Steve Smith's relationship to developer Charles E. Smith was misstated in yesterday's Washington Business. He is the developer's grandson. (Published 7/10/90) A story in Washington Business on July 9 described Conrad Cafritz as the eldest son of Morris Cafritz. He is the youngest son.(Published 7/17/90)

n all the years he worked in the shadow of his revered father, Thomas J. Owen never heard his old man say three simple words to him: "Job well done."

"He was a retiring man," said Owen, who succeeded his father, Thornton, as chief executive of Perpetual Financial Corp., the largest savings and loan company in the Washington area. "He never really said he approved of what I was doing. I knew he did from what he said to other people, but he never said it to me." Owen shrugged. "Conversation, I guess, was not his long suit."

John B. Adler, whose late father, Arthur, started a small chain of men's clothing stores, hardly remembers seeing his father as a child, except during family vacations. Putting aside his childhood ambivalence toward the business that consumed so much of his father's attention, the younger Adler later joined his father at work, discovering in time that he had become much like him. "I know I missed a great deal with my children, too," he said with a trace of anguish. "Can I make it up? Hopefully."

Though their businesses are disparate, Owen and Adler are linked by similar backgrounds and recent experiences: Both are the sons of successful fathers, and both are among a handful of local business people whose fortunes have coincidentally been in decline in recent weeks. Like countless families that share a business, some of Washington's financial upper tier have discovered that the ties that bind can also be the ones that entangle.

As traumatic as family life can be in its own right, the emotional interplay is even more complex when the family's life and livelihood -- if not its legacy -- revolve around the younger generation's ability to carry on.

While the public may view a successful entrepreneur's children as privileged inheritors, members of second- and third-generation business families often paint a different picture. Younger family members say they feel strong pressures to live up to the achievements of their parents, whose reputations seem to loom ever larger as time passes.

In larger businesses, cynical co-workers also may view the power of the younger generation as a mere consequence of their bloodline rather than their hard work and talent. When a founder is highly successful, the pressure to keep the business growing becomes more intense for the succeeding generation. Occasionally, said Ivan Lansberg, a former Yale professor and currently a research fellow in family-business management, heirs "subconsciously liberate themselves" from crushing expectations and lingering resentments by destroying the firms they inherit.

"Tommy" Owen, the third generation of his family to run Perpetual, stepped aside last month as chief executive of the institution, though he remains chairman. Owen won't discuss the reasons for his abrupt exit, but it came amid speculation that Perpetual's management was under pressure from federal regulators to bolster the company's deteriorating financial health.

When Owen inherited the leadership of Perpetual in 1978, it was a business with $650 million in assets; under Tommy Owen's direction, it grew explosively, with current assets of $6.5 billion. In the past six months, however, the company has reported $63 million in losses, primarily the result of bad real estate loans.

Adler announced last month that he would close the Arthur A. Adler stores in Washington and Chevy Chase after 48 years in business. Adler said the business fell victim to tough competition and an overly ambitious expansion orchestrated -- over his father's initial objections -- by John Adler himself. The store closings, he said, were the result of "some things that were totally beyond my control." Still, supervising the demise of the business his father started weighs on Adler: "I have a bit of a head problem with that," he said. "I have to say 'Let's make the best of it' and not let it destroy me."

Conrad Cafritz, the eldest son of the legendary Washington developer Morris Cafritz and society hostess Gwendolyn Cafritz, has acknowledged that his real-estate empire is short of cash, and has been selling some of his holdings to raise capital. However, his troubles pale compared to those of Donald DeFranceaux, whose father, George, made a fortune in the mortgage-banking business following World War II. "Donnie" DeFranceaux's DRG Funding Corp. of Georgetown has been implicated in the scandal surrounding the Department of Housing and Urban Development, having defaulted on about $500 million in mortgages backed by HUD.

Another son of Washington real-estate wealth, Steve Smith, whose father Charles E. Smith developed Crystal City, has been selling off pieces of his conglomerate of small companies in recent years. And Central Liquors, once the largest and most successful liquor retailer in Washington, has sunk into bankruptcy under the second generation's control.

B. Francis "Frank" Saul III hasn't even taken over his family's banking and real-estate businesses and already he, too, is in the midst of turmoil. Saul, heir apparent to holdings that include control of Chevy Chase Savings Bank and extensive real estate, has been accused by the government of illegally passing to a friend insider information Saul received in confidence from his father about an upcoming stock deal.

The younger Saul, 28, denies the accusations. "Having grown up in this type of family, I know that nothing is more precious than my family's reputation," he said. "This hurts me personally, but it hurts more to have it reflect on my family."

To escape the shadow and stigma of being the boss's child, heirs often consciously drive themselves to establish a reputation apart from their parent's. George Ferris Jr., who took over the Washington brokerage firm that his father started in the depths of the Depression, said the idea of matching his father's accomplishments spurred him to become the top broker in the firm Ferris Baker Watts. At that time, there were three other non-family members who were partners in the business, but Ferris said hard work "won me their acceptance -- or at least I thought it did."

But Ferris also acknowledges that he paid a price for his dedication. "I guess it's fair to say I neglected some part of my personal life," he said. "My first wife certainly felt neglected because she divorced me."

