NYU Stern School of Business

Undergraduate College

MGMT-UB.0028.001 (C50.0028): Managing Family Business and Privately Held Firms

Spring 2013

Instructor Details

Villalonga, Belen



Tisch 721


Course Meetings

MW, 9:30am to 10:45am

Tisch T-UC19


Course Description and Learning Goals

Most companies around the world are controlled by their founders or founding families, including not only private firms but also more than half of all public corporations in the U.S. and more than two thirds of public corporations around the world. Family control raises unique challenges as well as value-creating opportunities for these companies and their various stakeholders.

This course introduces students to the management, governance, and financial issues faced by family businesses and related organizations such as family offices and family foundations, and to the different career opportunities in and around them.

The course will consist of four modules, which address the following questions, among others:

1. Creating value through family business management. How do family-controlled companies differ from others? How does family control affect strategy and management decisions such as diversification, mergers and acquisitions, or financial policies? How do these decisions, in turn, impact firm value? How can this value be measured in family and privately held businesses?

2. Managing and financing growth in family businesses. How can growth in family businesses be managed given the demands for liquidity and control often placed on them by their shareholders? How can the company’s growth be financed given family owners’ reluctance to lose control? What do different capital providers, such as joint-venture partners, private equity partners, and public investors bring to the table, and what do they want in return? How do different mechanisms for retaining control in excess of share ownership work? How should family businesses be managed in the presence of shared control?

3. Governance of the family business system. What structures and mechanisms can be put in place to manage family dynamics in a productive way? How is decision-making allocated among the board of directors, shareholders, and business executives? What roles and responsibilities do family shareholders have? How do family assemblies and family councils work and interact with corporate governance bodies? What is a family constitution? How should family and non-family executives be compensated in private family firms?

4. Managing intergenerational transitions. How can succession be managed to ensure continuity in family business systems? How can family ownership and control of the family business, and of family wealth, be transferred from one generation to another? How do different estate-planning vehicles like trusts, foundations, and ESOPs work? How do the different organizations included in a family enterprise (family business, family office, and family foundation) interact?

Class discussions will be case-based and will benefit from the interaction with guest speakers. The cases cover a wide range of family businesses, incuding both public and private firms of various sizes and from multiple industries and countries. The course is designed for students who may be involved with family enterprises in a variety of roles: as founders, as managers of a company owned by their family or controlled by another family; as advisors (investment bankers, investment managers, consultants, or board members); or as investors or business partners (family shareholders, joint-venture partners, private equity partners, and hedge funds).

Students who want to pursue a general management, consulting, or finance career have a high probability of working at or with a family-controlled business. Whatever their future role, students will find it useful to understand the uniqueness of these companies, and why they may or may not want to be involved with them.


Course Outline


Module 1. Creating Value through Family Business Management

Session 1 Monday, January 28, 2013
Do family ownership, control and management create or destroy value? Course introduction and overview
• Case: The Pitcairn Family Heritage Fund (HBS 208073)
• Spreadsheet supplement: Pitcairn exhibits and portfolio performance evaluation tool (HBS 208720)
• Ernesto Poza, “The nature, importance, and uniqueness of family business,” Chapter 1 in Family Business
• Belén Villalonga and Raphael Amit, “How do family ownership, control, and management affect firm value?,” Journal of Financial Economics 2006
• Andrew Bast, “In hard times, family firms do better,” Newsweek December 29, 2010

Recommended supplemental readings:
• Business Week, “Family Inc.,” Business Week Special Report, November 10, 2003
• Business Week, “Defining family,” Appendix to Special Report, November 10, 2003
• Credit Suisse, “Credit Suisse launches family index. Family holdings outperform competitors,” Credit Suisse Press Release, January 30, 2007
• Hervé Prettre and Adrian Zürcher, “Stocks with significant family influence—update,” Credit Suisse Equity Research, July 23, 2007
• Edmund Y. Ng, “Family jewels,” Morgan Stanley Research Europe, July 2, 2007

1. Would you invest in this fund? Think of at least three reasons why you would or would not
2. If you were asked to manage this fund, preserving its investment philosophy but possibly modifying the selection criteria for inclusion of stocks in its portfolio, how would you modify those criteria (if at all)?
* Note: you may find useful the spreadsheet supplement to the case, which includes monthly stock returns since September 1996 for all the firms that were in the Pitcairn portfolio as of September 30, 2006. The portfolio performance evaluation tool included in the spreadsheet allows you to construct portfolios of those stocks or a subset of your choice by filtering on any of the characteristics shown in Exhibit 3 of the case. The tool will then give you key performance
indicators for each portfolio that you construct.

