This book deals with a much understudied and poorly understood aspect of business: the role of owners and boards in value creation. While there is abundant guidance on value creation for publicly listed firms and their managers, the role played by owners, and their corporate directors, in value creation and governance has been overlooked. This book aims to fill that gap.
• The first part deals with the mission, and the values and rules pertaining to the governance of the business. These structural elements are fundamental for owners to get right as they pave the way to value creation, or its opposite. They refer to “WHAT” owners have to do. Another element is the formation of the three boards that govern owner-led firms: the owners board, the board of directors, and the management board.
• The second part addresses the relational elements that owners must master to effectively manage the social and emotional dynamics in their enterprise. It deals with the “HOW” of ownership, namely the leadership process that lies at the heart of board work. This process ensures alignment across the three boards and also with stakeholders that is vital to realizing owners’ value creating aims.
• Thirdly, the book explores the histories, defining experiences, and talents that define owners and shape their enterprise. It concerns the “WHOM,” namely the identities of owners. It explores the diversity of ownership styles and identifies the critical personal transitions owners must make in their leadership quest.
This book offers a practical guide for business aiming for value creation. It also should be of interest to directors and executives of all firms with identifiable ownership, such as entrepreneurial, family, state-owned and private equity firms.
Author(s): Massimo Massa, Kai Taraporevala, Ludo Van der Heyden
Publisher: Palgrave Macmillan
Year: 2023
Language: English
Pages: 499
City: Cham
Preface
Chapter Outlines
Acknowledgments
Contents
List of Figures
1: Introduction: Corporate Ownership
1 Ownership Categories
2 Owner-Founder/Entrepreneur
3 Family Ownership
4 Corporate Owner
5 Private Equity Ownership
6 Government “Stateholder”9
7 Institutional Owner
8 Conclusion
Part I: Hardware: A Value Creation Framework
2: The Primacy of an Owner’s Mission
1 Primacy of the Mission
2 Owner’s Mission and the Definition of Value
3 Mission and the Family Firm
4 Mission, Values, Value Creation, and Performance Yardsticks
5 Evolution of the Mission and Impact on Value Creation
6 Executing the Wrong Mission: Dirty Business at Volkswagen or How Excellent Execution Can Destroy a Lot of Value
7 Disagreements About Mission: Dirty Business at Renault Nissan After a Historical Turnaround
8 Mission Capture and Control in Companies with Diffused Ownership
9 Blurred Mission Statements and the Need to Distinguish Mission from Goals
10 Mission and Vision
11 Conclusion
3: The Board of Directors: Governing the Mission
1 Origins of Corporate Governance
2 The Duality of Corporate Benefits and Corporate Responsibilities
3 The Board of Directors as the Nexus of the Governance Scene
4 Value Creation Gone Wrong in Owner-Led and Public Firms: VAG and BP
5 A Tale of Two Contrasting Family Businesses: Interbrew and Merck
6 Getting Value from Boards: A Step Change in Diversity Perspective23
4: The CEO and the Executive Team: Responsible for Executing the Mission
1 The Captain of the Ship
2 Operationalizing the Mission and Facing Trade-Offs: The Interbrew Case Continued
3 Operationalizing the Mission and Facing Trade-Offs
4 A Contrasting View: CEO Operationalization of Mission in Widely Held Companies
5: Goals, Strategies, and Fundamentals
1 Goals, Sub-Goals, and Fundamentals
2 The Simple Financial Math of Goal Setting
Profitability
3 Value Creation Metrics and the Evaluation of Strategies
4 Building a Company from the Inside through Superb Operational Strategies: Southwest Airlines and Hermès
Southwest
Hermès
5 Building a Company Through M&As and Superb Operational Integration Strategies: Interbrew (Again)
6 Building a Company Through Partnerships and Alliances: Interbrew’s Joint Venture with the Sun Group
6: Fundamentals: Financing and Risk
1 Risk: Definition, Typologies, and Valuation
2 Risks in Strategy Choice, Strategy Execution, and Governance
3 Financing
Private Parent – Private Subsidiaries: Kohler Co.
Public Parent – Private Subsidiaries: GE
Private Parent – Public Subsidiaries: The Tata Group
Public Parent – Public Subsidiaries: The Ayala Corporation
4 Interbrew: The Relations Between Financing and Strategy Choice
7: Control and the Corporate Board
1 Definition of Control
2 Ensuring Control: AGM Tactics, Pyramids, and Cross-Ownership Structures
3 Example: From Fiat to Exor
4 Raising Capital While Keeping Control: Different Classes of Shares, Non-Voting Shares, ICOs, and STOs
Different Voting Rights and Shareholding Classes
Non-Voting Shares at Snap Inc.
