A Death in the Business

By Dan Rottenberg

Even as Hasbro's brilliant chairman sought to conceal his terminal illness, he was positioning the company for his younger brother.

Until he got married at the age of 40, Alan Hassenfeld's friends and colleagues wondered whether he'd ever settle down. While his buttoned-down older brother Stephen ran Hasbro Inc., the Rhode Island toy manufacturer, free-spirited Alan cultivated a reputation as the company prankster — the sort of fellow who'd fill the hotel bathtubs of his fellow Hasbro executives with smelly fish — and spent much of the year living out of a suitcase while drumming up new markets and resources in the Far East and Europe. But when Alan finally tied the knot last April — to a woman he'd met in Hong Kong — absolutely no one wondered who his best man would be. Whatever the difference in their temperaments, his older brother Stephen was his best friend, his longtime housemate, and his senior partner in managing the company founded by their grandfather and great-uncle in 1923.

It was Stephen who, in 1970, lured Alan to Hasbro from the University of Pennsylvania campus at a time when Alan, a creative writing major flushed with sixties rebelliousness, professed no use for big business. It was Stephen who, as chief executive after their father died in 1979, aggressively transformed Hasbro from a money-losing also-ran into the world's largest toy manufacturer, with some $1.36 billion in sales in 1988, compared with barely $100 million in 1980. It was Stephen who had made Alan president of Hasbro in 1984. And it was Stephen with whom Alan spoke by phone or in person every day, even though Alan spent perhaps half his time overseas.

"We were as close as two brothers can be," Alan recalls. "We were seven years apart, so there was no sibling rivalry. I don't ever remember having an argument with him. We disagreed, but we always tackled problems together." Alan seemed content to bask in his brother's reflected glory for the rest of his business career. "I absolutely thought my brother was the best, and I trusted him completely," he says today.

But fate had other plans for the Hassenfeld brothers. Although Alan says Stephen "never looked better than at my wedding," Stephen had been fatally weakened by a 1987 bout with endocarditis, a bacterial infection in the lining of the heart. Barely six weeks after Alan's wedding, Stephen was hospitalized with pneumonia — and on June 25th, after a month in intensive care at New York City's Columbia Presbyterian Medical Center, he was dead at the age of 47. Virtually overnight, Alan Hassenfeld was simultaneously deprived of his strongest emotional tie and thrust into a job he'd never expected to hold: chief executive of a Fortune 500 company.

"Did I ever think this day would come about?" Alan asks rhetorically. "Absolutely not." When Stephen died, he adds, "our directors weren't necessarily sure whether I could handle the business, or how this would affect me."

His situation was rare but not unique in the annals of American family business. In 1963, Orvil Dryfoos, chairman and publisher of the New York Times, died of a heart ailment at the age of 50 and was succeeded by his youngest brother-in-law, Arthur Ochs (Punch) Sulzberger, an amiable 37-year-old dilettante who was then the company's assistant treasurer. Although Sulzberger described himself as "dumb-founded" by his promotion at the time, he has remained at the helm of the Times ever since, successfully steering the company into a diversified program that protects the mother paper, introducing a series of lifestyle sections, and personally recruiting William Safire as a columnist after meeting him at a dinner party.

Less successful as an instant chief executive was Marshall Field V of Field Enterprises, publisher of World Book Encyclopedia and Chicago's Sun-Times and Daily News. As a 24-year-old novice in 1965, young Field was rushed to Chicago from the East for accelerated grooming after his father, the manic-depressive Marshall Field IV, died suddenly (a possible suicide) at age 49. During Marshall V's tenure, the 102-year-old Daily News folded in 1978. Field Enterprises was dissolved altogether in 1983 at the insistence of Marshall's Californian half-brother and co-owner, Frederick W. (Ted) Field.

In life as in business, the unpredictable inevitably occurs sooner or later. Even the youngest, most vigorous chief executive can be hit by a truck or die in a plane crash, so astute companies learn to plan for the unexpected. But Alan Hassenfeld's accession at Hasbro was complicated by his unusually close emotional ties to his brother and his desire to protect his brother's privacy: In the last two years of his life Stephen had denied widespread rumors and even published speculation that he was suffering from AIDS. "I can't fight innuendo and rumor," Alan sighs today. 'We know what happened. That story should have been put to bed long ago." Still, a glimpse at the Hasbro transition suggests that even as Stephen Hassenfeld sought to conceal the terminal nature of his illness, he was actively preparing for his brother Alan's succession.

In any case, Alan — unlike Punch Sulzberger or Marshall Field V, and contrary to the loose-cannon image he had developed — was far more qualified to assume control than most observers imagined. Indeed, in 1986 Stephen himself remarked to an interviewer that he became chief executive instead of Alan not because he was smarter, tougher, or better but because "I got here first."