Session 2 Wednesday, January 30, 2013
Life cycle of the family business system
• Case: Bentington Industries (HBS 806115)
• John Davis and Renato Tagiuri, “Bivalent Attributes of the Family Firm,” Family Business Review 1996

Recommended supplemental readings:
•  Kelin Gersick, John Davis, Marion McCollom Hampton and Ivan Lansberg, “A developmental model of family business,” Introduction to Generation to Generation 

1. How would you describe the health of the business, family and ownership group in the Bentington family business system?
2. What are the issues and factors that have led to the conflicts in the Bentington family business system?
3. If you were the family business consultant to the Bentington family, what actions would you recommend to address these conflicts?
4. If you were the family business consultant, how would you respond to Paul’s threat?

Session 3 Monday, February 4, 2013
Managing shareholder conflict and family dynamics
• Case: J. Pérez Foods (HBS 801-147)
• John Davis, “Responsibilities and rights of family shareholders of a family business (HBS 801-264)
• Frank Sander and Robert Bordone, “All in the family: Managing business disputes with relatives,” Harvard Business School Publishing Newsletter

Recommended supplemental readings:
• John Davis and Rita Herrera, “The social psychology of family shareholder dynamics,” Family Business Review 1998
• Kelin Gersick, John Davis, Marion McCollom Hampton and Ivan Lansberg, “The ownership developmental dimension,” Chapter 1 in Generation to Generation

1. How did the shareholder conflict described in the (A) case come about?
2. How would you describe the health of the business, family and ownership group in the Perez family business system?
3. If you were Jaime Perez, Jr. at the end of the (A) case, what would you do to resolve this family shareholder conflict?

Session 4 Wednesday, February 6, 2013
Strategy in family business systems
• Case: The Mitchell Family and Mitchell Richards (HBS 605047)
• John Davis, “Family missions and family strategic planning for business families”

Recommended supplemental readings:
• Kelin Gersick, John Davis, Marion McCollom Hampton and Ivan Lansberg, “The family developmental dimension” and “The business developmental dimension,” Chapters 2 and 3 in Generation to Generation
• Ernesto Poza, “Great families in business: Building trust and commitment,” Chapter 2 in Family Business

4. How central is the Mitchell family to the strategy and success of Mitchells/Richards?
5. Can the Mitchell family successfully perpetuate its business for another generation? How?
6. In order to continue a successful family business, what should the family try to continue? What should it change?

Session 5 Monday, February 11, 2013
Creating value through family control and corporate strategy
• Case: Ayala Corporation (HBS 207-041)
• Spreadsheet supplement: Ayala Corporation (HBS 207-705)
• Belén Villalonga, “Note on measuring controlling shareholders' ownership, voting, and control rights” (HBS 209-109)
• Ken Gibson, “A case for the family-owned conglomerate,” McKinsey Quarterly 2002

Recommended supplemental readings:
• Rafael La Porta, Florencio Lopez de Silanes, and Andrei Shleifer, “Corporate ownership around the world,” Journal of Finance 1999
• Stijn Claessens, Simeon Djankov, and Larry Lang, “The separation of ownership and control in East Asian corporations,” Journal of Financial Economics 2000
• Mara Faccio and Larry Lang, “The ultimate ownership of European Corporations,” Journal of Financial Economics 2002

1. How much have Ayala Corp. and its publicly listed businesses grown over the last 10 years? How profitable have they been? How have Philippine inflation and exchange rates affected Ayala's growth and profitability?
2. What do you think about Ayala’s corporate strategy? Had you been in Jaime Augusto Zobel de Ayala’s shoes, would you have done anything differently?
3. How has Ayala financed its growth over the past 25 years? What are the pros and cons of their financial strategy relative to other feasible alternatives?
4. What fraction of Ayala Land, Globe Telecom, BPI, and Manila Water Co.’s common stock does Ayala Corp. own? What fraction of the votes outstanding in these companies does Ayala own and control? What are the Zobel family’s ownership, voting, and control stakes in each of these four companies? In answering these questions, you may find useful the technical note that is required reading for today's class. (*Also, note that the ownership stakes reported in Exhibit 4 of the case refer to voting stock (common and preferred), while those reported in Exhibits 7 through 10 refer to common stock only. For the purpose of this exercise, you can treat preferred voting stock as if it were another class of common stock.)

