Q&A: Five Questions with Edward Jackson

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From time to time, Family Business Director will interview family business leaders or experienced advisors to get their perspective on important questions common to family businesses. In this second installment, we talk with Edward Jackson, a fourth-generation family member and director of H.G. Hill Realty Company.

1. Give us a brief overview of your family and business.

Our family business was started in 1895 by my great-grandfather, Horace G. Hill. The business was originally a one store cash and carry grocery operation. As the grocery operation grew, Mr. Hill started buying land on the right-hand side of the road on major thoroughfares going away from downtown Nashville. The belief was that people would not want to cross traffic to get to a store on the way home in the evening. All grocery stores were accompanied by a drug store and hardware store. Today, the grocery stores have all been sold and the remaining properties are being redeveloped with grocery-anchored retail, office, and multi-family opportunities.

Senior management is composed of my first cousin, a G4 member as Chairman/CEO and an outside non-family President/CFO. There are also four other G4 members on the board.

2. What roles in the family business have you fulfilled over your career?

I am a G4 born-in family member and hold a seat on the board. Also, I am the Co-Chair of our company’s strategic planning committee that is tasked with numerous objectives to include: capital needs, shareholder liquidity, dividend policy, and succession planning.

3. Do you offer an ongoing share redemption program?  If so, how long has it been in place, and what do you perceive the primary benefits of the program to be?

Within the past two years, we have developed a share redemption program. It is my belief that having a liquidity option in place for family shareholders is extremely important. Family members may not ever participate in the plan; however, just having the opportunity to redeem a few shares makes people more comfortable. Also, if you do not like the direction the company is going or how it is being run, you can opt out. In a way, if no one redeems their shares, then management knows they have buy-in from the family on how things are going. Our board approves a pool of funds to be used for redemption at our spring board meeting, and the pool is then presented at the shareholder meeting. Shareholders then have approximately ninety days to submit any shares for redemption.

4. Does your family business have any independent (non-family) directors?  If so, when did you first add an independent director?  What are the challenges/benefits of having independent directors?

Yes, we have had independent directors involved with our business since 2003. I think that outside directors, who understand your family culture and are experienced with some aspect of your business, are invaluable resources. In my opinion, their value depends on your board structure. Is the board advisory in nature or is it a true fiduciary board that can hold management accountable for the operations of the business? Advisory board members are usually not making strategic decisions for the business. They do, however, give the family comfort knowing that someone other than family members are watching over the organization. On the other hand, a fiduciary board needs to have independent members that can help the company achieve its overall vision. They are experts in the fields that can assist management in achieving the company and family vision.

In our case, our current board is advisory in nature. Our independent directors are friends of the family that are in related business fields that complement our business model. These board members know our family, are in tune with what the family needs, and are good stewards of the business. They have been an invaluable resource and lend credibility to decisions being made at the board level.

One of the toughest challenges to having independent board members is board compensation. It is not as big an issue for an advisory board; however, as you move to being more of a fiduciary it might become more of an issue. I think it is important for the directors to share in the benefits of decisions that they are making at the board level. Our company has begun to look at different scenarios to accomplish this goal. Another challenge for the independent director is to get away from the question of “what does the family want to do?” This is where having a clear vision for the company that the family buys into is so important. This vision allows decisions at the board to be made freely as long as the decision moves the company in a direction to achieve the stated vision. As you can tell, I am a true believer in a strong independent board in a family business.

5. What is your best advice for other family business leaders?

The best advice for family business leaders is to know all you can about your shareholder base and to communicate tirelessly with them. Through our family council and Mercer Capital, we have surveyed our shareholders on a number of topics over the years and have found the surveys to be a good tool. Knowing how the family feels about certain topics i.e. selling the business or being family owned vs family controlled can give leaders valuable insight. Also, twice a year we bring in experts in different fields that relate to our business to speak to the family. These experts help explain the various market influences that can impact us both in a positive and negative way. Educating your shareholders on the business goes a long way.