If Alan seemed too sensitive for the executive suite — the sort of fellow who for more than 20 years wore two rubber bands on his wrist in memory of a girlfriend who died in an auto accident when he was 16, and who answered condolence notes with three page handwritten letters — he also possessed precisely the sort of personal touch that a creative company like Hasbro needs.

If Alan sometimes seemed like an overgrown kid — perhaps the only CEO in the Western world who concludes conversations by exclaiming, "Okie-dokie!" — well, Hasbro is a toy company, after all.

"Stephen was a very disciplined and controlled individual," says Paul Valentine, toy analyst for Standard & Poor's. "Alan's style is more free-form, and that could encourage the creative process," especially at a time when large toy makers are often criticized for their reluctance to take risks with original or innovative toy ideas.

As a result, Stephen's absence from Hasbro would be "like Joe Montana leaving the San Francisco 49ers," suggests Walter Rirchberger, the toy industry analyst for Paine Webber. "The other 45 guys who've been to the Super Bowl are still there, and one of them steps in as quarterback. You don't have a culture problem — Alan knows all the key guys and has worked with them."

Stephen and Alan were actually the third set of brothers to run Hasbro. The founders, Henry and Hillel Hassenfeld, were Polish immigrants whose Hassenfeld Brothers Inc. evolved from the rag business in Pawtucket, R.I., to cloth-covered pencil boxes and from there into pencils and school supplies. Stephen and Alan's father, Merrill, took the company into toys during World War II with nurse and doctor kits, while Merrill's brother Harold ran the pencil-making side in Shelbyville, Tennessee.

By the 1970s, when Stephen and Alan were both on board, the renamed Hasbro Industries had created such perennial winners as GI Joe (the first doll for boys) and Mr. Potato Head, which subsequently blossomed into an entire Potato Head family. Hasbro had also cultivated the casual culture of a family business in style as well as fact — the kind of company where executives wear open-collared sportshirts to the office, and where employees are invited to Hassenfeld weddings and bar mitzvahs and given financial help for sickness, college bills, or family problems. Although Hasbro went public in 1968 and the Hassenfeld family owns only about 13 percent of Hasbro stock today — with voting control of nearly 30 percent — the company's quarter-century club numbers some 325 people, and most of its key executives have been there 20 years or more.

"I've never seen a family so close and so caring in my life," says Henry Orenstein, an independent toy inventor who deals with Hasbro. "They're very protective of their employees as well."

The immediate family today includes Alan's mother, Sylvia Hassenfeld, 68, of New York, who sits on Hasbro's board but rarely exercises direct influence on the company. Most of her energy is devoted to her work as president of the American Jewish Joint Distribution Committee, which took her to Moscow three times in 1989 to deal with Jewish refugee matters. (The family has long been a major donor to Jewish and Rhode Island civic causes, and Alan chairs the governor's advisory council for refugee resettlement for Rhode Island, a center of Southeast Asian immigration.) Sylvia's importance at Hasbro, says a friend, stems primarily from the fact that "there's no one whose phone call Alan answers faster than hers."

Alan's older sister Ellen Block, 46, is married to a Chicago commodities trader and has three college age children who seem good bets to lead Hasbro into its fourth generation. The oldest Laurie, is a graduate student in graphic design who, since Stephen died, periodically picks up the phone to tell Alan, "N.S." — her code, Alan says, for "No stress!" Michael, a junior at American University, has spent three summers working at Hasbro and enjoys the business, but "there'll never be any pressure on him from me to join the business," Alan insists. Susie, a freshman at Alan's alma mater, the University of Pennsylvania, "has already told me, 'Watch out!'" Alan relates happily.

Actually, in the mid-seventies Hasbro was torn apart by a feud between the family's two branches, precipitated by Merrill's seemingly premature appointment of his son Stephen as president in 1974. When Merrill died in 1979, his brother, Harold, refused to acknowledge Stephen as Hasbro's new chief executive. The feud was resolved only when Harold's Empire Pencil Corp. split off to become an entirely separate company in 1980.

In retrospect, Merrill's elevation of Stephen to the presidency in 1974, when Stephen was only 32, was a foolish move in the short run and a brilliant one in the long run. As Stephen later described it, "If my father had operated the business as a father normally would — with him making the decisions — we would have done better through the seventies. But he wanted to make sure we learned, so he threw Alan and me into the water and let us make mistakes." Partly because of those mistakes, in 1978 Hasbro operated in the red for only the third time in its history. But because Stephen and Alan learned from their mistakes, Hasbro roared back in the eighties — acquiring such household names as Milton Bradley, Playskool, Child Guidance toys, and Coleco Industries, the maker of Cabbage Patch dolls. A bigger toy chest helps protect Hasbro from the boom-and-bust cycles that plague most companies in the fickle toy business.

