Value Creation for Owners and Directors: A Practical Guide on How to Lead your Business

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