A few bad eggs can hurt all family firms
A nationwide recall of eggs connected to widespread salmonella poisoning caused millions of wary Americans to alter their breakfast menus this summer, as federal investigators scrambled to find the source of the outbreak.
An Iowa family enterprise has been linked to the egg recall. The Des Moines Register reported that the giant DeCoster family agribusiness enterprise, which owns Wright County Egg, recalled millions of eggs it had shipped to wholesalers, distribution centers and food service companies in eight states. A New York Times article, citing a Food and Drug Administration official, said salmonella was found in feed given to pullets raised by a DeCoster facility and was also found in bone meal, an ingredient in DeCoster's feed.
A subsequent Times article said:
[FDA] inspection visits to Wright County egg found barns with abundant rodent holes and gaps in doors, siding and foundations where rodents could enter. Inspectors spotted mice scampering about 11 laying houses.... The report on Wright County Egg also described pits beneath laying houses where chicken manure was piled four to eight feet high.
Austin Jackson DeCoster moved to Iowa from Maine and established large hog and chicken operations, Register reporter Philip Brasher told National Public Radio. The business, now primarily run by DeCoster's son, Peter, has been cited many times for environmental, labor and immigration violations.
The elder DeCoster paid $2.1 million in penalties after pleading guilty to federal immigration charges in 2003, Brasher reported in the Register. According to the New York Times:
Neighbors sued the DeCosters' farms for what they said were noxious gases, millions of gallons of uncovered manure and putrid animal carcasses left on roadways. The Iowa Department of Natural Resources declared [A.J.] DeCoster a "habitual violator" ... for [the business's] handling of hog waste. And Mr. DeCoster paid more than $1.5 million as part of a settlement with 11 female workers, most of them Mexican, at his egg facilities over sexual harassment and assault charges, including rapes by supervisors.
In late August, as news of DeCoster's misdeeds circulated, the Associated Press reported that a federal judge recommended approval of a $12 million settlement for victims of another salmonella outbreak caused by a family-owned business: Peanut Corporation of America, run by second-generation leader Stewart Parnell. PCA's products were linked to nine deaths and some 700 illnesses in 2009. PCA later filed for Chapter 7 bankruptcy.
Of course, family business misdeeds aren't confined to the agriculture industry. We have all heard stories of family firms in retailing, manufacturing, business services and other fields that have been cited by authorities for violations related to labor, safety, false advertising, tax evasion and other nefarious practices. Sadly, many of us know of other family businesses -- small as well as large operations -- that have committed similar transgressions and gotten away with them.
Numerous non-family corporations also disregard the welfare of their neighbors, employees and customers in the never-ending quest for profits. But when a family company makes headlines for serious violations, the fallout taints all other family-owned businesses, large and small, in every industry.
Family companies already must fight the perception that the controlling family is out to skim money from the business and create make-work jobs for undeserving family members. Counterbalancing this negative public image is the impression that family business owners, in contrast to faceless corporations, care about their communities and are concerned about future sustainability. When a family enterprise makes news for harming others, the negative image overshadows the positive one.
Once again, the good eggs in the family business community have gotten shelled.
Posted Thursday, September 02, 2010 • 0 Comments • Permalink
Musings on the sale of America’s oldest family farm
About three weeks ago, the Boston Globe reported on the Tuttle family's plans to sell Tuttle Farm in Dover, N.H. The farm, founded in the 1630s, is the oldest continually operating family farm in the U.S. and No. 2 on Family Business Magazine's list of America's oldest family businesses.
The report was quickly picked up by other news organizations, and readers have expressed sadness that such a venerable family enterprise is coming to an end.
Certainly, as the editor of a magazine devoted to building and sustaining family businesses -- and celebrating the achievements of families who succeed in doing so -- I am sorry to see a high-ranking name disappear from our list of long-lived family firms. But it's important to note that a family shouldn't continue their business solely for the sake of corporate longevity or bragging rights. If their hearts tell them to sell, then selling is the right thing to do -- no matter how old the company is.
In the case of Tuttle Farm, the Tuttle family apparently grew weary of competition with large grocery chains. Will Tuttle, 63, who began helping his grandfather on the farm at age six, told the Globe:
"This is a different business now. Farming at any level is a labor of love, but now the future is so uncertain. Looking forward, I don't see much opportunity for small farms to thrive. It's a tough grind."
