Engaging 5 | One Voice
Engaging 5 | One Voice
Board Meeting: Martha Owen Jones
I was nervous about chairing the joint meeting of the board and owners council—we’re dealing with a serious offer to acquire our business, and that’s nerve-wracking. A few years ago, we brought independent directors onto our board because we wanted to get some outside perspective. That seems like a good idea when you’re talking about a strategy to expand a product line, but what would they say about something as momentous as an offer? Would they just look at the financial aspects of the deal, or would they honor our Shared Purpose?
I think the meeting was productive. We heard everyone’s viewpoints, no one got in anyone’s face, and we owners made our positions clear, but also listened to the directors. I think we have consensus on a path forward.
Nice job, Martha. When Martha became chair of the board, I wondered whether she would be able to corral all the different voices and perspectives. The agenda she developed—with the help of Amanda, who is chairing the owners council—really helped us have an in-depth discussion about Dan Sumner’s offer. We began with our Statement of Shared Purpose, which kept discussion focused throughout the meeting, because it reminded both the directors and owners of all that is at stake for us. Because we started with Shared Purpose, the directors were reminded of our desire to free up some capital for CombuSynth, along with our recognition that Owen Products is in a mature industry. So, those factors make the deal potentially attractive, if the stock we would receive pays a dividend—which is a big “if,” no matter what Dan says. But our Statement of Shared Purpose also reminded everyone that we are important employers in our community, and we are innovators in our industry. Owen Products, Ltd. is part of our legacy and we have responsibilities to many.
What would it mean to do a deal with Dan Sumner? That was the focus of our 90-minute discussion. It’s easy to think of Owen Products, Ltd. as a little company in a backwater industry, and not take it seriously, but any of the businesses I deal with at CombuSynth could have learned something from this meeting.
My dad was skeptical about the value of independent directors. He and his friends always feared the board would outvote them—and I inherited that concern. But today, I definitely see the value. The board asked a number of excellent questions about Sumner Ceramics, the market for terra cotta roofing tiles, the synergies between the two businesses, and the financial components of a sale. Their questions helped us think more carefully about the business case for and against the sale. We got into the weeds a few times on production techniques—both companies’ products are molded, but the processes are somewhat different—but Martha, as chair, was able to pull the discussion back to the deal.
One helpful point the board mentioned several times was that we didn’t need to make a final decision whether or not to do the deal, but rather to come to consensus on next steps. They reminded us that there are so many aspects to the ultimate decision: financial, production, sales, workforces, plants, raw materials, branding, leadership, governance. (Our work as governing owners has made me appreciate governance more than I did when Dad died, and I became president and spent a lot of time fretting about my siblings meddling in “my” business.) It became clearer to us that there are synergies between Owen Products and Sumner Ceramics, but that the deal, as Dan has framed it, takes away one of the things we as sibling-owners value most: being involved and in control of our enterprises. The board discussion helped us recognize that there might be more options than the one Dan proposed, if we are interested in exploring the opportunity further.
Amanda Owen Cooper
It is so hard to take off my corporate lawyer hat sometimes! I am so used to going into M&A negotiations with a fixed goal and arguing my point to win. I’m usually acting as an agent, not an owner. Or, if I’m at a client’s board meeting, my job is to listen and provide expert advice now and then. Not here. Here, I’m an owner, and it’s my family and our capital that is at stake.
Our special board meeting was a very different sort of gathering from other board meetings I’ve participated in—more purpose-oriented, rather than tactical. I worked hard to remind myself that I am chair of the owners council and responsible for ensuring that the four of us Owens speak with one voice in the board meeting setting—and that we are fully informed and comfortable with a consensus position before we make any major decisions. That’s certainly different from the emotional free-for-all that some of my clients think is a normal board meeting. I know we all appreciated the directors’ detailed questions and different perspectives.
