Decanting a Wine Empire
It is a question that still hangs over the wine world. How did Robert Mondavi—namesake of Napa Valley's preeminent family business, patriarch of the "Kennedys" of American wine—lose so much control over his company that a corporate conglomerate from upstate New York was able to buy it out from under him, without his family's consent? In her new book, The House of Mondavi: The Rise and Fall of an American Wine Dynasty, journalist Julia Flynn Siler provides an epic overview of every entrepreneur's nightmare—and demonstrates just how vulnerable even the most "takeoverproof" company can be.
Mondavi built his winery in the 1960s. He took it public in 1993. Ten years later, he lost it. What happened?
They had a tremendous run, and they were in an expansive mode. Everybody was talking about going global, and they wanted to do that, too, so they expanded very rapidly onto four continents and probably got stretched too thin.
Then the economy tanked?
After 9/11, the directors started asking tough questions about return on capital, which was poor. Many of those investments were long term and were not going to produce immediate returns. If Mondavi had stayed private, he probably could have weathered this storm.
But his sons, who started running the business in the mid-90s, couldn't work together.
The part of this story that was so startling was that emotions and very deeply rooted feelings from childhood—rivalries, feelings of never being appreciated by their dad—all came into play. The emotions were a bigger part of understanding what happened than the business and financial decisions.
After meeting with psychologists for years, the Mondavis couldn't find common ground?
One of the bankers for Constellation [which bought Mondavi] referred to the family as a real-life Falcon Crest.
You say Robert' own philanhropy—including a $35 million donation to the University of California-Davis—hurt his company.
That was a closely guarded secret. When the stock plummeted below $20 a share, the value of his stock holdings was not large enough to cover his various gifts. That ratcheted up the pressure to raise the stock price. The outside board seized upon Robert's bind and used it as leverage. He has done enormous good with the fortune that he created. But those generous gifts put him in a position where the family was essentially stripped of control.
If Robert, now 94, had been younger, could he have avoided the takeover?
Yes. One of the things that made him such a dynamic and successful entrepreneur was he had a very optimistic spirit. He always believed it would somehow work out. This time, the difference was that Robert's intelligence and charm and persuasiveness weren't there in full force to solve the problem.
New and forthcoming books for the executive's nightstand:
ARE THE RICH NECESSARY?
Great Economic Arguments and How They Reflect Our Personal Values by Hunter Lewis (Axios)
Carefully weighing the pros and cons of big-think economic issues—like whether the rich are good or bad for the economy—Lewis, the founder of investing firm Cambridge Associates, offers some big ideas of his own. The best way to reduce the income gap, he argues, isn't "public" or "private" investment; it's by growing the nonprofit sector—where Cambridge, surprise, has most of its clients.
THE LEADERSHIP DOJO:
Build Your Foundation as an Exemplary Leader by Richard Strozzi-Heckler (Frog Ltd.)
Strozzi-Heckler, a martial arts expert, former marine, and executive coach for AT&T and Microsoft, provides a decidedly mystical primer on leadership. Effective managers, he says, must cultivate their inner "warrior spirit"—becoming, à la George Washington in the Revolutionary War, the physical embodiment of their organizations. Unorthodox, sure, but it worked against the British.
WHAT WERE THEY THINKING?
Unconventional Wisdom About Management by Jeffrey Pfeffer (Harvard Business School Press)
Pfeffer, a professor at the Stanford Graduate School of Business, offers a collection of management do's and don'ts from his popular Business 2.0 column. Most convincingly, he argues that when times are tough, managers turn too often to short-term solutions (layoffs, say) at significant long-term expense (pushing irreplaceable talent out the door).
This story appears in the July 16, 2007 print edition of U.S. News & World Report.
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