Session 6 Wednesday, February 13, 2013
Measuring value creation for the family and other stakeholders in family businesses
• Case: Ayala Corporation (HBS 207-041)
• Spreadsheet supplement: Ayala Corporation (HBS 207-705)
• Belén Villalonga, “Note of sum-of-the-parts valuation” (HBS 209-105)

Recommended supplemental readings:
• Horngren et al., Chapter 11, “The market and equity methods for intercorporate investments” and “Consolidated financial statements,” 2006
• Tarun Khanna and Krishna Palepu, “Why focused strategies may be wrong for emerging markets,” Harvard Business Review 2007
• Belén Villalonga, “Research Roundtable Discussion: The diversification discount,” Financial Economics Network FEN-Educator Series, Social Science Research Network (SSRN) 2003

1. How have Ayala Corp. and its publicly listed businesses performed on the stock market between 1/1/1996 and 4/7/2006? (You can use the data in the spreadsheet supplement of the case for your stock return calculations).
2. How would you adjust for risk your measures of Ayala’s stock returns?
3. Is Ayala Corp. worth more than the sum of its parts? How would you interpret the results of this valuation?
4. How would you estimate Ayala Corp.’s Economic Value Added (EVA)? (*Note: EVA = NOPAT – WACC * Capital Employed).
5. What do you make of the results of all these analyses about Ayala’s value creation for its shareholders? What advice would you offer to Jaime Augusto going forward?

Session 7 Wednesday, February 20, 2013
Financial policies in the family business
• Case: Ford Motor Company Value Enhancement Plan (HBS 201-079)
• Eduardo Gentil, “Financial policy from the shareholder perspective,” Cambridge Advisors to Family Enterprise

Recommended supplemental readings:
• Samuel Hayes and Lynn Paine “Dual class share companies,” (HBS 306-032)

1. Why has Ford been holding so much cash? What have been its major sources and uses of cash since 1986? What would determine the appropriate amount of cash that a firm such as Ford should hold?
2. Be prepared to explain how the Value Enhancement Plan (VEP) works and how the prices of "new" Ford shares will relate to the prices of "old" Ford shares
3. What problems is the VEP designed to solve? Whose problems are they? What are the alternatives? Why are TIAA-CREF and Calpers so upset?
4. As a Ford shareholder, would you vote in favor of the proposed recapitalization? Why?

Session 8 Monday, February 25, 2013
Valuation in family business systems I
• Case: Kohler Co. (HBS 205-034)
• Spreadsheet supplement: Kohler Co. (HBS 205-707)
• Villalonga, Belén, “Note on valuing control and liquidity in family and closely held firms,” Technical Note (HBS 209-104)

Recommended supplemental readings:
• Any background reading from any valuation or corporate finance textbook about the Discounted Cash Flow and Multiples (Comparables) methods of valuation

1. What is the total enterprise value of Kohler Co. using a discounted cash flow approach? What is the total enterprise value using a multiples (market value of comparable companies) approach? What is the value of a share held by a minority shareholder in Kohler Co. that is implied by your valuations?
2. What assumptions can you use to arrive approximately at the share price of $55,400 that was estimated by Kohler Co.? Show how these assumptions impact your valuation.
3. What assumptions can you use to arrive approximately at the share price of $273,000 that was estimated by the dissenting shareholders? Show how these assumptions impact your valuation.

Session 9 Wednesday, February 27, 2013
Valuation in family business systems II
• Case: Kohler Co. (HBS 205-034)
• Spreadsheet supplement: Kohler Co. (HBS 205-707)
• Villalonga, Belén, “Note on valuing control and liquidity in family and closely held firms,” Technical Note (HBS 209-104)

Recommended supplemental readings:
• Forbes Magazine, “The Importance of Being Private,” 2004
• Bates, Lemmon, and Linck, "Shareholder wealth effects and bid negotiation in freeze-out deals: Are minority shareholders left out in the cold?," Journal of Financial Economics 2006