ICOs and STOs
5 Structuring the Governance Inside Holding Companies: Corporate Layer, Business Units, and the Separation of Governance and Executive Roles
6 Corporate and Business Unit Boards – The Cases of Berkshire Hathaway, Ayala Corporation, and Tata and Sons
8: Obsolescence and Counterfactual Thinking
1 Obsolescence: The Unrecognized Corporate Killer
2 Survival in the 2000s: A Tale of Two Steel Companies: Mittal and Tata
3 Survival in the 2010s: The CSX-NS Acquisition of Conrail
4 Survival in the 2020s: Disney and Fox
5 The Power of Counterfactual Thinking
9: MGSF and the Three Boards
1 The MGSF Ramework, the Three Boards, and the Question of Alignment
2 Three Boards Aligned in Value Creation
One Mission
The Owners’ Board
The Corporate Board
The Business Unit (BU) Boards (in Case of a Multi-business Enterprise)
3 The Perspective of an Engaged Owner on the Three Boards
A Fundamental: Understanding the Different Requirements of the Three Boards
Owners’ Board
Owners on the Corporate Board
Owners on the Business Unit Boards
4 Pathologies
5 Applying the Three Boards Structure to a Wider Range of Companies
Alcopa
The Pictet Partnership
Part II: Software: Effective Collaborative Processes and the Need to Manage Self
10: Delusions, Confusion, and Biases
1 Biases: Why Does Effective Decision Making Remain So Elusive?
2 Biases at Work in the Demise of a Corporate Leader: The Kodak Story
3 Biases Exposed and Compounded: Analyzing the Kodak Story
Reference Points in the Mental Processing of Contexts
Conservatism and Representativeness
Mental Accounting
Narrow Framing
Overconfidence and Self-attribution
Loss Aversion
Inertia
Anchoring, Attention Grabbing, and Social Norms
11: Biases in Action and How High-Performance Teams Address Them
1 Four Teams Climbing Everest: The Story
2 Analysis of Our Leaders: Individual Biases of Those “on Top”
Narrow Framing
Loss Aversion
Overconfidence and Self-attribution Biases
3 The Enron Board
4 Group Diversity as the Technology to Counter Individual Biases
5 An Alignment Framework for Effective Teamwork: The OVRxRPxI Model
The Solidarity Platform: Forming the Team by Defining What Members Share
The Distinct Elements of Performance
The Key to High Performance: Individual Commitments
6 The Imax Team Illustrating the OVRxRPxI High-Performance Model
7 Group Biases and How to Counter Them: Wisdom of the Crowd, Devil’s Advocacy, and Dialectical Inquiry
8 Simple Scoring of Team Performance
9 Lessons for Owners, Boards, and Management
12: Fair Process Leadership: The Path to Positive and Collaborative Dynamics for Owners and Their Directors
1 Motivation
2 Fairness at the Top
3 Fairness Matters More so than Commonly Thought
4 Trust, Performance, and Fair Play13
5 From Fair Play to Fair Process Leadership
6 An Iconic Example: Napoleon Bonaparte Examined Through the FPL Lens
13: Fair Process Leadership Illustrated: Applications to Owners, Board Members, and Executives
1 The Rise and Fall of Carlos Ghosn1
The Context
Samurai Ghosn Sent to Save NISSAN Village
Engaging
Exploring
Executing
Evaluating
Establishing an Imperial Reign and Ending in Demise
The FPL Angle
2 Benefits and Implications of Fair Process Leadership for Owners and Boards
3 Unfair Process at the Deutsche Börse Board11
Organization and Leadership
Strategic Review Following the Setback
Activist Shareholders and the Upcoming General Assembly Meeting
4 Prolonged Unfair Process in the HP Board14
Enter Carly Fiorina
Early Revolutionary Moves: PwC and Compaq
Growing Frictions with the Board and with the Larger Shareholders
The Unraveling of Fiorina’s Leadership
Life Continues at HP Without Fiorina, but Unfair Process As Well
The Board Finally Reflects Upon Its Previous Failures and Splits HP into Two Distinct Companies
Summing Up
Part III: Humanware: Owners as Leaders and Value Creators
14: Profiles in Ownership
1 Warren Buffett: A Relentless Drive for Mastery and an Unabated Focus on Pure Ownership1
The Determining Influence of Home and the Early Years
Shaping the Mind of a Master at Investing
A Stint as Chairman of Salomon Brothers at a Time of Crisis
Meeting Other Challenges in the Market and at Home
2 Anu Aga: Learning to Be an Owner and Trustee
3 Dominique Moorkens: Checking all the Boxes and Sharing the Lessons Gained along the Way with Others
Early Years and Early Training
First Move into Entrepreneurship
