Future.

by François M. de Visscher

For many family firms, the lack of a dividend policy is a serious omission at best, and a recipe for a shareholder-relations disaster-or a family feud-at worst. At the same time, a dividend policy formulated without consideration of other liquidity options, and outside the context of the company’s overall capital needs, is also a serious mistake. There are many ways to slake the thirst of shareholders, particularly inactive shareholders, for liquidity. Dividends are but one.

Lack of liquidity is one of the most common sources of discontent voiced by the shareholders of family firms. As the family and the business grow, the disparity in the financial and economic goals of shareholders increases. The shareholders active in management want the business to grow and the stock to appreciate. They prefer to see “excess” cash reinvested in the business, rather than frittered away on dividends. But the inactive shareholders tend to see their equity as an investment on which they are entitled to a return comparable with other investments. Oftentimes they view the business more as a cash cow than a long-term family enterprise, especially if they do not have other sources of income. More…

Mission Statements

by Leslie Dashew

In our last issue, I wrote about Vision Statements. There is often confusion between the concept of a vision statement and a mission statement. A mission statement is a statement of purpose: it describes why an organization exists. A vision statement, on the other hand, describes a desired state for the organization at some time in the future.

Mission statements help to clarify and focus the attention of those who belong to the organization. Business mission statements help employees understand why the business exists and can help them to understand how their role helps to contribute to the company’s purpose. For example, a company’s mission statement might read: The Company provides premier precision manufacturing solutions for our customers in the diesel engine and affiliated markets. Through our collective efforts, we will achieve strategic corporate growth and attractive capital appreciation for all stakeholders. We accomplish this by operating our businesses with a foundation of ethics, customer focus, developing and respecting our employees, and operational excellence. More…