For the following two questions, assume that (i) legal fees can be ignored; and (ii) Herbert Kohler, the dissenters, and the IRS all have the same cost of capital—i.e., that any interest charges are offset by the value for Herbert Kohler of paying late.
1. What is the maximum share price at which Herbert Kohler should be willing to settle with the dissenting shareholders in order to stop the trial on April 11, 2000? Assume that: (i) if the trial proceeds, it is expected to last less than a month and to result in one of two possible outcomes in terms of the price per share established in court: the $273,000 being claimed by the plaintiffs, or the $55,400 being defended by Herbert Kohler; (ii) Kohler estimates the probabilities of these two outcomes at 30% and 70%, respectively.
2. How would your answer to (4) change if you also assume that: (i) the inheritance tax owed on Frederic Kohler’s estate was 50.2% of his holdings in Kohler Co. (equivalent to 489 shares out of the 975 he owned); (ii) the taxes paid by the estate amounted to $27 million (489 shares at $55,400 each); (iii) were the settlement or the trial to result in a revised share price in excess of $55,400, the IRS would likely demand a similar valuation for its claim on Frederic’s estate; and (iv) Herbert Kohler estimates the probability of the IRS’s demand at 100% if he proceeds to trial, and 50% if he settles.


Module 2. Managing and financing growth in family businesses

Session 10 Monday, March 4, 2013
Renewing entrepreneurship beyond the founder’s generation
• Case: SUN Brewing (A) (HBS 207-022)
• Spreadsheet supplement: SUN Brewing (A) (HBS 207-703)
• Ernesto Poza, “Continuing entrepreneurship and the next generation,” Chapter 4 in Family Business

Recommended supplemental readings:

 • Kelin Gersick, John Davis, Marion McCollom Hampton and Ivan Lansberg, “Founders and the entrepreneurial experience,” Chapter 4 in Generation to Generation
• Citigroup, “Growing the family business: Creating value for all shareholders,” 2007

1. How did the Khemka family find themselves in the situation they were in at the time of the case? What could they have done differently?
2. Why were the different forms of financing chosen at each point in time?
3. How much money did SUN Brewing need in March 1999? How much was the company worth?
4. What risks were associated to investing in a Russian beer company in 1999?
5. What are the pros and cons of the different alternatives available to the Khemka family in 1999?

Session 11 Wednesday, March 6, 2013
Partnering with strategic investors
• Case: SUN Brewing (B) (HBS 207-039)
• Spreadsheet supplement: SUN Brewing (B) (HBS 207-704)

Recommended supplemental readings:

 • Kelin Gersick, John Davis, Marion McCollom Hampton and Ivan Lansberg, “The growing and evolving family business,” Chapter 5 in Generation to Generation

• Luigi Zingales, "What determines the value of corporate votes?," Quarterly Journal of Economics 1995
• Tatiana Nenova, "The value of corporate voting rights and control: A cross-country analysis," Journal of Financial Economics 2003

1. Did Interbrew add value to SUN Brewing? How?
2. What was SUN Interbrew’s Total Enterprise Value as of July 31, 2004?
3. What was the value of a share of SUN Interbrew?
4. Use the data provided in Exhibit 3 of the spreadsheet supplement to compute the historical voting premium in SUN Interbrew (the excess price of a voting (Class B) share over a nonvoting (Class A) share, as a percentage of the A-shares price). How has the premium evolved over time? Why?
5. How much was the Khemka family’s stake in SUN Interbrew worth?

Session 12 Monday, March 11, 2013
Partnering with private equity investors
• Case: Spyder Active Sports Inc.––2004 (HBS 206-027)
• Spreadsheet supplement: Spyder Active Sports Inc.––2004 (HBS 207-701)
• Villalonga, Belén, “Note on valuing control and liquidity in family and closely held firms,” Technical Note (HBS 209-104)

Recommended supplemental readings:
• Citigroup, “Growing the family business: Creating value for all shareholders,” 2007

1. Is 2004 a good time for Jacobs to sell?
2. What accounts for the firm’s success in the past few years?
3. Prepare estimates of value based on DCF and the trading and transaction multiples presented in the case. How well do these estimates reflect the considerations you believe to be most pertinent?
4. David is considering three major alternatives: (1) a trade sale of all or almost all of his company to a strategic buyer, such as a large competitor; (2) a sale of all or almost all of his company to a private equity investor; and (3) a sale of a sufficient minority position to a private equity investor so that CHB would be taken out and maybe provide some cash for David himself. Which one would you choose if you were David Jacobs? Which one would you choose if you were a general partner in CHB Capital Partners? Who else is affected by this choice and how?

