Our Top 10 News Stories of 2017
Family companies’ responses to hurricanes, Heineken’s viral ad campaign, Warren Buffett’s stake in Pilot Flying J, Harvey Weinstein’s lechery and a perpetual topic -- family feuds -- drew the most attention from our online readers in 2017.
Here are our top 10:
By April Hall
As Hurricane Maria pummeled Puerto Rico, the Bacardi family made plans to help the island, working with its private company’s board and executives to line up the necessary resources for a humanitarian mission.
The Bacardi team opened its first "Emergency Stop and Go" relief center Tuesday in Catano, where the company has rum-making facilities.
Five days after the storm hit, sixth-generation family member Ignacio del Valle flew on a company plane along with an emergency response team consisting of the head of operations for the Americas and other specialists to assess damage in San Juan and surrounding communities. Bacardi Limited, the fourth-largest spirits company in the world, has a rum plant in Catano, a San Juan suburb.
Del Valle, Bacardi Limited's regional president for Latin America and the Caribbean, says his first priority was to check on his employees and their communities. Next, he would assess damage to the rum plant and the family’s museum.
“I was able to walk several of the municipalities with the mayors,” del Valle says. While touring he spoke with “people who haven’t eaten for a couple of days -- no food, no water, no power.”
Bacardi became a part of a private industry initiative, Unidos Por Puerto Rico (United for Puerto Rico), that includes Coca Cola, Burger King and Walgreens. The group was formed by the island’s first lady, Beatriz Rossello, and is taking the lead on collecting funds for relief and rebuilding.
By April Hall
As Hurricane Katrina made landfall in 2005, the Rau family evacuated to a hotel in Dallas. Back in their hometown, New Orleans, the third-generation family business, Rau Antiques, was taking a beating.
It would be three weeks before owner Bill Rau would be able to assess the damage.
In the end, the business was hit with $5 million in damage, mostly in its warehouse filled with fine art and antiques. Some of the items were already sold but hadn’t been shipped.
For family businesses now facing similar challenges in Houston and Florida, the Rau family’s story of ruin and ultimate triumph may be just the inspiration they need.
From the beginning, given the unpredictability of the storm, Rau didn’t know how the antiques store would fare. He had tried to secure his inventory, he hoped to get in touch with his employees, he knew he would reopen, but there was no guide for what to do next.
But the family prevailed, and today the business is even more successful.
Rau shares his story on how things played out and three lessons he learned.
By April Hall
Taking on social issues in advertisements can be a dicey proposition, as Pepsi recently found out, but family businesses are in a unique position to make it work.
Family businesses can use the owners’ personal values to shape their brands, while messages with social themes coming from faceless corporations can feel insincere, says Scott Davis, chief growth officer at Prophet, an international brand consultancy.
Heineken, a family-controlled company, released “Worlds Apart,” a four-and-a-half-minute video, on April 20. Since its release, the video has been praised and has spread like wildfire on social media. Heineken’s official post of the video had more than 14 million views by the end of 2017.
By Barbara Spector
In his 2014 annual letter to shareholders of Berkshire Hathaway Inc., Warren Buffett wrote that his company is a natural partner for families seeking to exit their businesses.
And indeed, many struggling family business owners see the Oracle of Omaha as a savior, or at least someone who can help their companies recover from financial or reputational troubles.
The news that Berkshire Hathaway agreed to buy a 38.6% stake in Pilot Travel Centers LLC and would acquire a majority holding by 2023 was reported in the media as a positive development.
In the case of Pilot, whose recent history has been checkered, that is likely true.
Pilot Travel Centers, which operates the Pilot Flying J truck stop chain, was founded by James Haslam II as a single gas station in Gate City, Va., in 1958. Today the company, run by second-generation member James (Jimmy) Haslam III, has more than 750 locations and has been valued by the Bloomberg Billionaires Index at $9.1 billion. Bloomberg estimates the Haslam family’s 50.1% stake in the company at $4.5 billion.
By Barbara Spector
When a family member commits sexual misconduct, other members of the family business must step in no matter how touchy the subject.
Take Harvey Weinstein, whose sexual harassment of actresses, reporters, employees and other women who crossed his path was a poorly kept secret in Hollywood, in New York and around the world. On Oct. 8, Weinstein was finally fired by the board of his movie and TV studio, the Weinstein Co. The firing came three days after the New York Times published a report alleging that Weinstein had harassed actresses Ashley Judd and Rose McGowan, among other women, and prevented many from coming forward through payoffs and non-disclosure agreements.
Weinstein’s misconduct was epic, both in its scope and in its openness (though his company’s board -- made up entirely of men -- cited “new information” as the reason for his firing). In this case, a family member -- Harvey’s brother, Bob -- may have leaked the story to the media, according to the New York Post’s “Page Six” gossip column that quoted an unnamed “insider.”
Unfortunately, Weinstein is not the only family business owner to have committed sexual improprieties, and many other family firms also try to sweep such abuses under the rug.
