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CEOs and their Willful Scions

What makes the heir of a CEO thumb his nose and walk away?

For Don Sebastiani, part of the third generation of a prominent California winemaking family, a bottle of wine was always meant to be enjoyed. It was the family business that left a bad taste. The youngest of three children of August Sebastiani, the autocratic heir of company founder Samuele, Don went to work for his father in 1975 after graduating from college. Five years later, he quit. “I was the second son in a paternalistic environment in which the older brother was to take charge,” he explains. “A few centuries ago, I probably would have become a priest.”

As it happened, Sebastiani went from winemaker to lawmaker-elected to the California State legislature in 1980. August had died shortly before, ending a 36-year rule as the undisputed head of Sebastiani Vineyards, and left his eldest son, Sam, in charge. Sam was 12 years older than Don, a schooled manager for whom the chief executive’s chair was never in doubt. The lines were less clear for Don, now 45, who had approached his father about taking on more responsibility in the business but was rebuffed. “He wasn’t very good about communicating things and avoiding a logjam down the road,” Sebastiani recalls. “He was kind of crummy about that.”

Most children learn early that a parent is boss. As such, they grow up with unavoidable conflict, but ultimately live their own lives. For the child of an overbearing parent, conflicts often are never fully resolved. And if the scion of that domineering figure lands in the family business, carrying tattered baggage from home, family members’ contention and resentment can flood a company. Pity the critical, strong-armed CEO who, despite his behavior, still expects his son or daughter to succeed him. A child in that uncomfortable spot, feeling angry and compromised, can use his most powerful weapon-his feet-to walk out, saying in effect, “You know what you can do with this job.” Warns Joseph Astrachan, associate director of the Family Enterprise Center at Keenesaw State University in Marietta, GA, “By the point the kid is even willing to vocalize that he’s thinking about leaving, it’s too late for the parent to have much, if any, impact.”

Tensions in the family business can be so severe that the slightest rupture can seem irreparable. Indeed, Astrachan’s statistics on family business longevity are hardly optimistic. While six of every 10 family businesses that want to make it through a second generation do so, just two in 10 with that same goal actually get through the third. But Astrachan sees hopeful signs. “There’s a heightened sense that family businesses can work out,” he relates. “People are addressing issues long before the conflicts occur.”

That’s key. By working together, parents and children in family businesses can avoid these High Noon showdowns. “Predict where you will have conflicts in the future and resolve them,” Astrachan advises. To pull this off, each side has specific tools. “For the parent,” he explains, “it’s not to provide the child with unrealistic expectations.” Make sure a child is not being treated unfairly-either with too much privilege or too little-by enlisting trusted observers from outside the corporation to offer advice and counsel.

A child, in turn, must develop self-confidence and credibility. But an overbearing parent typically doesn’t give enough space to grow. Astrachan encourages children of such limited types to construct these qualities themselves-a solid individual identity is part of the job description in a family business where Dad is a titan among peers and a tyrant with employees. “As the child of a major business leader, if you do not have self-confidence, and do not take significant responsibility, you will get eaten alive. If you can hear criticism from your father without feeling the need to defend your actions, without feeling the need to get hostile, to whine, to be emotional, you probably have a lot of self-confidence.”

To be sure, there are many high-profile cases of accomplished family management transitions-the Galvins of Motorola, the McCoys of BancOne, the Sulzbergers of the New York Times Co. But perhaps what makes these models is that the families involved did not ignore the reality that it’s tough for a younger generation to walk into big shoes. The pressures of an overbearing parent, of competition, of obligation-sometimes all three at once-can be unbearable. -“The problem of a dominant father and an ambitious child is classic,” says Leon Danco, founder of the Center for Family Business in Cleveland. And the trouble is that most parents locked in this drama don’t recognize their own flaws and fears. For them, Danco offers this simple advice: “The willingness to review one’s power is a sign of greatness.”

Sebastiani, unable to win his father’s vote, became an elected official. Similar thoughts may have influenced Jeffrey Greenberg, the eldest son of Maurice “Hank” Greenberg, the mercurial chairman and CEO of insurance titan American International Group. Jeffrey, now 46, seemed the logical and rightful heir to his father’s position. The Georgetown Law School graduate was moving up the ladder at AIG in 1995 when he left, landing at giant insurance broker Marsh & McLennan as the head of its risk-capital unit.

Jeffrey did not return calls seeking to discuss his departure. But by many accounts, working for Hank Greenberg-whether you’re related or not-doesn’t leave much room for comment. Greenberg has steered AIG with a steel grip for the past 31 years. Words to describe him include: demanding, impatient, tireless-not exactly a warm and fuzzy type.

Greenberg has another son in the business-43-year-old Evan, Jeffrey’s younger brother. Evan is the non-conformist, the one without the college degree, yet he has been with AIG for 23 years in increasingly visible roles and is reportedly a tough customer in his own right. “One-on-one, he insists on doing all the talking and refuses to listen to anyone,” says a former AIG executive who requested anonymity. In May 1997, Evan catapulted to president and COO from a post as executive vp for foreign general insurance. Unceremoniously, AIG veteran Thomas Tizzio, 60, was slid out of the president’s job into a senior vice chairmanship. “It’s a highly political atmosphere,” the one-time AIG official relates, adding that Greenberg and Tizzio “both think they are president.”

Evan Greenberg would not discuss his filial relationship, but reports suggest he’s one of the few people able to stand up to his dad. That alone may win him more than a few points-and the inside track to succeed Hank. At the same time, reports the ex-AIG executive, the younger Greenberg appears to be straddling a political tightrope. “Evan won’t attach his name to anything risky that might fail,” this person claims. “That would blemish his record-something he thinks he can ill-afford.”