Session 13 Wednesday, March 13, 2013
Panel session: Private equity and family business

Session 14 Monday, March 25, 2013
Partnering with other financial investors
• Case: The Oracle of Omaha meets the Visionaries of Galilee (IMD 412)

Recommended supplemental readings:
• Case: Berkshire Hathaway (HBS 709-449)

1. What is Warren Buffett’s investment philosophy with respect to family businesses?
2. How does Buffett select which companies to invest in? What is his due diligence process like?
3. How does Buffett add value to the companies in which he invests?
4. Why does Eitan Wertheimer want to do a deal with Berkshire Hathaway?
5. Imagine you are Eitan Wertheimer. What three questions would you like to ask Warren Buffet before you agree to the sale?

Session 15 Wednesday, March 27, 2013
Tradeoffs between family control, shareholder liquidity, and firm growth
• Case: Freedom Communications Inc. (KEL 339)
• Villalonga, Belén, “Note on financing growth in family firms,” (HBS 211-074)
• Ernesto Poza, “Financial considerations unique to family businesses,” Chapter 8 in Family Business

Recommended supplemental readings:
• François de Visscher, “Balancing capital, liquidity, and control”
• François de Visscher, “Dividends or redemptions?”
• François de Visscher, “Redeeming the family business”


Module 3. Governance of the family business system

Session 16 Monday, April 1, 2013

Governance in family business systems: The roles of management, the family, and the board
• Case: The Agnellis and Fiat: Family business governance in a crisis (A) (HBS 812-128)
• John Davis, “Fundamentals of family business system governance” (HBS 807-019)

Recommended supplemental readings:
• John Davis, “Governance of the family business” (HBS 807-022)
• John Davis, “Reminders for owner-managers regarding the board of directors of private companies,” (HBS 805-154)

1. Should the Agnelli Family accept Morchio's proposal or recruit a new CEO? Give pros and cons for the two options.
2. What do you think of the decision-making process used by the Agnelli family in this situation?
3. What do you think of their governance system in general?

Session 17 Wednesday, April 3, 2013
Governance in family-controlled public corporations
• Case: The New York Times Co. (HBS 207-113)
• Donald Graham, "The Gray Lady's virtue," Wall Street Journal, April 23, 2007
• Joe Nocera, "Destroying Dow Jones to save it," New York Times, May 19, 2007
• Allan Sloan, "The REAL reason the Bancrofts lost Dow Jones," CNNmoney.com, August 20, 2007
• Belen Villalonga and Raphael Amit, "How are U.S. family firms controlled?," Review of Financial Studies 2009

Recommended supplemental readings:
• Joe Hagan, "Bleeding ‘Times’ blood," New York Magazine, October 5, 2008
• David Swensen, "News You Can Endow," New York Times, January 28, 2009

1. Why is there so much family ownership in the newspaper industry?
2. How did the Sulzberger family manage to retain control of the New York Times Co. after itwent public?
3. How does the New York Times Co.’s dual-class structure differ from the one Dow Jones & Co. had prior to its takeover by Rupert Murdoch’s News Corp.?
4. What explains the behavior of the New York Times Co.’s institutional shareholders—not just Morgan Stanley Investment Management’s but also Private Capital Management, T. Rowe Price, Fidelity, and Vanguard?
5. How should Arthur Sulzberger, Jr. respond to Morgan Stanley Investment Management’s proposal?

Session 18 Monday, April 8, 2013
Family governance: The Family Council and the Family Assembly
• Courtney Sampson and John Davis, “Family Governance at the Cousin Consortium Stage,” Harvard Business School Multimedia/Video Case (HBS 805-161)
• Charlotte Lamp, “The Eddy Family Council: Meeting and eating since 2000,” Family Business Magazine 2008
• John Davis, “Governance of the business family” (HBS 807-020)
• Ernesto Poza, “Family communication: Family meetings, family councils, and family offices,” Chapter 11 in Family Business

Recommended supplemental readings:
• John Davis and Courtney Sampson, “Family Governance at the Cousin Consortium Stage: The Port Blakely Companies and the Eddy Family—Supplement” (HBS 806-076)
• Charlotte Lamp, “The Eddy Family Academy: Building a family curriculum,” Family Business Magazine 2012

Session 19 Wednesday, April 10, 2013
Family governance: The Family Constitution
• Belén Villalonga, “Building a Family Constitution—Instructions for in-class simulation exercise”
• John Davis, “The Family Constitution handbook”
• John Ward, “Technical note: The Family Constitution: It’s the process that counts, not the content” (KEL 601)

