Family
Business Magazine E-Newsletter
October
22, 2008
Contents
1.
Read the presidential candidates' positions on business issues.
2.
Judge rules Apollo must proceed with Huntsman deal.
3.
GM reportedly first sought merger with Ford.
4.
Star-Ledger drivers' agreement
averts Newhouses' sale of paper.
5.
How private family firms differ from public companies.
6.
What if the successor isn't working out?
1. Read the presidential candidates'
positions on business issues. Election Day in the U.S. is
Tuesday, November 4. Here are links to the websites of Republican
presidential nominee John McCain and Democratic nominee Barack Obama,
describing each candidate's position on the economy, health care and
taxes.
John
McCain on the economy
Barack
Obama on the economy
John
McCain on health care
Barack
Obama on health care
John
McCain on taxes
Barack
Obama on taxes
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2. Judge rules Apollo must proceed
with Huntsman deal. A Delaware Chancery Court judge
ordered Hexion Specialty Chemicals Inc., a unit of private equity firm
Apollo Management LP, "to honor its obligations" and proceed with a
$6.5 billion acquisition of Huntsman Corp., the Wall Street Journal reported.
Huntsman had agreed to buy Huntsman at $28 a share in July 2007, the
article said. In June 2008, the firm sued Huntsman, asking the court to
nullify the acquisition "because a combined Hexion-Huntsman would be
insolvent, preventing the financing banks from lending the $15.35
billion in financing that would fund the deal," the Journal reported. "Apollo also said
that a deterioration in Huntsman's business constituted a 'material
adverse effect.'" In the Sept. 29, 2008, ruling, the judge said Apollo
and Heixon "'knowingly and intentionally' breached their obligations"
by trying to back out of the deal, the Deseret News reported. The Wall Street Journal article noted,
"It is far from clear that the deal can get done in the current market
environment. The court essentially said figuring that out is Apollo's
problem." Huntsman president and CEO Peter Huntsman said his father,
founder and chairman Jon Huntsman Sr., "broke down" when he heard the
ruling, according to the Deseret News,
a paper from the Salt Lake City area, where Huntsman is based. "He just
started crying," Peter Huntsman told the Deseret News. "He was so emotional
after all that he has been through." The article noted that "If the
company is sold as planned, an estimated $700 million will go toward
Jon Huntsman Sr.'s humanitarian and philanthropic endeavors,
particularly in cancer research. But these goals were bogged down by
Hexion's attempts to terminate the agreement by claiming Huntsman was
insolvent." (Sources: Wall
Street Journal, Sept. 30, 2008; Deseret News, Sept. 30, 2008.)
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3. GM reportedly first sought merger
with Ford. General Motors approached Ford Motor Co. about
a possible merger before proposing a deal with Chrysler, according to
the New York Times. "[B]ut
Ford rejected the idea and ended the discussions last month," the
article said. Ford's executive chairman, William C. Ford Jr.,
participated in the talks, the report noted. Ford and Alan R. Mulally,
CEO of Ford Motor, "were said to have concluded that their company had
a better chance to reorganize on its own than in tandem with another
automaker, the Times article
said. Meanwhile, Ford's CFO, Don Leclair, retired unexpectedly, the Wall Street Journal reported,
citing "increasing friction between him and other senior executives."
"The strained relations between Mr. Leclair and other members of Ford's
senior management team centered on whether Mr. Leclair had been too
forceful in pursuing his agenda without informing other vice presidents
in a timely way of his plans...," the Journal
article said. "He also did not have the strong support of the Ford
family, whose members continue to control the auto maker through a
separate class of stock." The report added, "Ford family members were
also displeased earlier this year when they learned that billionaire
investor Kirk Kerkorian had quietly accumulated a 4.7% stake in the
company." Kerkorian's adviser had had discussions with Mulally and
Leclair before Kerkorian began buying Ford shares, the Journal report noted. But today
Bloomberg News reported that Kerkorian "is unwinding his Ford Motor Co.
stake after the auto-industry recession cut the value of his $995
million holding by two-thirds."