For his part, Hank Greenberg has said publicly that Evan is “absolutely” the best choice to provide the management and leadership that the president’s job entails. Family business experts say these endorsements ripple through a family-run corporation, telling employees whether a parent values a child or not. Says Paul Karofsky, executive director of Northeastern University‘s Center for Family Business in Boston, “If your criteria says, we will select the best possible leader, regardless of his or her last name, then that certainly can be effective.”

Conversely, the parent who engages in a bitter power struggle with a child, or one who forces a child’s succession on the company, sends a destructive message. “If the elder squashes a son, then that says something about the elder’s style of management,” notes Harry Levinson, chairman of the Levinson Institute in Boston and a pioneer in the psychology of executive leadership. “If the father puts his son in the executive role for which the son is incompetent, and everybody else suffers, they’re going to know you can’t depend on the father to exercise good judgment.”

And even when a child proves competent, the strain of family ties can reverberate through an organization, gaining momentum along the way. Until June 1997, Jessica Bibliowicz was the head of mutual funds for Smith Barney-now Salomon Smith Barney-a unit of financial services giant Travelers Group. The chairman and CEO of Travelers is Sanford Weill, the consummate deal maker whose bold actions-like merging Travelers with banking behemoth Citicorp, for toppers-have turned the investment business on its head. But to Bibliowicz, Sandy Weill is “Dad.”

Bibliowicz, 38, left Dad’s company after three years-older brother Marc Weill is still there as chief investment officer of Travelers Insurance. She says the decision wasn’t easy, but some observers familiar with the situation have related that Smith Barney employees were giving Bibliowicz a hard time and Weill didn’t back her. Bibliowicz dismisses that assessment, but does describe a workplace where both she and employees felt uncomfortable because of who she was. “Being the chairman’s daughter can sometimes be a spooky thing [for colleagues],” she observes, “even if your intent is not to use that fact. It creates another level of tension in the environment, and that’s not good for anybody.”

Although her sales and marketing initiatives seemed to be paying off for Smith Barney’s mutual funds, Bibliowicz felt her position was increasingly no-win. The highly competitive investment business is stressful enough without layering nepotism on top, she explains. “Everybody is better off when they can make all the decisions they have to without regard for the family member,” says Bibliowicz, who now is president and COO of New York-based investment advisory firm John A. Levin & Co. “They don’t have to worry about the implications and impact.”

Do she and her father get along? “He’s a pretty demanding guy,” Bibliowicz admits, “but that’s okay with me. As long as you find your own balance, [working together] can be terrific.”

On occasion, not the parent, but what that parent has built causes problems. Tom Bloch was groomed to lead H&R Block, the Kansas City-based tax-preparation firm. He became president and CEO in August 1992, taking over from his father Henry, the chairman and co-founder. But three years later, Bloch resigned. He insists there was no family rift. “I had an interest in doing something that was good for the community,” says Bloch, who now teaches math at a Catholic-run middle-school in a poor Kansas City neighborhood.

Bloch, 44, had always loved the tax business. He joined the family firm in 1974 as an entry-level tax preparer, and, as his older brother had no interest in the work, there was little doubt where his career would lead. But Bloch found himself torn between the duties of family obligation-taking on his father’s demanding work-and wanting to spend time with his own family.

Within a year of becoming CEO, Bloch says he considered resigning-and became extremely conflicted about it. “Probably every CEO would say his heart is in the job,” he explains, “but when the company was started by your father, that is even more true.” Telling his father was toughest of all. “He was surprised,” Bloch recalls. “He knew I’d been thinking about it. He was very supportive and he appreciated my reasoning. But I think he was disappointed at the same time. He always felt that in the end I would remain with the company.”

When an heir does leave the family business, examine the reasons. If the split stemmed from anger, it’s helpful for a parent-once their own hurt and frustration has dissipated-to retrace what led to the blow-up. Jilted parents are not likely to invite their children back to the business -and if they did, they’d probably be snubbed. But Danco, the family business expert, lays out a tough question: “Why did the kid want to leave? I put the blame on the one with the power-the old man. Motivated kids and accommodating heirs don’t just happen. You’ve got to build them.”

Of course, children do return to the fold. Today, Don Sebastiani heads the family business he once spurned. By 1986, the family was bitterly divided over his brother Sam’s stewardship. Depending on which observer is telling the tale, the conflict stemmed either from Sam’s formal managerial style or from his jealous mother-August’s wife. Tensions grew so heated that family members would take circuitous routes in order to avoid each other at work. Amidst the turmoil, the lawmaker was asked to become chairman and CEO. Being ousted understandably did not sit well with Sam, who now runs an independent food and wine company called Viansa.

One of the downsides of blending family and business is that when a trauma surfaces there’s no escape. Two worlds-business and personal-are inextricably linked. “It was very difficult,” Don recalls. “Family beef, you know.”

Which makes it all the more important to practice prevention-and resolve any conflicts that do occur as quickly as possible. Without exception, family business counselors stress that an independent board of directors is the single most valuable way for a corporation to preserve itself over generations. Effective boards are concerned with the company’s ultimate survival, and will use whatever means are necessary to protect it. “A good board is the answer,” prescribes Danco, of the Center for Family Business. “Longevity of a company requires a board-an outside board. It’s sort of like diet, exercise, and don’t smoke.”

Jonathan Burton, a freelance writer and, frequent contributor to CE, also writes for Bloomberg Personal and Individual Investor.

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