Session 20 Monday, April 15, 2013
Family shareholder governance
• Case: The Torvald Klaveness Group: From old traditions to future innovations (IMD 280)
• Ernesto Poza, “Ownership of an enterprise built to last,” Chapter 3 in Family Business
• John Davis, “Governance of the family business owners” (HBS 807-021)

Recommended supplemental readings:
• Joan Magretta, “Governing the family-owned enterprise: An interview with Finland’s Krister Ahlström,” Harvard Business Review 1998

1. What are the key issues that lie ahead for the Klaveness family and Group?
2. What should Trond propose at the August 2002 meeting?
3. How should he and the Klaveness family proceed?
4. What kinds of owners, board, and management are appropriate for Klaveness?

Session 21 Wednesday, April 17, 2013
Family business system governance and corporate strategy
• Case: Itaú-Unibanco (A): The merger process (HBS 212-094)

1. What similarities and differences were there between Itaú and Unibanco? What were theirrelative strengths and weaknesses?
2. What structures did each of the families have in place to govern the family, the the businesses, and the shareholder?
3. Do you believe the merger was value-creating? Why or why not?
4. What was unique about the merger process and structure?
5. If you were in Pedro or Roberto’s shoes on November 3, 2008, what would you do next?

Session 22 Monday, April 22, 2013
Motivating and compensating family members
• Case: Kohl Industries (HBS )
• John Davis, “Compensating family employees in a family business” (HBS 808-221)

Recommended supplemental readings:
• Lloyd Shefsky, “Equal pay for unequal work equals a lack of equanimity,” Family BusinessMagazine 2007

1. What were the principles James Cole used to create the compensation systems he has usedfor his three children?
2. What compensation system(s) would you recommend to the Cole family?

Session 23 Wednesday, April 24, 2013
Aligning the incentives of non-family executives with the family’s goals
• Case: Donald Salter Communications Inc. (HBS 2195-014)
• Technical note about the compensation plan
• Ernesto Poza, “Key nonfamily management: The visible commitment to managing the family business professionally,” Chapter 9 in Family Business

1. What are the principal challenges facing Jim Myers, and what actions is he taking to address them? What special challenges does Myers face as a result of the company's Subchapter S status and the fact that it is a family-owned business?
2. If you were a compensation consultant hired by the stockholders of Donald Salter Communications to design the executive incentive plan, what values for the Target Award and the Percentage Cap would you recommend? Is there anything about the incentive plan that you would change? How would you design the rest of Jim Myers' compensation package?
3. Does the executive incentive plan meet Myers' stated goal of increasing the link between pay and market-value based performance in the company? Please be specific.
4. How should the company's enterprise value be calculated for purposes of determining the incentive compensation of Jim Myers and other senior managers? Can the same value also be used for purposes of repurchasing company stock from shareholders who wish to "cash out"?
5. Evaluate the other elements of Myers' proposed turnaround plan. Do you think his plan will be successful? Would you do anything differently?


Module 4. Managing intergenerational transitions

Session 24 Monday, April 29, 2013
Family business succession
• Case: Precista Tools (A) and (B) (HBS 488-046 and 488-047)
• Ernesto Poza, “Succession and the transfer of power,” Chapter 5 in Family Business

Recommended supplemental readings:

 • Kelin Gersick, John Davis, Marion McCollom Hampton and Ivan Lansberg, “The diversity of successions: Different dreams and challenges,” Chapter 7 in Generation to Generation

• John Davis, “An Examination of the challenges daughters face in family businesssuccession”

• Renato Tagiuri, “Succeeding the Founder in Family Companies”

1. What led to the situation faced by Greta Huebel in the Precista case?
2. Why did the work relationship between Greta and Franz change?
3. If you were Greta, at the end of the (B) case, what would you do?

Session 25 Wednesday, May 1, 2013
Intergenerational transfers of ownership, control, and wealth
• Case: Ottawa Devices (A) and (B) (HBS 204-101 and 204-102)
• Ernesto Poza, “Planning the Estate,” Chapter 7 in Family Business

Recommended supplemental readings:
• Henry Reiling, “Note on trusts” (HBS 283-022)
• Henry Reiling, “Gift and estate taxes” (HBS 283-024)

1. The Rollinses have utilized several techniques for addressing common intergenerationalwealth transfer issues. Please seek to understand these conceptually, mechanically and practically (their risks and potential rewards).
2. Are the various conflicts reconcileable and the risks associated with independence worthtaking?
3. What are the best available alternatives for keeping the company in the family and the least painful ways to resolve the conflicts?
4. Which alternative or combination of alternatives do you recommend and why?

