Discussion Guides

Jon Pepper Books / Discussion Guide No. 1: Family Ownership

 
The Crowe Power Company has been under control of the founding family for five generations. Many great companies retained family control for through a variety of means with widely differing results, and others have stumbled because of infighting or pressure from outside shareholders.

 
Weigh the relative merits of family control:

 
Pros

  • Families tend to take long-term view on company goals
  • Families may have greater personal investment in the company’s reputation, especially its willingness to “do the right thing”
  • Family participation may include more focus on corporate citizenship
  • Family members may take the vision of the founder more seriously
  • Nobody will work harder than the people whose names are associated with the company

 

Cons

  • Undeserved special treatment for descendants who work at the company, move up the ranks quickly and enjoy outsized clout
  • Keeping family control may limit the talent pool for top jobs
  • Through special shares, families can sometimes control the company with a relatively small ownership. Is that fair to other shareholders or is that the bargain they struck by buying stock?
  • Company resources may be directed toward vanity projects that create little value for the enterprise
  • The company may cling to past practices established by members of the founding family and regard them as sacrosanct

 

Questions:

  • Do you know examples of companies that improved performance when power was handed to the next generation?
  • Do you know of companies where family involvement has hindered performance?
  • What examples can you think of where a family asserted itself to push the company to do “the right thing”?
  • What has been the breaking point for family control in prominent companies?
  • On balance, is sustained family interest better or worse in the long term for company performance?

 

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