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| Your Family's 100 Year Plan Part III |
After The Diaspora
Suzanne McGee
02/01/2005
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In the 1740's, Swedish engineer, scientist and philosopher Emanuel Swedenborg began analyzing the Bible. He went on to write 30 volumes of revelations he believed came from God, describing Biblical accounts as symbolic of the human condition, and his ideas garnered a following on both sides of the Atlantic. His followers, known as Swedenborgians, eventually scattered across the northeastern United States (Harvard University boasted a Swedenborgian chapel). Some of the religion’s most powerful adherents came from Pittsburgh’s community of wealthy Scottish immigrant entrepreneurs, including Andrew Carnegie and John Pitcairn. Today Pitcairn’s descendants remain linked by their faith in the tenets of the Swedenborgian Church of North America rather than their common ownership of the mammoth Pittsburgh Plate & Glass (PPG) that he founded more than a century ago.
 Pitcairn’s great-grandchildren grew up in the tiny community of Bryn Athyn, Pa.—home to a Swedenborgian cathedral built by their grandfather, the PPG founder’s son—as fourth-generation heirs to the business. They felt a close connection to the firm, to their religion and to their cousins. Each day of the week, a different group of cousins spent an afternoon romping in the gardens at their grandparents’ spacious home. “That’s how the bonds were formed at our generation,” explains 49-year-old Laird Pendleton, one of John Pitcairn’s great-grandsons.
By the time Pendleton reached adulthood, his cousins were pursuing their own interests and spreading across the country. While they all could trace their financial well-being to PPG, the ties to the family business, now publicly traded, were slackening. Tax laws made holding the family’s remaining block of PPG stock costly, and family members discovered they harbored clashing ideas about how they should manage their assets. Some wanted cash, rather than stock, so they could launch their own businesses. As a result, Pitcairn’s descendants, who had steadily cut their stake in PPG throughout the 1960s, ’70s and ’80s, sold their final holdings back to the company in 1986.
 Without a family business in common, connections among the Pitcairn heirs might have become frayed, but they did have a mutual desire to stay together. “What we did—what we had to do—was to find a way to make the family about more than the family business,” says Dirk Junge, Pendleton’s 55-year-old cousin. Thus was born a new Pitcairn family “business”—the business of maintaining the family’s values and heritage, as well as managing the financial assets of the 600-plus family members, spread from Boston to San Diego, from Singapore to South Africa.
The fourth generation of a family business often faces a similar, decisive moment. Usually, family businesses that survive to this point have gone public and employ professional managers; the family may retain a sizable minority ownership stake. TOP VIEW
Rarely do all the great-grandchildren of a business founder gather to discuss and decide the future of the family enterprise. More often, generation four is comprised of geographically scattered tribes with members who range across many occupations and avocations, including a smattering of individuals who may want to remain involved in the family business. Some, like the Pitcairns, have found a common interest outside the business to hold the family together. But more often, the entrepreneurial impulses of fourth-generation family members spur a range of diverse new enterprises. |
Even in cases when the family business remains under the family’s control, second and third cousins rarely interact on professional or social levels. They no longer take vacations together, as their parents might have, nor share holiday dinners crowded around one large table, nor schooldays dashing in and out of each other’s homes. Yet these distant cousins do have common interests. Individually they may be only moderately wealthy, but if their assets are managed collectively via a family office or some other institution, they function as a single ultra-high-net-worth entity, a condition that gives them access to investment products and services at much lower costs. They can also act as one another’s confidants. After all, they are unlikely to meet many outsiders who share the experience of growing up as heirs to a family business and to a family fortune.
In even the most tightly knit fourth- and fifth-generation business, however, these bonds become frayed when cousins disagree on how the family business should be managed. One recent high-profile dispute involved Freedom Communications, a media conglomerate launched by Raymond Cyrus Hoiles in 1905. As of 2003, only one member of the family remained in an operating role, and a majority of the descendants simply wanted to cash out. The feuding family struck a deal with two private equity firms, the Blackstone Group and Providence Equity Partners, to inject the cash to buy out the half of the clan that wanted to liquidate. For $1 billion, the remaining family owners turned over 40 percent of the newspaper chain to the private equity firms.
“The fourth and fifth generations seem to be called on to address a lot of these very thorny problems about what to do with the family firm. And then what happens to the family?” asks John Ward, professor of family enterprises at Northwestern University’s Kellogg School of Management.
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