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CEO Sacked for Pushing Company Towards Going Public

If you are the non-family CEO of a family business---and you cherish your job---you better make sure you understand where your family owners stand and what they want relative to strategy and ownership. Thomas Middelhoff, 49, didn’t and recently found himself dismissed due to “differences of opinion over…future strategy.” The Middelhoff’s employer was the German global media conglomerate Bertelsmann with $20 billion in sales and over 80,000 employees. Middelhoff has been instrumental in the company’s international growth. The company is the world’s leading book publisher (Random House) and a leader in music recordings, magazines, and European radio and television, printing and the internet. The company was founded by Carl Bertelsmann in 1835 as a publisher of Lutheran hymnals. The family of Bertelsmann’s descendant, Reinhard Mohn, who rebuilt the company after World War II, owns 17% of the company and controls another 58% through the Bertelsmann foundation. Middelhoff’s apparent undoing was his advocacy of taking the company public as part of a deal to buy the European television company of RTL in 2000. The agreement brought in Bertelsmann first major outside shareholder and gave it the right to sell its shares to the public starting in 2005. As media shares have plummeted, the Mohns were reminded of the risks of being publicly traded. Company executives quoted in The New York Times said that the family feared that going through with the plan would result in losing control of the company. “Mr. Mohn and his family had not committed to the plan as fully as Mr. Middelhoff indicated,” according to executives. Middlehoff will no doubt land a new job (rumors have him taking the reins at troubled Deutsche Telekom). Still, he’s probably learned a valuable lesson: don’t try to push family owners to go public when they cherish being private and control.

 

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