Revenge of the idiot nephew

By David Graulich

Nephews occupy a peculiar and difficult place in the family business universe. Of all the bloodlines, relationships, and rivalries woven into the fabric of a family business, nephews carry the heaviest etymological burden.

You see, the Italian word for nephew, nepote, is the root of the word nepotism. According to the Oxford English Dictionary, the original meaning of nepotism was "the unfair preferment of nephews to other qualified persons." Nepotism was the term used when certain popes gave special favors to their nephews. In parts of Europe to this day the word "nephew" is a euphemism for the illegitimate son of a clergyman.

Sons and daughters of the boss often have to convince skeptics of their abilities, but most people acknowledge the right of parents to give their children a chance. But a nephew? Where are the support groups that offer great solace and advice to NOBs (nephews of bosses)? Glance at a listing of corporate names. There are "& Sons' and "Brothers," proudly flaunting their ampersands and family crests, but nary a nephew among them.

To help those nephews struggling for respect, we offer some role models, illustrious nephews of the busness world. For example, there's Henry David Thoreau. His uncle, Charles Dunbar, discovered a large deposit of graphite in 1821 near Bristol, New Hampshire, and launched Dunbar & Stow, a pencil manufacturer. Nephew Henry drifted in and out of the family business, between stints at Walden Pond, but made some solid contributions to the enterprise. Historians credit Thoreau with the idea of adapting the German method of combining clay and graphite to improve pencil-lead quality, and with devising a better method for drilling holes into the pencil's wood casing. Also, in an inspired bit of marketing a full century before the onset of celebrity endorsements, Henry persuaded his friend, Ralph Waldo Emerson, to write a letter endorsing the family's product.

Then there's Perry Bass of Fort Worth, Texas. Perry's uncle, Sid Richardson, was a legendary wildcatter who borrowed $40 from Perry's mother and built an oil and gas empire. Richardson never married, and upon his death in 1959, his nephew Perry inherited the business. Perry's first love wasn't commerce, but he was no dummy. After his eldest son, also named Sid, graduated from Stanford Business School in 1968, Perry handed him the company, saying, "This is your responsibility ... I'm going sailing." Sid Bass and his brothers proved to be skilled investors who expanded the Bass family fortune into one of the 10 largest in the United States. Credit Perry, the honorable nephew, with knowing his own strengths and weaknesses — and raising some smart kids.

But the Babe Ruth spot in our Nephew Hall of Fame is reserved for Roy E. Disney, the son of Walt's brother. His career personifies the agony and the ecstasy of nephewhood. "My nephew will never amount to anything," Walt Disney once remarked, and around the Disney back lots, Roy was known as "the idiot nephew." "The prevailing view was that Roy was ineffectual and weak," John Tay lor writes in his book, Storming the Magic Kingdom: Wall Street, the Raiders, and the Battle for Disney. Following Walt's death, Roy was shunted aside by the new management, which included Walt's son-in-law.

But rather than go quietly into the night, Roy hired a smart corporate lawyer and unleashed a shrewd takeover attempt. When the smoke cleared, Walt's son-in-law and the rest of senior management were gone. Roy hand-picked the replacement team, all outsiders, including Disney's new creative genius Michael Eisner.

The rest is business history. Disney's profits have gone from $108 million to $730 million, the stock price has more than quadrupled, and the movie studio has regained its touch. Not bad for an idiot nephew.

Of course, these stirring tales of nephew derring-do won't erase the centuries of ridicule that have forced many nephews into living what Thoreau called "lives of quiet desperation." But the achievements: of Roy E. Disney and others make this truth self-evident Some nephews aren't so goofy after all.