Throughout the seventies and eighties, Stephen and Alan seemed to complement each other nearly perfectly. "It was a more amicable relationship than many father-son relationships," says Paine Webber's Walter Rirchberger. Stephen — quiet, demure, disciplined — concentrated on finance, product development, and marketing. Alan — more relaxed, robust, and outgoing — spent his first eight years at Hasbro setting up the company's international operations. His approach was to take a toy that had faded in the U.S. and remarket it overseas, often for several times the original price. He subsequently ran Hasbro's sales and marketing group before Stephen made him president in 1984.


Throughout most of the seventies and eighties the bachelor brothers shared living quarters — a waterfront home in Bristol, R.I., and an apartment in midtown Manhattan's Museum Towers — but both their travel schedules were so hectic that "we were home together maybe two months a year," Alan says.

Just as Merrill Hassenfeld granted his son Stephen the freedom to fail, so Stephen extended the same freedom to Alan — apparently with the same positive results. When he was 22, Alan recalls, "I was in the Far East and I made some minor company decision by myself. And I realized that once you respect yourself, it really doesn't matter what others think of you. It was a turning point for me."

Thereafter Alan happily deferred to his brother in public, at least partly because the corporate decisions announced by Stephen were usually the result of constant dialogue between the two brothers. "There's a Chinese proverb," Alan says: "Two tigers can't live on the same hill together."

"Steve was in charge because you've got to have one boss," Rirchberger says. "In some family businesses run by a husband and wife, people don't know who's in charge, so they play one boss off against the other, just like kids in a family playing off their parents. The Hassenfelds decided to have one boss — Steve — and everyone knew who the boss was."

The first clue that things would change occurred in late July 1987, when Stephen missed ten weeks of work, closeting himself in his New York apartment, receiving few visitors, and handling company business almost entirely by phone. When he returned in October, he announced that he had fully recovered from endocarditis.

Nevertheless, even as Stephen sought to assure employees, customers, and shareholders that his health problems were over, during the next year Hasbro took steps that effectively minimized the impact of Stephen's subsequent death. The company put into effect a "poison pill" plan that enables existing stockholders to buy more shares as a defense against an unfriendly takeover bid. And Stephen put the finishing touches on a strong board of outside directors which he'd begun assembling in the mid-eighties; it includes such heavyweights as Preston Robert Tisch of Loews Corp., E. John Rosenwald Jr. of Bear Stearns, Alex Grass of Rite Aid Corp., Albert Duval, retired chairman of Hammermill Paper, and Harvard Business School professor Andrall Pearson.

"They've been great at identifying issues to focus on," Alan said recently after a one-on-one lunch with another of his directors, retired Massachusetts Mutual Life chairman James Martin. Another plus: An outside board keeps members of the founding family from growing complacent. "This is different from a small family company," Alan notes. "Succession here isn't automatic."

Most significantly, Stephen and Alan reorganized the company's management, creating three new operating divisions run by veteran Hasbro executives and delegating long-term planning to another veteran, executive vice-president Barry Alperin. The reorganization was announced in December 1988 — just six months before Stephen died — but the company has publicly maintained that Stephen's illness wasn't a factor in the reorganization.

"Stephen and I talked long and hard for six or seven months," Alan says."What was good five years before in terms of an organizational chart was no longer the way to handle it in the nineties. You had to give people the authority to go along with the added responsibility." Alan does concede that the timing of the reorganization was fortuitous: "If we hadn't reorganized at the end of '88, when Steve passed away in June, things would have been more difficult."

Even when Stephen was hospitalized in May 1989, Alan says he refused to contemplate the prospect of his brother's death. "Maybe a week before he died, I wondered what might happen," he says. "But before that, any thought (of Stephen's death) was negative thinking. I had no inkling — or inclination to believe — Stephen was terminally sick."

When Stephen entered the hospital, Hasbro stock shot up in heavy trading amid rumors that the company would be sold. But Stephen's crisis seemed to have marked an epiphany of sorts for Alan. "Everything my grandfather, father, and brother built I've got such a burning desire to see it stand the test of time," he says today. At an emergency board meeting summoned by Alan, the Hassenfelds vowed to maintain the company's family identity. Within two weeks of Stephen's death Alan was elected to succeed him as chairman and CEO while retaining his previous title as president.

With the transition, Alan's peripatetic globe-trotting all but ground to a halt. He shelved his previous plans to take an apartment in London — from which he had hoped to personally lead Hasbro's assault on Europe's consolidated economy in 1992. A Christmas 1989 trip to Japan, Thailand, and Hong Kong represented his first jaunt in 18 months to that once-familiar part of the world. And he's exercised greater caution about making internal changes.

