Family
Business Magazine E-Newsletter
August
5, 2008
Contents
1.
Former Samsung chairman guilty but will not go to jail.
2.
Family's desire for diversification prompts sale of Rohm & Haas.
3.
Clear Channel story to be told in two books.
4.
Boscov's files for Chapter 11.
5.
Rooney family at odds over fate of Pittsburgh Steelers.
6.
How a family council unifies the family.
7.
Fostering success in a co-leadership arrangement.
1. Former Samsung chairman guilty but
will not go to jail. Lee Kin-hee, the former chairman of
South Korea's Samsung Group conglomerate, was found guilty of tax
evasion, the Wall Street Journal
reported. Lee was sentenced to "a suspended prison term that means no
time behind bars, adding to a longtime pattern of South Korean courts
dealing light penalties to major business figures," the Journal reported. The judge ordered
Lee to pay a $110 million fine for tax evasion; Lee had previously
promised to repay back taxes, the article said. Lee had been indicted
for using secret accounts "to hide about $4.5 billion in assets he
inherited from his father, who started the Samsung group of companies
as a trading firm 70 years ago," the Journal
article said. "Samsung officials argued Mr. Lee needed the accounts to
preserve his family's control of the conglomerate and fend off hostile
bidders if they ever emerged." Lee resigned as chairman after the
indictment was announced in April. "Though no longer in charge at
Samsung, Mr. Lee remains the largest individual shareholder in Samsung
Electronics and several more of the 15 publicly traded companies in the
broader group," the article said. Former President George H.W. Bush and
International Olympic Committee honorary president Juan Antonio
Samaranch were among the public figures who wrote testimonials in
support of Lee, the Journal
said in an earlier report. (Source: Wall Street Journal, July 11,
2008; July 17, 2008.)
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2. Family's desire for
diversification prompts sale of Rohm & Haas. Dow
Chemical Co. has agreed to buy Philadelphia's Rohm & Haas Co. for
$78 a share, the Philadelphia
Inquirer reported. The Haas family, who owned one-third of the
company, wanted to sell their stake because "about 45 members of the
extended Haas family had been told by financial advisers to diversify
their assets," the article said. Rohm & Haas CEO Raj Gupta
originally arranged for the company to buy the family's shares over
several years, but the plan fell through. "Several major chemical
companies heard Rohm & Haas was in play, so instead, Gupta had to
privately auction the company," the Inquirer
reported. The company had planned to celebrate its 100th
anniversary in 2009, according to the report. Two Haas family members
sit on Rohm and Haas' board, and 90-year-old patriarch John Haas
maintained an office at the company headquarters, the Inquirer said. Arnold Thackray,
founding president and chancellor of the Chemical Heritage Foundation
(a Philadelphia non-profit organization supported by the Haas family),
told the Inquirer, "The next
generation, as is typical in these cases, are artists, and they have
musical interests; they're absolutely not scientific, technical people
by education." (Source: Philadelphia
Inquirer, July 11, 2008.)
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3. Clear Channel story to be told in
two books. After it learned that a writer named Alec Foege
was planning to publish a book about the company that it suspected
might be unflattering, Clear Channel Communications hired a writer to
"tell the Clear Channel story its own way," the Wall Street Journal reported. Both
books -- Foege's Right of the Dial:
The Rise of Clear Channel and the Fall of Commercial Radio and
the version commissioned by the company, Clear Vision: The Story of Clear Channel
Communications by former trade magazine editor Reed Bunzel --
are now available. The latter volume "doesn't disclose Mr. Bunzel's
financial relationship with Clear Channel, but careful readers may
notice that the company holds the copyright to the book," the Journal noted. Bunzel received
access to the founding Mays family and company executives, while Foege
was denied access, the article said. Clear Channel reviewed Bunzel's
manuscript prior to publication, the Journal
reported. (Source: Wall Street
Journal, July 10, 2008.)
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4. Boscov's files for Chapter
11. Boscov's, the
Reading, Pa.-based department store
chain that had survived industrywide consolidation, has filed for
Chapter 11 bankruptcy protection, the Philadelphia
Inquirer reported. The family-owned chain "said in the filing
that it plans to close about 10 unprofitable stores after liquidating
their inventories with going-out-of-business sales," according to the
report. "As with all bankruptcy proceedings, creditors could consider
an offer from a rival or investment fund for the whole chain." Boscov's
had sought to avoid bankruptcy by seeking private equity funding, the Inquirer reported. The chain's
financial woes may have been exacerbated by the 2006 buyout of
second-generation leaders Al Boscov and brother-in-law Ed Lakin, the
paper noted in an earlier article. Within a week of taking the helm,
third-generation leader Ken Lakin announced plans to expand by buying
10 stores that other department store chains
had closed, the Inquirer said.