In spite of the fact that they all come from different fields, our independent directors were unified in their ultimate advice:
You’re in a mature industry and your choices for growth are limited. If you turn Dan down now, you may never understand all the opportunity that exists for your two companies. We understand that the stock-for-stock deal that he’s proposing is unattractive because it would put your business and your futures under Dan’s control, and we agree that this runs afoul of your Shared Purpose. So, it’s not the right deal.
But you’ve also told us that there are synergies and opportunities here that no other company in your industry can offer. Why not say to Dan that you appreciate his interest, you can see how collaborating in some way could create unique opportunities, but that the deal doesn’t help you achieve your Shared Purpose, so you don’t want to do it.
Then, sit tight, and see what happens next.
Looking for a thorough introduction to forums in family businesses? Read “An Introduction to Building Your Forums“
Family Business Governance Analysis:
- In this chapter, the owners council and board of directors of Owen Products, Ltd. has just met to discuss the offer that Sumner Ceramics has made for Owen Products, Ltd. Last we looked in on Martha Owen Jones, she was working on the agenda for the meeting, and fretting about it. From her and her siblings’ description of the meeting, they achieved their objective: they informed the board about the offer, expressed points of interest and concern, and listened to the board’s ideas.
- From the time the Owen children inherited their shares in the business, they have worked to become engaged owners. Early on, they articulated their Shared Purpose—the answer to the question “why do we want to be owners of this business together?”—and their Vision for the future, and they refer back to it often. They meet quarterly as an owners council and they stay up to date on what’s going on in the business, but at a high level, without going into the weeds. As we see here, they also beefed up their board of directors by adding independent directors who bring outside experience and perspective to strategic discussions. The Owens recognize that they are responsible for articulating the Shared Purpose and Vision, while the board is responsible for making sure that Shared Purpose and Vision are translated into a strategic plan for the business. The board of directors and owners council are separate forums, with separate goals and tasks, but they are deeply interdependent. We have several helpful articles on this interdependence—check out “Aligning Shared Purpose and Strategy” and “How to Build a Board…And Keep it from Running Away with the Business.”
- I think it’s safe to say that because the owners council has done its work effectively, the value of the board’s input in this meeting was maximized. Had the board been operating without the input of the Shared Purpose and Vision, or a knowledge of the owners’ priorities, they would not have been able to zero in on the advantages and disadvantages of the offer that Dan Sumner has put on the table. If you don’t know where you’re going, any path will get you there, and without the owners council’s input, the board would probably have defaulted to evaluating the offer in primarily financial terms, or perhaps in terms of market synergies. In any event, they would not have been able to provide the level and specificity of input that they did.
- The board provided sound advice, as we might imagine given that they have greater deal-making experience than the Owens. Basically, they said “we understand that this deal is unattractive because it’s stock for stock, and you would lose control without gaining any cash other than the possibility of dividends. At the same time, you’re in a mature industry and there are synergies and opportunities here that no one else can offer. Yes, this is the wrong deal but that doesn’t mean that you have to close the door. Tell Dan what you think, and then sit tight.” It is easy to get locked onto the specific terms of a deal and miss the possibilities for shaping it into something more mutually beneficial. Who knows whether this deal will turn into something that the Owens want to do, but just going through the process—talking with Dan, visiting his plant, evaluating the deal, talking with the board, considering options—is building their ownership skills and their understanding of their options. I think that the board’s message also points out that there may not be many other deals, given the size and maturity of the industry. If in fact they have any interest in selling, this may be the only partner of any value in the industry, so perhaps it’s worthwhile keeping the door open for that reason alone. So long as they keep their Shared Purpose and Vision squarely in their sights, there is little to lose and much to gain by seeing how the deal might morph.
- A final point, and perhaps the most important one, is that we see the Owens honoring their most important commitment—to speak with one voice. There seems to be a universal gasp when the next generation takes over ownership of a family business, because there are so many, many stories of infighting taking down the business. Engaged ownership by a group of siblings or cousins isn’t easy, but it isn’t impossible, either. So long as the owners are together by choice, and they commit to educating and preparing themselves so that they always speak with one voice to the board, management and family, the odds are in their favor that they will be successful as owners.