Thrown into the Business Early with Father’s Coaching
BMW Drops the Family Firm which Opens an Asian Chapter
The Death of the Patriarch and the Birth of Alcopa
Entry of the G3 and Formalization of the Alcopa Governance
Creation of the Owners’ Board
Time for CEO Succession
Enjoying Being an Active Shareholder of a Group Exiting the Carbon Economy
4 Bart Huisken: Remarkable Entrepreneur and Orphan Owner3
Dreams Can Come True
Launching the Project and Meeting Ericsson (Again)
Going Alone with Clear Business Principles and Aiming for a Market over US$ 2 Billion
Where to Locate? How to Sell? How to Manufacture? How to Finance? Meeting Ericsson Again
Early Growth Supported by Angel Money
Meeting the VCs and Enjoying First Breakthroughs
2004: VC Puts Pressure on the Venture and Yields Remarkable Results
2005: Conflicts Emerge, at Board Level First, Then with CEO/Chair
Major Problems Mitigated by Two Further Breakthroughs
A New A Team at the Helm
A New Management Team
The Endgame
5 Priscilla de Moustier: Leading More than 1000 Family Shareholders into the Fourth Century of the Family Business’s Existence5
Forging for the King
A First Upheaval: The French Revolution
Major Actors of French Industrialization during the Nineteenth Century
Creation of a Partnership to Support the Sustainability of the Family Company
Facing Prussian Annexation of Lorraine and the Challenge of Steel
Surviving World Wars
Facing Nationalisation Following World War II
Restructuring Lorraine’s Iron and Steel Industry
Meeting Financing Constraints, Competition, and Europe’s Steel Crisis
The Wendel Group in 1976
A Business in Steel and Upstream and Downstream Activities
The Role of Family Shareholders in Crisis Times
Staying in Business Together, or Not: That Is the Question
From “Iron and Steel Baron” to “Shareholder Entrepreneur”
Building Leading Companies: The Packaging Venture
Initiating Major Diversification into Technology
Restructuring and Diversifying the Marine-Wendel Portfolio
Ernest-Antoine Seillière: The “Shareholder-Entrepreneur”
Valeo: A Late Return to French Industrial Roots
The Family Ownership and Governance in 1996
Marine-Wendel
CGIP
An Air of Wall Street Enters Wendel
Going Down with Wall Street
Recovering from the Crisis and Rebuilding the Portfolio
Priscilla Takes the Chair of Wendel Participations in a Major Governance Reset
Priscilla’s Views on Ownership Philosophy and Practice
15: Transitioning to Ownership and Developing as Owner
1 Talents and Competences: The Vital Mix
2 A Rich Diversity of Personalities
3 Lessons from Warren Buffett
Summary Lessons for Owners and Directors
4 Lessons from Anu Aga
Summary Lessons for Owners and Directors
5 Lessons from Dominique Moorkens
Summary Lessons for Owners and Directors
6 Lessons from Bart Huisken
Summary Lessons for Owners and Directors
7 Lessons from Priscilla de Moustier
Key Lessons for Owners and Directors
16: Ownership in the Twenty-First Century: Closing Thoughts
1 The Great Thinkers on Capitalism and Ownership: Friedman, Smith, and Marx
2 Views of the Firm: Modern Economic Theory Versus Legal Reality
3 Owner-Led Capitalism: A Distinct Capitalistic Form
4 Owner Dilemmas and Trade-offs: Autonomy, Control, and Collaboration
5 A World in Crisis … Learning to Deal with ESG?
6 An Earth in Search of Responsible Ownership and Effective Governance
7 The Promise of Ownership in the Twenty-First Century
Appendix A: Igniting Performance: Drawing on Our Five Energy Batteries
Challenge # 1: Information and Competence (IQ)
Challenge # 2: Emotions and Relations (EQ)
Challenge # 3: Courage and Action (PHQ)
Challenge # 4: Time and Experience (TQ)
Challenge # 5: Purpose and Spirit (SQ)
Appendix B: Napoleon Bonaparte: Lessons in Fair Process Leadership
Fair Process Leadership in the Early Years
Birth and Early Years
Emerging Military Leader
An Innovative Military Strategy Leveraged by FPL Software
Napoleon’s Obsession with Britain
Saving France from the Chaos and the Enemies of the Revolution
Organizing Modern France
Increasing Unfair Process Leadership as Emperor
Once a General, Always a General: Writing the Most Illustrious Pages of France’s Military and World History
Imperial Power, Growing Isolation, and Decreasing FPL
Summarizing: The Empire Fails Due to the Early and Gradual Loss of FPL at the Top
Appendix C: New Ownership Forms
Shareholder Value Versus Firm Value
Token Holders and their Rights
Index