Ferris's children were 4 and 1 years old at the time of the divorce; both now work for the brokerage, though George Ferris III, 38, has been on a two-year leave of absence to pursue a screenwriting career. His 96-year-old grandfather still works part time at the firm.

George Ferris III can identify with much of his father's early experience. The family name, he said, can be a mixed blessing -- helpful in opening doors at the beginning of a career but an object of co-workers' suspicion later on. Ferris referred to it as the "silver spoon syndrome": "Nobody {in the firm} wants to be seen as toadying to the family scion."

Ferris added, "I think different ethnic groups take different approaches {to succession}. I think there's a big stigma in WASP families about the son succeeding the father. It must be the New England Protestant work ethic -- you don't get something you didn't work hard to earn."

In the Ferris family's case, George Ferris III will not succeed his father as head of the brokerage, at least not immediately. Recognizing that more senior executives are in line ahead of him, he said "it gives me a twinge" knowing a family member will be out of the top spot for the first time in the firm's history.

Tommy Owen originally had not planned to join his family's auction and banking business, but changed his mind when several close associates of his father died, threatening the business's stability. As well-known and well-connected as Thornton Owen was, his son believes it was inevitable that he would find himself in competition with his father's legacy, too. "I always heard how good he was, how smart he was," said Owen. "I just figured I'd never be as smart as him so I decided I would work twice as hard."

Many companies in the Washington area, of course, have passed from one generation to the next without financial or managerial turbulence. Marriott Corp., the largest publicly traded corporation in the region, was founded in Washington by Alice and J. Willard Marriott Sr. 63 years ago, and has enjoyed its most profitable years since J. Willard Marriott Jr. took over at the age of 32 in 1964.

The Washington Post Co. and Hechinger Co. both have members of the third generation prominent among their management. Under Israel Cohen, the son of the founder of Giant Food Inc., the supermarket chain has taken the dominant position in the region. Fantle's drugstores, the Trak Auto and Crown Book chains, and the Mars/M&M Co. candy empire are all controlled by family as well.

In fact, families are the principal owners of about 60 percent of all American companies with 50 or more employees, according to research by John Ward, a professor at Loyola University in Chicago. Most of these enterprises involve a father and a son, but a growing number -- about 5 percent of all firms with more than 50 workers -- include a daughter as well, Ward said.

"When you consider how many companies have intergenerational ownership, you realize that the ability to pull off the succession from one generation to the next is going to be very important to the structure of our economy in the next few years," said Ward.

A study by Peter Davis of the Wharton School in Philadelphia suggests that the transfer is far from automatic: Only 30 percent of all businesses survive to a second generation, he said, and only 13 percent to a third. Less than 2 percent are still in the family by the fourth generation, according to Davis.

The gradual extinction of family control, he said, is a result of a number of factors: The businesses become obsolete or bankrupt, the inheritors sell it because they receive a good offer or need to sell it to pay estate taxes. In some instances, the family can't agree on a successor or strategy and sells to settle its differences, Davis said.

At its best, said John Ward, a family business can be warm and intimate, with a deeper pride in its product or service than non-family firms. Indeed, Chuck Duncan, who worked with both Arthur and his son John Adler, fondly recalls the older man as a "surrogate father" and his son almost as a brother. "{Arthur} threatened to fire me once when he thought I bought too much inventory," Duncan said, "but in the next minute he was putting his arm around me and telling me he loved me."

When Duncan struck out on his own by buying a men's clothing store in Charlotte, N.C., in 1980, he broke the news to the elder Adler one night over dinner. "He started crying," said Duncan, "not because I was leaving but because he felt so much pride in what I was accomplishing."

According to Lansberg, successor generations frequently have trouble operating with a free hand after the founder begins to hand over the reigns of the company. Giving up one's authority over a business, especially one that an individual created or built, "means addressing your own mortality," said Lansberg.

"It's really quite astonishing," he said. "I've worked with {entrepreneurs} who are aging and really quite wealthy and who don't have a will. You have to remember these are people who've always believed they controlled their own destiny."

John Adler's father was in his early seventies before he ceded control to his son, and visited the stores that bore his name until three days before he died at 81 in 1988. Right up until he died in 1985, J. Willard Marriott Sr. would ask his eldest son for progress reports on the original family business, the Hot Shoppes restaurants, the younger Marriott said in a 1986 interview in Regardie's magazine.

The desire to break free of parental control compels some heirs to make radical changes to the family businesses -- in effect, to make over the firm in the younger generation's image, said Lansberg.

David Sheftell, who worked with both Adlers over the course of 30 years, said he saw some fairly distinct differences between the way father and son approached the retailing business: "Arthur was conservative, John was a progressive type. He would say, 'We've gotta have two or three stores, we've got to progress, I have to expand and do more business.' If it wasn't for John I think we would have stayed a one-store operation."

The second- and third-generation business heirs interviewed for this article said their parent's lingering involvement in the business led to a number of disagreements, a few of them harsh. Tommy Owen recalls one run-in with his father about six months after Owen became Perpetual's president and his father moved to chairman.

"I told him, 'Here are the keys, I'm not staying,' " Owen said. "Some parents never let go and the kids don't stand up enough to develop their own independence. I decided that was not going to be me."

Thornton Owen backed off thereafter. His son was then 42 years old.