What the Bronfman saga teaches us
In response to a reader’s question on how her son can be a worthy heir (Feb. 17, 2022), I quoted US family business experts Noel Tichy and Ivan Lansberg, who advise clients to provide their potential successors with crucible experiences. These are challenging tasks with real impact (success or failure) that require perseverance and acumen, designed to train heirs to make difficult decisions and manage whatever consequences ensue.
“I agree that crucible experiences are important,” says another reader, T. E. “I got the Omicron variant, and though people say that it is mild, that was not the case for me. I was scared that if I pass away, none of my children will be able to manage the business well. [I pity] our employees; many have been with us for decades. But I find it hard to get my children to listen to me. My father was very strict when I was growing up, and I wanted my children to be closer to me than I was to him. He trained me well. I am not strict with my own children, and today, they are not as capable or motivated as I was at their age. But they are now in their 30s, with their own families, so it is hard to be strict. What is your advice?”
My reply
I am sorry to hear you suffered from the virus, which makes the issue of family business succession more urgent.
In 1966, Sam Bronfman, the head of Canadian distiller Seagram, told Fortune Magazine, “You’ve heard about shirtsleeves to shirtsleeves in three generations? I’m worried about the third generation. Empires have come and gone.”
At that time, Seagram was at its peak, and Sam trained his own son Edgar Sr. to be a worthy successor. After college, Edgar Sr. started as a clerk in the accounts department, and after several years of handling finances on the round, he worked at the factory to garner firsthand experience of blending spirits. Then he worked for years at an investment bank to hone skills in mergers and financing, and only when he proved successful there was he invited to join the family business.
By then, “he was a veteran of countless deals in which he had not had the privilege of leaning back on his family fortune to pull them off,” says Tichy in his book “Succession.”
“He had been carefully hardened by crucible experiences more tasking and challenging than [those undergone by most people],” he adds.
Edgar Sr. knew the business inside and out, and in his 23 years as head of Seagram, he multiplied sales from $1.5 billion to $5.2 billion, and made profitable deals with DuPont, Texas Pacific Coal and Oil, etc.
However, Edgar Sr. did not raise his own son Edgar Jr. with the same tough love that his father had given him. The company stake in DuPont was their crown jewel, but in 1995, Edgar Jr. sold it to buy entertainment companies MCA Universal and Polygram in a deal that his uncle Charles (Edgar Sr.’s brother) bitterly opposed.
When the dot-com bubble burst, the company went into debt. Sam’s prediction sadly came true.
“The true tragedy of the Bronfman saga is not that the family lost a ton of money,” says Tichy. “It is that a proud and doting father, hoping to avoid causing the pain to his son that his father had caused him, ended up actually setting him up for precisely the failure that would define his checkered career.”
Before his death in 2013, Edgar Sr. said, “I’m glad that there isn’t any Seagram to leave to [heirs because] this whole question of entitlement and that they’re the Seagram Bronfmans or whatever is not a good thing. People have to go and fend for themselves. I don’t know who the h** will run it. There would be family fights. It’s much better not to have that as a legacy.”
T. E., it is hard to be strict with your children who are now adults. But talk to them and explain that they have to shape up and learn the ropes as much as they can, for the sake of your employees—and while you are still around to help. Ask your trusted executive team to design crucible experiences to train your children to be capable heirs in the future. God bless.
Queena N. Lee-Chua is with the board of directors of Ateneo’s Family Business Center. Get her book “All in the Family Business” at Lazada or Shopee, or the ebook at Amazon, Google Play, Apple iBooks. Contact the author at [email protected].
