It is a maxim I have long defended, in both The Wealth of Nations and The Theory of Moral Sentiments, that the interests of the several parties to any commercial arrangement are seldom perfectly aligned, and that this misalignment is felt nowhere more keenly than among persons who are also connected by blood. The family enterprise presents to the political economist a peculiar specimen: the passions of affection and the passions of interest operating upon the same small theatre, and not always in harmony.
The matter before us is this. A person held a share in a family business. That person was, at some prior moment, purchased out of that share for the sum of one hundred and sixty thousand pounds — I render the figure in the currency familiar to my own age, though the editors assure me it is American dollars, a distinction that need not detain us. In the fullness of time, the remaining relations sold the whole concern, and each of them received, upon that occasion, the sum of three million dollars. The question now presented — whether the earlier party was cheated — is, on its surface, a question of contract; but beneath the surface, it is a question of knowledge, of consent, and of what my Theory calls the impartial spectator's judgment of propriety.
Let us consider what a buyout represents in its nature. It is not a gift, nor a penalty. It is a transfer of a contingent future interest in exchange for a certain present sum. The party accepting such a sum does so, we must suppose, because the certainty of one hundred and sixty thousand dollars is, at the moment of acceptance, preferred to the uncertainty of whatever the enterprise may eventually yield. Whether the enterprise yields nothing, or yields three million to each remaining partner, the logic of the original exchange is not thereby retrospectively altered — provided, and here the matter turns entirely, that the buyer possessed no knowledge of the sale's imminence that the seller did not also possess.
This is where the impartial spectator must be summoned with some care. If the remaining relations had, at the time of the buyout, already secured a prospective purchaser, or had received any valuation meaningfully above the implied price embedded in that one hundred and sixty thousand dollars, and they withheld this intelligence from their relation, then we are not in the realm of commerce's ordinary hazards. We are in the rather older and less reputable realm of advantage taken of a person whose trust was, by nature, not easily withheld from those who shared his parentage.
The brother who now urges that the aggrieved party ought to share in the profit has perhaps understood something that contract alone does not resolve: that the sale of a family concern is not quite the same transaction as the sale of a stranger's property, and that the obligations of candour between relations are somewhat more exacting than those between mere counterparties. Whether equity or law will vindicate this sentiment is another matter. But the impartial spectator, observing the whole from a sufficient remove, will note that a disproportion of eighteen to one between what was paid to remove a member and what was collected by those who remained is, at the very least, a figure that invites examination before it invites acceptance.