Family
Business Magazine E-Newsletter
September
18, 2007
Contents
1.
Family succession at Polo Ralph Lauren Corp.?
2.
Saudi Binladin Group denies connection to 9/11 attacks.
3.
Fortune: Observers wonder
about succession at Fidelity.
4.
Advantages of a family holding company.
5.
Avoiding conflicts over family wealth.
1. Family succession at Polo Ralph
Lauren Corp.? Designer Ralph Lauren is in the process of
building his brand, according to a recent profile in Fortune. His Polo Ralph Lauren
Corp. which already generates $4 billion in revenue, "has been going
further upscale and farther afield," with the goal of doubling its
business in Asia and Europe over the next decade, the magazine
reported. The 67-year-old founder, whose brother Jerry oversees men's
design at the company, may be considering his 36-year-old son, David,
as a potential successor, the article said. "Lauren will not comment
formally on the issue, other than to say there are 200 designers at the
company who understand his DNA and he has a seasoned management team," Fortune reported. "However, he
can't help but mention his son when the issue comes up." Lauren told
the magazine that while David is not a designer, "he's a very creative
person who's in charge of all of our advertising and PR, and I think
he's finding his way. As he learns more about the company, we'll
determine what his input is going to be going forward." (Source: Fortune, Sept. 17, 2007.)
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2. Saudi Binladin Group denies
connection to 9/11 attacks. Attorneys for the Saudi
Binladen Group filed defense papers in U.S. District Court stating that
the company is not responsible for the terrorist attacks of Sept. 11,
2001, "because it made Osama bin Laden surrender his stake in the
company 14 years ago," the Associated Press reported. The lawyers for
the engineering firm, owned by bin Laden's family, were responding to
lawsuits "brought by victims' representatives, survivors and insurance
carriers," the AP article said. The plaintiffs allege that the company
"provided material support and assistance to al-Qaeda before the
attacks," the report noted. (Source: Associated Press, Sept. 4,
2007.)
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3. Fortune: Observers wonder about succession at
Fidelity. Ned Johnson, the publicity-shy, 77-year-old CEO
of Fidelity Investments, has not spoken to the media about his decision
to hire Rodger Lawson as president or the departure of three other top
executives this year -- including head of operations and distribution
Ellyn McColgan, who reportedly was a potential succession candidate --
according to a recent article in Fortune.
He also has not addressed rumors that his daughter, Abigail, who runs
the 401(k) and employer services division, has been ill. Observers
anonymously told Fortune that
while Abigail, 45, has not mentioned her health and rarely misses work,
she appears to have lost weight and at one point seemed to be wearing a
wig. "No one knows what to construe from Ned's recent moves or what
role Abby's health may have played in them," the article said. His
"refusal to discuss Fidelity is part management style and also a perk
that comes with running a privately held company. But it may be
clouding the firm's future." (Source: Fortune, Sept. 17, 2007.)
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4. Advantages of a family holding
company. Why should a family business consider
establishing a family holding company? The holding company structure
offers several benefits, notes Francois de Visscher in The Family Business Policies &
Procedures Handbook. It enables the family to attract outside
sources of capital to fund the operating business without affecting
their other assets.
- Increased liquidity. "The new
structure can meet family cash needs without hurting the operating
company," de Visscher notes. For example, he writes, consider a holding
company that receives a fixed portion of the operating company's
profit, distributing a steady amount of dividends and diverting the
excess into a financial assets pool. "During lean years, when the
company may not be able to afford a regular level of payouts, the
holding company can tap income from the financial assets pool."
- Family talent. A family can
reorganize its foundation and real estate as stand-alone entities
inside the family company and appoint formerly inactive family
shareholders to run them. "By putting more family talent to use," de
Visscher writes, "the business has reinforced the 'family effect' --
the willingness of family members to keep their capital in the family
company."
- Outside capital. "Lenders who may
not be interested in writing loans to the operating company may be
happy to lend money to, say, the real estate entity," de Visscher
points out.
- New business opportunities. "The
holding company structure," de Visscher writes, "provides the ability
to take bigger business risks without risking the family's wealth."
For an example
of how a family company benefited by establishing a holding company --
plus other advice that can help you sustain your business for future
generations -- see The Family
Business Policies & Procedures Handbook. Learn more about
the book and view the table of contents here.
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5. Avoiding conflicts over family
wealth. "It's no surprise that a family's wealth may
intensify conflict, but family members may not recognize that these
conflicts can simmer beneath the surface for years," writes Dirk Junge
-- a family business adviser who's also a fourth-generation business
family member -- in the just-published Autumn 2007 issue of Family Business Magazine. Junge
offers the following tips for preventing future conflict:
- Clarify roles. "Uncover who wants to
be involved directly in the business and on the board, and determine
requirements for such involvement, including education and outside
experience. Policies governing hiring, promotions, compensation and
succession should be put in writing. Clarity and full disclosure will
eliminate the potential for future conflict of interest."
- Develop a policy and process that are based
on inclusiveness. "Consider creating an auxiliary board to
serve in an advisory capacity to the board of directors."
- Train the family to communicate effectively.
"Many families find it helpful to identify a 'family ombudsman' as the
point person to field comments and complaints."
- Separate family issues from business issues.
"Professional governance systems are as important for family offices
and closely held family businesses as they are for publicly traded
companies."
For more
information, see "From family business conflict to
family connectedness" by Dirk Junge in the Autumn 2007 issue of Family Business Magazine. Visit our website
for subscription information.
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