August 17, 2017

In This Issue

Private Companies & Smart Growth - Uber Ethics Plan Lessons - TIKI Protects Brand After Charlottesville Protests

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Thu, Aug 17, 2017

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Smart Growth

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Earlier this year, Tyson Foods, a family-controlled, publicly traded company known for its chicken, pork and beef products, announced it would explore the sale of its Sara Lee frozen bakery business and other "non-protein" brands. Tyson also said it would acquire AdvancePierre Foods, a supplier of packaged meat sandwiches.

At about the same time, JAB Holding Co., which invests for Germany's Reimann family, announced that it planned to sell high-end shoe companies Jimmy Choo and Bally International. A few weeks prior, JAB had acquired Panera Bread Co.; it also owns Krispy Kreme Doughnuts and other food companies. The Reimanns decided that selling pricey shoes among all that food was a misstep.

Both these family enterprises rethought their holdings and concluded they needed to get on a smarter growth track. They both understood that while diversification is a good idea, a company must diversify in a way that leverages its strengths.

Most family businesses aspire to grow (although some would rather continue operating as a small venture focused on superior customer service). Whether it's achieved through acquisition or organically, growth must be well planned.

• Is an independent board reviewing your plans? Independent directors who have helped other companies grow and/or have expertise in your industry can provide a "reality check" on your ambitious plans and can help you navigate pitfalls.

• Are you anticipating the marketplace of the future? If you're planning to make a new widget (or acquire a widget company), have you considered whether customers will still want that widget in five years or whether strong competitors or copycats might develop widgets of their own?

• Are you conducting market research, or relying on instinct? Is your plan based on systematic focus-group studies, or just a few conversations with the CEO's cronies or some favorite customers? Be aware of your blind spots.

 Do you have the infrastructure to support your growth plans? Can your existing staff and facilities handle the growth? Will projects fall through the cracks as staffers take on new assignments? Have you budgeted enough to meet your future needs? Bear in mind that growth doesn't automatically result in economies of scale; you will initially have more expenses.

• Have you weighed the pros and cons of your funding mechanism? Are you taking on investors who will push for short-term gains? If you plan to fund your growth through company profits, are your family shareholders on board with a reduction in their dividends?

• Do you know when to stop? After a few new offerings that are big hits, it's tempting to press onward in the same direction. Make sure you haven't begun to compete with yourself, and that you're not producing more than the market will bear.

• Does your prospective acquisition fit in with your company culture? Cultural fit is especially important in a family business. Do your due diligence to make sure that the integration will be smooth.

Like Tyson and JAB, you must regularly review your growth strategy and be prepared to make changes if you're not on the right track. The shoes might have been a good fit a few years ago, but now it could be time for a change.


Lessons From Uber’s Governance Breakdown

When private companies need an ethics plan

By Eve Tahmincioglu

The latest developments in the Uber saga, including a legal complaint against the former CEO and shareholder feuding, are just another sign of how the ride-hailing company could have benefited from strong ethics guidelines.

And to be effective, those guidelines would have to have strong board oversight, maintains Patricia Harned, Chief Executive Officer of the Ethics & Compliance Initiative (ECI).

“Uber is very quickly becoming the poster child for what happens,” she says, when companies don’t make investments in and commitments to ethics and compliance programs. And that’s the case for public or private companies.

Private companies, she continues, adopt a lot of the practices mandated for public companies because they’re effective and create internal controls companies need.

What’s happening with Uber is that the rules that were in place when the company was a small startup, ones that were aggressive to promote growth. They should have changed as it became more successful in the global market place, she says, adding that at the top of the list should have been having systems in place to review CEO conduct, in addition to basic ethics and compliance practice.

“It begins with having a good set of ethical values that the company agrees to and commits to,” she stresses.

Companies, she adds, need to have a code of conduct internally for the employees that’s a reflection of the company's values. And there should be a chief ethics and compliance officer with oversight on the internal operations but who can also support the board so they’re sure management is upholding those standards.

While board members aren’t keeping track of day-to-day operations, she advises that directors need to ask good questions of management and have the information streams they can rely on so they can keep track of ethics or compliance problems and figure out how to handle them.

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