Ever since the Rigas family’s criminal self-dealing at Adelphia Communications Corp. became front-page news in 2002—at the same time that scandals at Enron and WorldCom were making headlines—family-controlled public companies have received as much media scrutiny as their non-family corporate counterparts.
In the past year, several family-controlled companies’ dual-class stock structure—in which members of the controlling family own a small portion of the total stock but have most of the voting power—has been a subject of controversy on Wall Street. Ford Motor Co., the New York Times Co. and Dow Jones & Co. (which on July 31 agreed to be bought by News Corp.) all have been criticized for allegedly insufficient consideration of minority shareholders’ interests.
There’s no question that opening ownership to the public can help a company to grow and the controlling family to prosper. Just ask the Waltons, Robertses and Tysons, proprietors of Wal-Mart, Comcast and Tyson Foods, respectively—to name just a few families who have reaped the benefits of such arrangements. But, as reporter Deanne Stone notes in her profile of the Koss Corporation in this issue, going public involves disclosing information that a family might prefer to keep under wraps. “If you’re not comfortable in the spotlight, this is not where you want to be,” Michael Koss, president and CEO of the stereophone company, tells Stone.
This issue of Family Business also features a comprehensive analysis by longtime contributor James E. Barrett of dual-class stock arrangements. In addition, we focus on a governance mechanism that can help bring prosperity and harmony to all family firms, regardless of ownership structure: the family council. Charlotte Lamp, a third-generation shareholder in Port Blakely Companies in the Pacific Northwest, describes her family’s diligent six-year effort to establish a family council that has strengthened the business and unified the family. In another insightful feature, Dirk Jungé of Pitcairn discusses how the establishment of a family governance system can help prevent conflicts over the family’s wealth.
That’s not all you’ll find in this edition. Tom Durso profiles family business women who are succeeding in industries typically thought to be the province of men, and Sandra Westlund-Deenihan, president of Quality Float Works in Schaumberg, Ill., tells of her rocky road to family business succession. Advisers G. Scott Budge and Geoffrey N. Irvine discuss the role of real estate in a business family’s wealth portfolio. And Dave Donelson tells the story of Massachusetts-based Charles River Apparel, whose family owners have built their company one relationship at a time.
As the articles in this issue demonstrate, no matter who your shareholders are or how your ownership is structured, sound management is the key to your company’s success.