His wife, Michelle Tuttle, told the newspaper:
"A lot of people won't drive a few miles for fresh vegetables. They are going to Wal-Mart and Target and trying to save whatever they can, and we don't have the buying power to compete."
I can't help comparing the Tuttles' clear-headed decision making about the future of their farm to the 2006 acquisition of Japanese temple builder Kongo Gumi -- once the world's oldest family company (founded in the year 578!) -- by a public corporation, Takamatsu Construction. As family business adviser James Olan Hutcheson wrote in the Autumn 2008 issue of Family Business, Kongo Gumi's family owners took on excessive debt, a problem compounded by a recession in the company's primary business. Hutcheson wrote:
The circumstances that led to Kongo Gumi's dissolution ... were based on the astounding runup in Japanese real estate values during the 1980s, as well as the equally shocking collapse of the country's land prices that followed in the 1990s. What seemed reasonable adventures into real estate speculation thus led to $343 million in debt, which proved unsustainable as Kongo Gumi's temple-building business, affected by a secularization trend in Japanese culture, also declined significantly.
The Takamatsu executive who took over as Kongo Gumi's president after the acquisition also cited "reliance on overly expensive longtime suppliers and excessive executive perks," Hutcheson's report noted.
The Tuttles, rather than taking on debt or trying risky new strategies to compete in a cutthroat economy, are opting to exit on their own terms. They plan to maintain their ties to the land; they will move to a home they own next door to the farm. Because of a conservation restriction, they noted, the historic property will remain as open space for them to look upon proudly.
"I didn't want this to become a burden," Will Tuttle said in explaining his decision to the Globe. To me, that sounds like solid logic.
Posted Monday, August 16, 2010 • 0 Comments • Permalink
Family Business Magazine is honored
Family Business Magazine recently was honored with several trade press awards.
The 20th anniversary issue (Autumn 2009) received an Apex Award for Publication Excellence in the "Magazines & Journals - Print Over 32 Pages" category. The Apex Award is a national honor that recognizes excellence in publications work by professional communicators.
On July 28, I accepted two additional awards on behalf of our editorial and publishing team at the 2010 Northeast Region Azbee Awards of Excellence banquet, held in New York City. The Azbees are presented by the American Society of Business Publication Editors.
Margaret Steen's report on an unusual approach to succession planning at W.S. Darley & Co., a third-generation company in Itasca, Ill. ("Planning a smooth succession," FB, Summer 2009), received a Regional Gold Azbee Award. The award category was "Editorial Excellence - Case History."
Deanne Stone's profile of ABC Recycling Ltd. in Vancouver, British Columbia, a fourth-generation company owned by the Yochlowitz family ("Communication and commitment," FB, Summer 2009), received a Regional Silver Azbee Award for "Editorial Excellence - Organization Profile."
Of course, this recognition would not have been possible had the Darley and Yochlowitz families not shared their stories with us. We're thrilled the competition judges agreed that telling these stories provided a valuable service to our readers.
Posted Friday, July 30, 2010 • 0 Comments • Permalink
The name game
Earlier this month, Bloomberg reported that Gucci Group, now owned by PPR SA of France, filed a lawsuit in Florence, Italy, against Elisabetta Gucci, a great-granddaughter of Gucci's founder, seeking to block her from opening a hotel chain under the name EG Hotels by Elisabetta Gucci.
In an e-mail to Bloomberg, Gucci Group said:
"Gucci wants to make it clear that it has no relationship to Elisabetta Gucci Hotels and that it is not involved in any project whatsoever with Elisabetta Gucci Hotels. If necessary, Gucci will take any needful step to protect its rights."
Elisabetta Gucci seems to understand the importance of clarifying her independence from the company her great-grandfather founded. Her website says she has "no involvement with fashion herself or the main designer brand."
This case brings to mind Walter S. Taylor, the late owner of Bully Hill Vineyards in Hammondsport, N.Y. Taylor, a descendant of the family that owned Taylor Wine Co., was fired from Taylor by his uncles for criticizing the company's winemaking practices and started Bully Hill, which was formally launched in 1970.
