Case 1: Tru-Color Inc

The board of directors of Tru-Color Inc., a family-owned paint manufacturer, is trying to decide how to respond to a buyout offer from a large competitor. The board is made up of six members of the Franklin family.

Dad

Mom

Al

Bob

Carol

Dave

Mr. Franklin (dad) is Chairperson of the board and owns 30% of the stock. Each of his four children holds 10% and the remaining 30% are held by Mrs. Franklin (mom). Mr. Franklin, Al and Carol work in the company (Mr. Franklin is CEO, Al is president and Carol is sales manager). Because they are simultaneously family members, employees and owners, they are in sector 7 of the three-circle model. Mrs. Franklin, Bob and David do not work in the firm. As family owners, they are in sector 4. David has never participated in the board and has given a proxy to his mother. But Mrs. Franklin is not present at todays meeting Mr. Franklin is convinced that he is serving all his roles Chairperson, CEO and father best by keeping the company. His most vocal challenger is his second son, Bob. In the following text you will be able to read the main excerpts from the Boards conversation. Mr. Franklin: Ive resisted bringing this matter to a vote because I prefer us to reach consensus. But Im beginning to see that that may not be possible. As you know, Im very opposed to this sale, especially at this time, when the company is on the brink of tremendous growth.

Bob: Youve talked about growth for years, but is it realistic? The new solvent may never be patented. Perhaps we should take a bird in the hand. Mr. Franklin: In my view, youve opposed every move Ive made with this company since you joined the board. What do you really want?

As the meeting progresses, other board members join the debate. Siblings may have grown up in the same family, but they also represent different combinations of roles. Carol: I think the board should let those of us who work in the company make the decision. The chair has been running this company for almost thirty years, and his judgment has been pretty damn good so far. If he wants to turn down the offer, I dont see why we need a vote. Its his company, and thats that. Bob: I absolutely disagree. Thats not how this board should work. Ever since you became sales manager and received these shares, youve been nothing but a yeswoman.

Later in the meeting, the oldest son Al, who has been quiet until now, is asked for his point of view. Everyone assumes that he will give a ringing endorsement for keeping the company in the family. Al: You know that as president I have the most to lose by selling out, so Ill vote to reject the offer. However, its not as easy a decision as you think. I dont relish continuing to try to run this company with this kind of board, and a big part of me thinks it might be just as well to get out now and start over. This board has resisted every major change Ive proposed, and its wearing thin. Mr. Franklin: Just be a little patient. When I retire, you can do whatever you want.

At the end of the board meeting, Mr. Franklin confidently announces that, even with Bob in opposition, the majority of shareholders clearly favor keeping the company. At that moment, Carol announces that she has a letter from Mrs.

Franklin concerning the voting of her shares and those of the absent sibling Dave. She has instructions to read it if the board was not unanimous. Mrs. Franklin: As all of you know, I have rarely attended board meetings and have always voted with the chairperson. If you are reading this letter, it means that you are not able to reach consensus and are still disagreeing on what to do with the company. Here is what I think. Al has done an excellent job as president. He has worked hard for almost twenty years in the company and he knows every part of it. He also has new ideas. Our current chairperson is almost sixty-five years old. There are other things that he should do with his life and this may be his last chance to leave while he is still young and healthy enough to enjoy himself. Therefore, here is how I vote my shares: if the chairperson will step down and turn control of the company to the president, I will vote to reject the offer. If he will not, then I vote to sell. Adapted from Generation to Generation by Kelin E. Gersick et al.

Discussion questions: 1. In your opinion, what are the between the lines points that each individual is trying to make, reflecting his or her three different roles in the three-circle model? 2. What do you think of the outcome of the meeting? Is there anything anyone could have done differently, in order for the outcome to be a better one?