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Long-Term Strategies Bring Success to Family Firms

Two large publicly traded family businesses demonstrate the power of long-term strategies, generally unavailable to companies pressured by the market for short-term results.

Holderbank, the Swiss cement giant controlled by the Schmidheiny family, seeks to expand by investing in emerging markets where growth is greatest. Success in such markets, however, takes time and risk. Non-family investors pressured Holderbank to pull out of losing Latin American operations. With family support, Chairman and CEO Thomas Schmidheiny stayed the course. Holderbank is now the largest cement maker in the region with operations there the single largest contributor to the company’s profits.

The Washington Post Co. has struggled of late. Net income was down 40% last year and operating margins were down one third. But CEO Donald Graham, the third generation to lead the family’s media company, continues massive investments in digital cable and internet education businesses which have great future potential but little chance of improving 2001 earnings. The Graham family owns all of the company’s voting shares and according to Forbes, “has the luxury to thumb its nose at Wall Street…(and) has ignored analysts’ quarterly estimates for years.” Warren Buffett, who owns 18.2% of non-voting shares, has seen his original $11 million investment grow to $1 billion in 28 years. Says Graham: “We are trying to make every dollar of profit we can, consistent with the quality goals of the company for the long term.”

Holderbank and The Washington Post Co. have each achieved success with family owners assuring the company’s ability to stay the course – even when outside investors clamber of short-term financial rewards.

 

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