"When things like this happen so quickly," Alan explains, "you have to worry about your own people, calming everybody down. You don't necessarily react the first moment; you take a step back and size it up. Some of the moves I've made recently, some people think I should have made long ago. I had people reporting to me longer than necessary."

Because toy companies plan their products at least a year before bringing them to market a verdict on Alan's first six months as CEO would be premature. But industry observers are positive in their assessment so far.

"It was Alan who was instrumental in deciding to proceed with Record Breakers [a six-inch battery operated toy car that goes 25 miles per hour] and quickly and aggressively bring it to market," says Paul Valentine of Standard & Poor's. "So he's already shown he can move quickly and creatively as the need arises."

"Alan is very effective with people," notes Henry Orenstein, the independent toy developer. "People like him. Alan delegates authority more than Stephen. I really believe he'll take the company to the $2 billion level soon."

Should that happen, Alan insists, his brother will deserve most of the credit. "Steve set a wonderful table for me in the people he surrounded himself with," he says, echoing a comment Stephen made about his father ten years ago. "My brother taught me a lot — probably almost everything I know about this business. This isn't meant to sound hokey, but many times if I'm trying to think a situation out, I'll still sit and talk to my brother. In some cases, I don't totally admit that my brother's not here."

The Business
Hasbro Inc.
Pawtucket, RI
Latest 12 months*
Net Sales 1,387.6
Net earnings 89.3
Long-term debt 126.4
Stockholder's equity 765.7
Current market value 1,158.8
Per share data:
Past year price range $16.00 to $24.38
Earnings per share $1.51
Book value $13.05
Indicated dividend $0.16
Current yield 0.8%
Price-earnings ratio 13.0
Five-year return on equity 20.5%
Family board members 2 (of 12 total)
Family ownership 13.0%
Shares outstanding (millions) 58.7
*for period ending October 1, 1989

A CEO's privacy vs. the right to know

Doctors and lawyers agree that a lover has the right to know if a mate has AIDS — the deadly condition that kills 60 to 75 percent of its victims within two years of diagnosis. But does a stockholder have the right to the same information about his company's chief executive?

During the two years prior to his death, there was widespread speculation on Wall Street and in the business press that Hasbro chairman Stephen Hassenfeld was suffering from AIDS — a rumor he steadfastly denied. That controversy raised a theoretical question: Which takes precedence — a chief executive's individual right to privacy or his stockholders right under federal securities laws, to "material" information about the company?

Securities laws don't require executives to disclose details about their health, and in any case the best medical knowledge about AIDS is hardly precise. While AIDS is almost always fatal, some victims can live as long as five to eight years after the illness is diagnosed, depending on the victim's immune system, his medication, and other factors. Thus even if Stephen Hassenfeld knew he had AIDS, suggests one AIDS specialist, "he had no way of telling how long he would live."

Even if Stephen knew he had any form of terminal illness, he wouldn't necessarily be required to disclose it. "That would only apply if the CEO were the personification the company — someone like Carl Edwin Land at Polaroid," suggests Carl Schneider, a Philadelphia lawyer and former Securities & Exchange Commission consultant who writes frequetitly about disclosure issues. "And he wouldn't necessarily have to disclose the nature of his illness — only that he's contemplating severing his ties with the company."

If indeed Hassenfeld's illness was common knowledge in the investment community, Schneider says, there was no need to announce it. "You only have to disclose things if they're not publicly known. But here was a case where it was widely known that he was ill."

Schneider says such an executive might be faulted if he falsely denied his condition. "You have a right to remain silent," Schneider says, "You have no right to lie. If a CEO falsely denied he had AIDS, that could be material," if a stockholder wanted to bring suit.

Investment banker Gilbert Harrison, chairman of Financo, Inc., who, represented Hasbro in its 1984 acquisition of Milton Bradley, says he was unaware that Hassenfeld was thought to have AIDS. But he suggests that in any case Hasbro stockholders have no cause for complaint.

"Because Stephen wasn't married," Harrison says, "He basically devoted his undivided attention to building the business. To the extent that he didn't carry the outside burden of the pressures of family life, shareholders benefited." -D.R.

Keep records and clean your ears

How can a family-run company prepare for the unexpected — like the death of a young and seemingly heathy key family member? Hasbro chairman Alan Hassenfeld offers these suggestion, based on his own recent experience.


  • "Don't take the simple things for granted. Make sure there are good records — wills, trusts — even at a young age. Stephen and I were as close as two brothers could be, and we instinctively did many things jointly. But when you see how fragile life can be, it forces you to communicate. You must delineate the separation in case something happens."



  • "If you're next in line for the CEO's job, organize your personal affairs sooner rather than later. When you're a CEO, you spend time worrying about everything but yourself. If something were to happen to me, I would feel better that at least things were organized."



  • "Have a good outside board of directors, and clean your ears so you can listen."


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April 1990

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