The report noted that Kerkorian's Tracinda Corp. "sold 7.3 million Ford
shares [Oct. 20] and said it contacted an investment bank about
unloading the rest." (Sources: New
York Times,
Oct. 11, 2008; Wall Street Journal, Oct.
13, 2008; Bloomberg News, Oct. 22, 2008.)
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4. Star-Ledger drivers' agreement averts Newhouses' sale
of paper. "The union representing [Newark] Star-Ledger truck drivers ratified
a new labor agreement ... ensuring [New Jersey's] largest newspaper
will not be sold or closed," said a report on the Star-Ledger's website, NJ.com.
"The union agreement was the last of three conditions set July 31 by
Advance Publications to maintain ownership of the nation's 15th-largest
daily paper. Losses buffeting the newspaper industry prompted the
ultimatum.... In addition to concessions from the drivers' and mailers'
unions, management sought buyouts from 200 of the newspaper's 750
full-time, non-union employees." For the Newhouse family, whose
company, Advance Publications, has owned the paper since 1935,
"continuing to publish without changing the contract with drivers was
out of the question," according to an article in the New York Observer. Advance
president Donald Newhouse told the Observer,
"That's what we've told our employees and we do not bluff or lie."
Newhouse told the Wall Street
Journal, "We are where we are today because there was a general
belief that we meant what we said and that what we said was
true." (Sources: NJ.com, Oct. 8, 2008; New York Observer, Sept. 23, 2008; Wall Street Journal, Oct. 8, 2008.)
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5. How private family firms differ
from public companies. Privately held family firms do
business differently from public corporations, writes family business
adviser Glenn R. Ayres in The Family
Business Shareholder's Handbook. "Family firms certainly do not
have all the answers," Ayres writes, "but the best of them can serve as
examples of how to run companies that are truly built to provide
long-term value to all of their stakeholders." He offers these points
as evidence:
- In public
companies, the driving force behind the company's vision is the CEO. In
family enterprises, more frequently than not, the ownership family sets
the vision for the organization and then charges the management team
with determining the best way to carry it out. The family vision for
many of these firms liberates management by defining and blessing some
critical additional measures of success beyond simply short-term profit.
- In family
enterprises, there is often a positive tension between the family's
goals and the goals of the management team. Having these perspectives
play off against each other may at times limit economic opportunities,
but more often than not, it is what builds quality companies that last.
- Good
boards of directors in the family business arena are normally a blend
of family and non-family directors. Board members usually have term
limits and serve at the pleasure of the family who elected them,
thereby wedding them to the same diverse measures of success the family
used in creating its vision for the company.
- Compensation
schemes are almost always tied to the company's long-range goals, not
its short-term profit potential.
For more
thought leadership on effective ownership and stewardship of a family
firm, see The Family Business
Shareholder's Handbook. Learn more about the book and see the
table of contents here.
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6. What if the successor isn't
working out? If it turns out that the family successor is
not the right person for the job, what can be done to remedy the
situation while preserving family harmony? In the current issue of Family Business Magazine, family
business adviser Jane Hilburt-Davis offers these suggestions:
- Make sure you've tried everything to
improve the situation. Thoroughly assess the situation and the
successor's potential for change before moving to the next step.
- Face the facts. If the assessment
indicates there is little hope for change, the time has come to begin
the transition process. The next step should be a frank and direct
conversation between you and your successor.
- Make a 'parallel plan' for the family and
the business. Family councils are the ideal milieu for dealing
openly with sensitive family issues. The goal is to help the family
understand the reasons for the changes, and to ask for their support
during this period of transition.
- Do it right the next time. Involve
the board, align the choice of the next leader with the company's
strategic plan, and avoid those third rails of selection: loyalty,
birthright, primogeniture, etc. Create a family hiring and employment
policy to promote a culture of meritocracy. Problems can be avoided by
sound, rational planning and a rigorous, objective search process.
For more advice
on this and other nettlesome family business issues, see the Autumn 2008 issue of Family Business Magazine. Information on how
to subscribe to our award-winning print edition is available here.
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