Weinstein’s scandal reminds me of a family business story that hit the news last July in a region far removed from Hollywood -- Minnesota/St. Paul.
By April Hall
Untangling the family from the business can be difficult when your name is on millions of bottles every year.
Recently Hollis Bulleit, called “The First Lady of Bourbon” for her work as brand ambassador for the spirit her father created, posted a scathing statement on Facebook in which she claimed she was ostracized from her family and ultimately lost her job with Bulleit Bourbon because she came out as a lesbian and brought her girlfriend, Cher, home for Thanksgiving.
The story broke on Queerty, a “news and entertainment site for LGBTQ millennials,” but has now spread to international media outlets, including The Washington Post and Forbes. Since the story broke, Hollis Bulleit has declined interview requests.
Family consultant Dennis Jaffe says that when the family business is involved, grievances between family members tend to get aired publicly.
By Barbara Spector
Three of the siblings who control The Feil Organization, a multibillion-dollar New York real estate firm, recently ended an eight-year feud after spending an estimated tens of millions in legal fees.
The family business, whose holdings include the Fred F. French Building on Manhattan’s Fifth Avenue, is said to be worth $7 billion.
Jeffrey Feil, who was groomed by his father, Louis, to take over the family business, has been fighting in court with his sisters Marilyn Barry and Carole Feil since the death of their mother, Gertrude, in 2006. Among other issues, the feud has involved dividend payments to the sisters and their contention that their brother withheld access to business records.
The siblings -- along with another sister, Judith Jaffe -- own the business equally. Jeffrey Feil contended in court that he runs the business the way their father, the founder, would have wanted.
The parties recently agreed to settle three different lawsuits in New York and Louisiana, according to the Wall Street Journal. Under the terms of the settlement, Jeffrey Feil will use a new formula to distribute dividends to his sisters. The board will include non-family as well as family members. Although Jeffrey Feil will name his successor, the successor will report to the board, whose power will increase.
“When we read this, we were just struck by what an inefficient process this was to uncover some very basic developmental solutions,” says Doug Baumoel, founding partner of Continuity Family Business Consulting, a firm whose specialties include conflict management, corporate and family governance, and organizational development.
By April Hall
Family businesses are among the most innovative in their industries, according to a recent study by an international team of researchers.
When they looked at investments in new ideas -- in both time and money -- Patricio Duran of Universidad Adolfo Ibáñez in Chile, Nadine Kammerlander of WHU—Otto Beisheim School of Management in Germany, and Marc van Essen and Thomas Zellweger of University of St. Gallen in Switzerland found that family firms can be more innovative than non-family firms. The findings were published in the Academy of Management Journal.
The study, which compared money spent on research and development with new products, patents and patent citations, found that family firms were more successful by ratio of input to output and by return on dollars invested.
The researchers examined 108 empirical studies focused on 42 countries published between 1981 and 2012 for their meta-analysis. Through investigating statistics in these studies and their correlation, they were able to “discern significant relationships between family control of a firm, its innovation input, and its innovation output while controlling for a series of study-, firm- and industry-related factors.”
One interesting point the group noticed, Kammerlander tells Family Business in an email interview, is that later-generation leaders of family businesses invest fewer resources in innovation, indicating that they are more risk-averse than business founders. This could be because founders take great risks in establishing the business.
“But even if their [next-generation leaders’] spending is risk-averse,” Kammerlander says, “their innovation output is great.”
By April Hall
At publicly traded Ford Motor Co. and Nordstrom Inc., the controlling families are pushing for major changes.
Bill Ford, executive chairman of Ford Motor and great-grandson of founder Henry Ford, feels he didn’t get buy-in for his ideas and has installed a new CEO who he hopes will carry out his vision.
The Nordstrom family is exploring taking Nordstrom Inc. private as their company contends with disruptive change in the retail sector.
Founding families who try to assert control of public companies generally want to maintain a long-term outlook, says Lloyd Shefsky, founder and co-director of the Center for Family Enterprises at Northwestern University’s Kellogg School of Management.
[Editor’s Note: The Nordstrom family put its effort to take Nordstrom Inc. private on hold after they failed to obtain financing for the deal.]
By April Hall
Young people often have fresh ideas when they join the family firm. A next-generation member’s innovative approach could be as simple as a way to streamline production or as complex as a new brand. Pitching these ideas to the current leadership can be intimidating, but it can also be incredibly rewarding.
At Transitions West 2017, Family Business Magazine gave the future generation of leaders an opportunity to test their business pitches on a panel of entrepreneurs in a special session we’re calling “Fam Tank.”
One of the panelists is Elizabeth Rees, who found entrepreneurial success with the support of her family’s well-established business, printing company Kubin-Nicholson, based in Milwaukee.
Rees joined Kubin-Nicholson in 2011, but found she wasn’t passionate about traditional large-format printing. Still, she says, “There’s ink in my blood.”
Rees started her own wall-covering company, Chasing Paper, after eight months of research at Kubin-Nicholson. Chasing Paper’s products are fabric pieces, somewhat like wallpaper, that can be easily installed and removed from walls without damage.