Engaging 4 | Prep Work
Engaging 4 | Prep Work
Martha Owen Jones
When I agreed to co-chair the board of Owen Products, Ltd. for the next three years, I didn’t imagine that we would face such a…well, I don’t know whether to call it an opportunity or a challenge. Dan Sumner wants to buy Owen Products, Ltd. Mike and Amanda say his interest is absolutely serious. My siblings and I feel very unsettled, but we agree that we need to discuss the possibility with the Board, because we owe it to ourselves as owners and to the business to evaluate it carefully.
I’ve called all the directors, told them that Mike and I wish to convene a special joint meeting of the Board of Directors and Owners Council of Owen Products, Ltd. We’ve scheduled it for two weeks from today.
So, what should the board meeting agenda look like? We certainly can’t just describe Mike’s conversation with Dan and say, “What do you think?” And I, for one, am worried that the Board will view this through a purely financial lens, rather than evaluating what it would mean for all our forms of capital. But we, as an Owners Council, may be too blinded by emotion, or shock, or visions of big dividends, to see this situation clearly. Our directors are more experienced and less biased by family loyalty than we are.
Clearly, we as an Owners Council need to do our homework about the deal, determine our wishes in advance, and be prepared to speak with one voice. We cannot afford to waste the potential that the meeting offers, which is what would happen if we just passed out the letter. Also, we need to do the prep work ourselves to preserve privacy—we absolutely do not want word of this to get out beyond the circle of the owners and Board. Which means, we are not going to want to distribute the minutes as widely as we ordinarily might. I will make sure all materials are marked “Confidential.” (I’ve even taken to doing work on this down at the local coffee house, where I can work anonymously, and so no one at home is privy to this information.)
I think I should also alert our counsel, Brian Clairborn, and ask his advice about how to preserve confidentiality and what our obligations are. Amanda could probably tell me (she’s a corporate lawyer, after all), but we agreed that she is not our counsel on this deal—she is speaking only as an owner. It’s probably best that she not try to wear two hats. (But what about Mike? Isn’t he wearing two hats? He’s the head of the company and an owner. And I’m an owner and a director.)
At our emergency meeting of the Owners Council, I recommended that all of us revisit our Statement of Shared Purpose and Vision, to ground us and help us consider how doing this deal might affect us, both individually and as a business. Here it is:
We want to be owners in this business together because:
- We have a deep respect for the effort, commitment, and sacrifice of our parents and grandparents to build this business and we want to continue their work.
- We want to build on our collective knowledge of terra cotta production techniques and ceramic firing technologies.
- We are a major employer in the towns where our plants are located, and we understand that our employees’ livelihoods depend on our success.
- We encourage participation and leadership by Owen family members, taking into consideration the needs of our business.
Legacy, innovation, community service, family participation. Those are the things we agreed are important to us. So, I think Shared Purpose has to be our first agenda item, because it’s the basis on which we evaluate our options. I think that our Shared Purpose for all our Core Capital is relevant as well:
- Our capital provides a safety net for our family, first and foremost.
- We invest in the ideas of our family members because they will create the enterprise capital of our future.
- We invest in our family relationships because we are stronger together.
I am going to suggest to Amanda (who chairs the Owners Council) that the owners open the meeting by reviewing our Shared Purpose with the Board. I think we should all take turns reading it. We should go over our Vision as well. I took a look at our Vision statement and noticed a number of items that we really need to consider. For one, under Enterprise Capital, we’ve said:
Owen Products is the engine of Owen family capital. The company will have the resources it needs to continue to operate successfully. The company is in a mature industry. It will strive to build market share but not seek growth-for-growth’s sake.
A substantial part of Owen Products’ success has been due to our production and logistics systems, which are the most advanced in our industry. We will invest in maintaining and strengthening this capability and also in developing other ways to leverage this enterprise capital.
