Family
Business Magazine E-Newsletter
January
3, 2008
Contents
1.
Warren Buffett to buy 60% of Pritzkers' Marmon Holdings.
2.
Loews to spin off Lorillard.
3.
Rupert Murdoch promotes son James.
4.
Estee Lauder CEO could step down within two years.
5.
In setting family pay, separate ownership and employment.
6.
A plan for the next generation.
1. Warren Buffett to buy 60% of
Pritzkers' Marmon Holdings. Warren Buffett has agreed to
pay $4.5 billion to buy 60% of Marmon Holdings Inc., an industrial
conglomerate, from Chicago's Pritzker family and "will purchase the
rest of the company in stages by 2014," the Wall Street Journal reported. The
Pritzkers, who have owned Marmon for more than 50 years, have been
selling off their assets as part of an agreement to divide their
enterprise among 11 cousins by 2011, the Journal reported. "Including the
Marmon deal, the Pritzkers have raised more than $10 billion from asset
sales in the past six years," the article said. Earlier in 2007, the
Pritzkers sold a minority stake in the Global Hyatt Corp. hotel chain
to Goldman Sachs and an investment company controlled by Wal-Mart heir
S. Robson Walton. "The Marmon and Hyatt deals offer a road map for how
the Pritzkers are likely to run what remains of their empire after the
family breakup is complete," the Journal
reported. "The asset sales will give liquidity to family members
who want more independence, while allowing ... others to continue to
run the core businesses with high-profile outside partners." Tom
Pritzker, the "effective head of the family's main business interests,"
has been "engaged in a balancing act, trying to expand the family
holdings while raising funds to distribute" to siblings and cousins,
the article said. "The 11 participants already have received big sums
of cash, and any holdings not liquidated by 2011 will be divided
between the family members." The article added, "It's unclear whether
the long payout in the Marmon deal will be popular among some of Tom
Pritzker's relatives who have been seeking direct control of their
wealth." (Source: Wall Street
Journal, Dec. 26, 2007.)
Return
to the top.
2. Loews to spin off Lorillard.
Loews Corp., a New York-based conglomerate controlled by the Tisch
family, plans to spin off its tobacco unit, Lorillard Inc., as a
separate, publicly traded company, according to a Wall Street Journal report. Loews,
which has owned Lorillard for nearly 40 years, has interests in CNA
Financial Corp., Loews Hotels, Bulova Corp. and Diamond Offshore
Drilling Inc. and is exiting the tobacco business to pursue growth in
other areas, the article said. (Source: Wall Street Journal, Dec. 18, 2007.)
Return
to the top.
3. Rupert Murdoch promotes son James.
Rupert Murdoch named his 34-year-old son James as chief executive of
News Corp.'s international business, confirming James' status as the
company's heir apparent. The move was "part of a broad executive
reshuffle prompted by the company's acquisition of Dow Jones, publisher
of the Wall Street Journal,"
the International Herald Tribune reported.
James Murdoch previously was chief executive of British Sky
Broadcasting, a satellite TV company in which News Corp. has a
significant stake. Prior to assuming that position, he had spent three
years running Star TV, News Corp.'s Asian television business. Because
James was only 30 years old when he was named to head Sky, there was
speculation that nepotism had played a role in his rise, but in his
post at Sky he "has shown enough of his father's media mettle to
persuade analysts that he is up for a bigger job," the Herald Tribune report noted.
"Appointing a trusted lieutenant, his son, will allow Rupert Murdoch to
devote more attention to the Wall
Street Journal," the Herald
Tribune article said. In announcing the move, Rupert Murdoch
said, "This is the right time to align our operations in Europe and
Asia under new, structured group leadership," the Financial Times reported. "[Sky's]
success, coupled with James Murdoch's competitive style, has
contributed to a sense among analysts that James was ultimately more
likely to succeed his father at News Corp. than Lachlan, his older
brother," the Financial Times
article noted. (Sources: International
Herald Tribune, Dec. 7, 2007; Financial
Times, Dec. 6, 2007.)
Return
to the top.
4. Estee Lauder CEO could step down
within two years. Estee Lauder Co. in November named
Procter & Gamble Co.'s Fabrizio Freda president and chief operating
officer and said he could succeed William Lauder as the company's CEO
within two years. Freda, who is due to join Estee Lauder on March 3,
had headed P&G's global snacks division and now working for P&G
in Switzerland. He has not worked in the U.S. before, according to a
Reuters report. Bear Stearns analyst Justin Hott wrote in a note to
clients, "We think investors will perceive [Freda's] hiring as a
positive because Estee has had many operational difficulties under
family-run management over the past few years," Reuters reported. Estee
Lauder chairman Leonard Lauder, William's father, announced his
intention to step down in two years and said he hoped William would
succeed him. (Source: Reuters, Nov. 9, 2007.)
Return
to the top.
5. In setting family pay, separate
ownership and employment. "In family businesses, owners
and employees often are the same people," write family business
advisers Colette Lombard Hoover and Edwin A. Hoover in The Family Business Compensation Handbook.
"This can be confusing enough for the first generation. It can -- and
often does -- get worse in the second. For example, sometimes family
employees who are (or will be) owners are paid less than comparable
non-family employees; sometimes they're paid more. The rationale can be
that a family owner who's also an employee has ownership equity and
therefore deserves less; or it can be that she has the responsibility
of ownership and therefore deserves more." The Hoovers' advice: "We
strongly suggest that ownership and employment be thought of separately
for purposes of determining compensation. Compensation is a business
concern, not a family concern. Business rules for dealing with it must
be worked out. When they aren't, family rules will dominate and confuse
the compensation issue."
For more
practical advice on rewarding and motivating family and non-family
employees, see The Family Business
Compensation Handbook. Learn more about the book and see the
table of contents here.
Return
to the top.
6. A plan for the next
generation. In the Winter 2008 issue of Family Business Magazine, Greg
McCann, founder of Stetson University's Family Enterprise Center and
author of When Your Parents Sign the
Paychecks, offers some tips on cultivating ownership in the
next generation of your business family:
- Communicate
your family and business values, your company vision and other relevant
information to your next generation. You want to cultivate a sense of
stewardship, not consumerism or entitlement.
- Insist
that your next-generation members develop a clear sense of who they are.
- General
development: Your next-generation members should pursue relevant
education, training and experience. They should understand that they
must develop their credibility and marketability, create options for
themselves and develop themselves by testing their mettle.
- Owner
development: Do they know how to read a financial statement? Can they
articulate the role of a board of directors? Do they understand the
relationship between the owners or the board and the family? Between
the board and management?
- Consider
a long-term development plan. What would you as a parent and a business
owner like to see on the resume of your next generation in order for
them to earn some of the rights, responsibilities and privileges of
ownership?
For more family
business news and advice, see the Winter 2008 issue of Family Business Magazine. Visit
our website for subscription information.
Return to the top.
Do you know anyone who would like to
receive this free e-newsletter? Enter the e-mail address here.
Is your e-mail address changing?
Unsubscribe your old address and subscribe your new one here.
Quick
Links:
The
Family Business Compensation Handbook
The
Family Business Mentoring Handbook
Family
Business Magazine
No longer want to receive this
e-newsletter? Unsubscribe here.