THE DISTRIBUTOR’S LINK 151 HOW TO HANDLE EMBEZZLEMENT IN A FAMILY BUSINESS continued from page 98 11. Generally, how can we protect the company from future misuse of company assets or embezzlement 12. How do we protect the whistleblower 13. Do we have a whistleblower program set-up internally Are employees trained annually 14. Do we talk openly in Family Council about our responsibility to financially protect and care for company assets Do we give specific examples of what is and is not allowed 15. Do we have a solid non-compete clause in our employment contracts and/or employee handbook in case we have to release the family member from employment 16. Do we consistently run a professional background check on applicants 17. If I need to walk the family member out the door, how do I prepare Computer security, locks, passwords, current company asset retrieval, bank account access protection, social media tracking, last paycheck, etc. 18. Do we need to involve the corporate attorney, Board of Directors, outside legal attorney, CPA, business psychologist If so, when and how Once you’re clear on these aspects, it’s time for the second meeting—this one with the suspect family member. When you begin the meeting, keep it at the level of discovery. Lay out the facts and ask the family member their perception of what happened. Really listen to what they say and how they say it. Remember, it’s common for family members not to realize that they are indeed embezzling. If this is a first offense, and if the embezzlement is not excessive, some education may be the best course of action. However, if you believe the family member knew what he or she was doing and did it anyway, or if the embezzlement is substantial, termination may be the only option. During the meeting, you need to be vigilant in checking yourself by asking “What would I do if this wasn’t a family member” and “Is this at a level where I will be able to trust them again” Your answers to these two questions will reveal a lot about your best action plan. Keep Your Family and Business Strong Of course, education of all employees (family and nonfamily), strict policies about how the company’s assets and resources can be used, and enforced controls that can spot any wrongdoing are the best ways to reduce your family business’ chances of falling victim to embezzlement. Acknowledging what could happen, along with some planning to prevent it, will keep your family and business strong, successful, and honest.
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