"Though times were good and the economy relatively strong then, the
money spent on buying and occupying the 10 new stores may have helped
drain the chain of the financial cushion (and cash) it now needs to
convince suppliers it can pay its bills," the Inquirer reported prior to the
bankruptcy filing. Ken Lakin told the Inquirer
that Boscov's, with help from an investment bank, "entered into a
private recapitalization agreement around the time of the Lakin-Boscov
retirements and replaced, dollar for dollar, the money given to both
men as part of their buyout package." Also in 2006, Boscov's sold its
credit card portfolio to HSBC Finance Corp. in an effort to raise cash,
the report noted. "[T]aking on the debt to buy the additional stores
has been a strain on the company -- particularly over the last 12
months, as the national economy has deteriorated and taken consumer
spending down with it," the Inquirer
said. (Source: Philadelphia
Inquirer, August 3, 2008, August 4, 2008.)
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5. Rooney family at odds over fate of
Pittsburgh Steelers. The Rooney family, which has owned
the Pittsburgh Steelers National Football League team for 75 years, is
considering selling the team amid disagreements among the founder's
five sons, the Wall Street Journal
reported. Steelers chairman Dan Rooney, the eldest brother, has offered
to buy most of the shares owned by his brothers, who want to focus on
their racetracks and other interests. But some of his brothers "worry
that Dan Rooney's plan undervalues the team and takes on too much
debt," the article said. "Technically, the Steelers ownership is out of
compliance with NFL guidelines already," the Journal noted. "The league
requires that a single person own at least 30% of a franchise to be
principal owner; in the Rooney family, each brother's share works out
to 16%." The league also limits ownership of gambling operations, the
article said. "These concerns make it unlikely the current ownership
structure will continue." Billionaire Stanley Druckenmiller has
expressed interest in the team, the Journal
reported. (Source: Wall Street
Journal, July 8, 2008.)
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6. How a family council unifies the
family. Sound business governance is important, but in a
family company, it's not enough. There must also be a means of keeping
the family united in support of its business ventures -- a job that
becomes more complex and challenging with each generational transition.
A family, like a small town, can harbor many different constituencies
and special interests. A family council offers a mechanism for each of
them to be represented. Among the most crucial functions of family
governance are keeping family members informed about what's happening
with the business and ensuring that the business operates in accordance
with family values. This helps to strengthen family members' connection
and commitment to the business, even if they live far away and have no
aspirations to work for the company.
For tips on
establishing a family council, hosting family meetings and establishing
a shareholder education program, see The
Family Business Shareholder's Handbook. Learn more about the
book and see the table of contents here.
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7. Fostering success in a
co-leadership arrangement. "Before you decide to establish
a co-leadership arrangement in your family business, it is a good idea
to fully consider the ramifications," writes family business adviser
Mike Henning in the current issue of Family
Business Magazine. Henning offers the following points to
consider for prospective co-CEOs or co-presidents:
- Check out
the philosophy of your prospective partner as well as his or her vision
of the future to ensure that you are on the same page.
- Do you
like each other? Do you trust each other? Do your personalities
complement each other?
- If you
believe you would be better off running the operation yourself than
having a partner to share the rewards and benefits, as well as the
heartaches, then forget the partnership arrangement.
- Are you
capable of sharing goals, decision making, ideas and personal business
with your partner?
- Can you
share responsibilities, risks and decisions with someone else --
without trying to pressure that person to agree with you? Are you
likely to undermine your partner's actions or change the agreed-upon
direction or decision? If your honest answer to the second question is
yes, then co-leadership is not for you.
- Are you
willing to take time and effort to initiate the appropriate guidelines
that will be a sound foundation for your partnership?
For more
thoughts on co-leadership, see "Partners at the top" by Mike Henning
in the Summer 2008 issue of Family Business Magazine. See here for subscription
information.
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Learn the secrets for keeping your
family business prosperous and growing -- while maintaining the unity,
satisfaction and love upon which it was built -- by reading Family Business Magazine. Learn how
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