Clearly, a deal with Sumner Ceramics would affect our Vision in those areas, and others. And how does our growing investment in Christopher’s startup, CombuSynth, affect our Vision? We say: We will encourage Owen family members to create new entrepreneurial opportunities and will consider redeploying enterprise capital from our existing business activities to fund them. How would the deal with Dan change our ability to invest in CombuSynth?
After we go over Shared Purpose and Vision, Mike should relay his call with Dan Sumner, and include a copy of Dan’s letter. (I am still irritated by Dan’s comment to Mike about us “looking over his shoulder,” I must say.)
I think that the next agenda item should be a report by Mike and Amanda of their meeting with Dan and their tour of Sumner Ceramics.
Dan provided us with financial statements, and Christopher made a number of observations about them, including about the level of debt that Sumner Ceramics carries. I think that the next item should be a review of the deal as they discussed it, and the financials.
Next, I think we should circle back and discuss with the Board how we believe the deal would or would not further our Shared Purpose and Vision. Otherwise, I fear that the discussion will veer away from what we believe is important. It’s our company, and we need to be prepared to stick to our principles. I’m also going to encourage Amanda to hold another Owners Council meeting before the board meeting to go over everything, so that we have an opportunity to focus and prepare.
Then, open discussion.
What are our objectives for the meeting? I would like us to come away from the meeting with an agreement on next steps: Formally tell Dan we’re not interested? Agree to get more information? What information do we need, that we don’t have? What advice does the Board have at this point?
I’ll write this up and review it with Amanda, as head of the Owners Council.
Family Business Governance Analysis:
- In this episode, we can see forums at work: Martha, as Co-Chair, is planning the agenda for the board meeting for discussion with Amanda, who heads the Owners Council.
- Martha is thinking through what information needs to be presented, in what order, and by whom. This is important for anyone who chairs a board meeting, but especially with an issue such as this one, where the issue is tremendously important, and the elements of the meeting need to be thought through carefully so that all the participants can be fully informed and capable of discussing the matters at hand.
- Clearly, she is wearing two hats. Her concerns that the owners’ perspectives get heard are notable, but she is also resolute regarding the benefits that discussion with the board might offer: perspective, experience, independence.
- Her work is grounded in the Shared Purpose and Vision that she and her siblings developed after Charlie Owen died and they became shareholders. By anchoring themselves with their Shared Purpose and Vision, there is less chance that they will be distracted by Dan’s talk, the energy of the deal making, the promise of cash, or Mike’s excitement about Sumner Ceramics’ plant. This will help them stick to what is important to them.
- But notice that the specific Shared Purpose and the Vision don’t necessarily provide an answer to the question “should we do the deal with Dan?” There’s nothing there that says, for example, “We’ll never sell the company.” There is the phrase in the Vision “We will consider redeploying enterprise capital from our existing business activities to help fund [new entrepreneurial opportunities created by Owen family members],” but that phrase could mean anything from sharing expertise to a complete liquidation. The Shared Purpose and Vision just provide a framework for evaluating choices.
- Concerns about confidentiality: You can really see Marth’s concerns about confidentiality—all the Owens are sensitive to confidentiality. It particularly hits home for Martha, who recognizes that she cannot discuss any of this with her husband, Ryan, because he is Head of Operations at the western plant. The Owens are right to be concerned—news of a potential deal, if leaked, could spread like wildfire and do real harm to the organization. When information like that leaks before anyone is ready, and in a form that has not been thought through, employees who hear it may fear for their jobs, may come to resent management and owners, and they can spread the information much more broadly—not only through the company, but through the community. This comes to resemble the childhood game of “Telephone” that we all played, where a message is passed from person to person and it just gets more distorted and inaccurate with each passage. The Owens are wise to keep this information absolutely confidential until they are ready to make an announcement.
- How will the Owens weigh the potential opportunity to create liquidity that they could redeploy in CombuSynth? Owen Products, Ltd. is in a mature industry, as the Vision says. And Christopher is looking for additional capital. How will the Owens weigh the options that the deal with Dan Sumner might open?