Session 26 Monday, May 6, 2013
Panel session on family offices

Session 27 Wednesday, May 8, 2013
From the family business to the family enterprise. Course wrap-up
• Belén Villalonga, “Growing, financing, and managing family and closely held firms: Overview of the course” (HBS 209-137)
• Christian Caspar, Ana Karina Dias, and Heinz-Peter Elstrodt, “The five attributes of enduring family businesses,” McKinsey Quarterly 2012

Recommended supplemental readings:
• Kelin Gersick, Ivan Lansberg, and John Davis, “The impact of family dynamics on structureand process in family foundations,” Family Business Review 1990
• Leon Danco and John Ward, “Beyond success: The continuing contribution of the family foundation,” Family Business Review 1990

Session 28 Monday, May 13, 2013
Student paper presentations


Assessment Components


 The course grade will be based on the following components and weights:

- Class participation: 40%

- Final paper: 50%

- In-class presentation of final paper: 10%

Total: 100%



All class sessions involve active discussion based on the readings and cases. You should be prepared to share your ideas and critically interpret the perspectives presented by others. Please carefully review the readings and case preparation questions for every class session. Most class participation will be voluntary; however, to ensure that everyone has the opportunity to be involved, individuals will be frequently “cold-called.” Quantity of participation, if lacking in quality, will not be rewarded.

Quality participation typically involves:

- Applying the concepts offered in the readings and lectures

- Providing careful analysis, and helping turn vague ideas into precise statements

- Offering relevant perspectives on the issue, in a way that is accurate and logically consistent

- Moving the discussion forward by building on previous contributions with new insights

- Asking good questions. This is a skill to be practiced; good answers are rare, but so are good


Bring your name card so that I can identify you more easily in the classroom and please sit in the same seat throughout.


Final paper: 

The final paper should be an individual write-up about a family business, focused on any of the issues covered in class. The paper should have a minimum length of 10 pages, double-spaced in Times 12 point font or equivalent.

Important dates:

- Topic should be submitted to your instructor for approval by Wednesday, March 13, 2013 (before spring break), via email or in person.

- Each student will do a brief presentation of his/her paper at our last class on Monday, May 13, 2013.

- The final paper should be submitted via email by Monday, May 20, 2013 (one week after our last class)

The paper can either be:

a) A “field study” on a real family organization (family business or family office) that you have access to, whether it is your own family’s or someone else’s

b)“Library” research (based on public sources) on one of the following:

- Publicly traded family business, e.g. Viacom, Reliance

- Private family firm where a lawsuit has brought about public court records about it, e.g. Pritzker, Mondavi

- Publicly traded family office, e.g. Wendel (France)

- Family foundation (which have some mandatory filings)

Examples of suitable paper topics include:

- Family relationships driving corporate finance / strategy decisions. E.g. Breakup of Reliance (India) or Pritzker (U.S.) business groups as a result of family feuds: how much value was destroyed?

- Family-led buyouts in the U.S. cable TV industry: Cox, Cablevision

- Families tunneling money away from minority investors: Parmalat (Italy), Hollinger (Canada)

- Analysis of the evolution of the voting premium in a dual-class company around a family or corporate event: Roche (Switzerland)

- Value creation in Investor, the Wallenberg family’s business group (Sweden): Comparing the whole with the sum of its parts

- Ownership, control, business or family-related issues that your own family business is going through. E.g. management succession, ownership transition, valuation, compensation



 At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 

  25-35% of students can expect to receive A’s for excellent work

  50-70% of students can expect to receive B’s for good or very good work

  5-15% of students can expect to receive C’s or less for adequate or below work 

Note that while the School uses these ranges as a guide, the actual distribution for this course and your own grade will depend upon how well  you actually perform in this course.



The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.


Professional Responsibilities For This Course




In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:




Classroom Norms


Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 


Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 


Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.


Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.


Recording of Classes

Your class may be recorded for educational purposes


Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.



Required materials:

Ernesto Poza, Family Business, Third Edition

Case packet

 Additional recommended materials:

Kelin Gersick, John Davis, Marion McCollom Hampton and Ivan Lansberg, Generation to Generation

 All other materials listed on the syllabus will be posted on or linked to in Blackboard


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