When Taylor Wine Co. was sold to Coca-Cola, Walter Taylor was no longer permitted to use his surname on Bully Hill's labels. In protest, he blacked out his last name and featured a goat on his labels (which showcased his original artwork). His slogan was: "They have my name and my heritage, but they didn't get my goat."
Taylor -- who became a quadriplegic after a 1990 car accident and died at age 69 in 2001 -- renamed the entrance to his winery Greyton Taylor Memorial Drive, in honor of his father. The labels included the winery's address -- a roundabout way of getting Taylor's last name onto the bottles.
Another famous lawsuit over use of the family name involved winemakers Ernest and Julio Gallo and their younger brother Joseph, who had worked in the family wine business but didn't have an ownership stake. When Joseph opened a cheese business in 1983 and named it the Joseph Gallo Cheese Company, his brothers sued him for trademark infringement and won. (He renamed his business Joseph Farms.) Joseph later filed a countersuit in which he argued that his brothers owed him one-third interest in the wine business; he lost that suit as well. He was estranged from his brothers until his death in 2007.
A family policy on use of the family name -- one that anticipates what would happen to the name if the business is sold -- might avoid the tragedy of a family lawsuit. But a policy won't necessarily heal the hurt feelings of a family member who has been forbidden to use his or her own name. As Lorenz Ziller, managing director of the EG Hotels company, told Bloomberg:
"Elisabetta Gucci is doing her job. She cannot cancel her name or her background. If she has a famous name or a famous background, that's not her fault and we are not trying to use it as [such]."
Posted Thursday, July 15, 2010 • 1 Comments • Permalink
The national pastime
In honor of the USA's 234th birthday, many citizens will spend the July Fourth weekend participating in time-honored American traditions: attending barbecues, marching in parades, watching fireworks -- and complaining about high taxes.
U.S. business owners and high-net-worth individuals have long railed against the federal estate tax, in particular. As part of a graduated series of tax reform provisions enacted by Congress in 2001, the estate tax was allowed to lapse in 2010. On Jan. 1, 2011, the tax is scheduled to return at a rate of 55% on estates of more than $1 million, unless Congress passes changes to the Economic Growth and Tax Relief Reconciliation Act of 2001.
Attorney Doug Raymond of DrinkerBiddle told attendees at the Family Business Magazine/Stetson University "Transitions" conference in April that a compromise being floated in the Congress would impose a tax of 45% on estates over $3.5 million. (A proposed tax of 35% for estates over $5 million would not meet "pay as you go" guidelines, he said.) "Because of the importance of this issue to so many people, and so many small businesses in particular ... it's likely that something will happen so that we don't end up with a 55% tax on January 1," Raymond said. "But if you're hoping to get much better than 45%, you're probably whistling in the dark."
Estate taxes weren't a problem for the heirs of Texas pipeline tycoon Dan L. Duncan, who died in March and was recently identified by the New York Times as possibly the first U.S. billionaire to pass his estate to his heirs tax-free. Forbes had estimated him to be the 74th-wealthiest person in the world, with a fortune of about $9 billion. Among the assets he left to his descendants were his holdings in EPCO and Dan Duncan LLP, two entities in his natural gas and pipeline empire, according to the Times report.
The tax savings to Mr. Duncan's four children and four grandchildren "is sure to be unsettling to those who have paid estate taxes on more modest wealth," the Times article noted. "Many lawyers say Mr. Duncan's heirs have the means and motivation to wage a fierce court battle to challenge the constitutionality of any retroactive tax."
I have previously written about the efforts of some terminally ill people and their families as 2009 drew to a close to prolong their lives past Jan. 1, 2010, so as to avoid the estate tax. Mr. Duncan, who died of a brain hemorrhage, made it to 77 -- relatively young by today's standards. Let's hope his heirs are sorry he died too soon, rather than happy that he picked a good year to expire.
Though Mr. Duncan's billions will be going to his heirs rather than into the federal government's coffers, there is hope that the beneficiaries will use some of their extra inheritance to benefit society. His will provided for donations to several philanthropic causes and directed that any funds or assets not otherwise specified for a relative or charity be put into two family charitable trusts, according to the Times report.
Posted Friday, July 02, 2010 • 1 Comments • Permalink
