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136 Managing the familY business

CASE STUDY (continued)

added Nell Minow, co-founder of The corporate Library, which specializes incorporate

governance issues. Lately, she admits, things seem to be going well for Ford' whose chairman'

william C. FordJr., fired himself as chief executive in 2006 to hire an outsider, Alan Mulally'

'nrrt f *orrta "rgo.

th" (dual-class) system has not always worked well at this companyl

Forddeclinedtocomment,butreferredtoapreviouslyissuedstatementinlesponseto a shareholder proposal to eliminate the dual-class structure.

'The Ford family's involvement

with the company has greatly benefited all shareholders, and the long history of Ford family

inv he Ford Motor Company has been one of its greatest strengthsJ

with just 27o today? The dilution happened gradually at first'

but accelerated over the last decade' In 2000, shortly after Bill Ford became chairman, the

company underwent a complex recapitalization that included a $10 billion special dividend

and the issuance of some 600 million new common shares. The move diluted the family s

holdings from 5.g% to 3.go/oat the time, but cemented their grip on the company by pro-

tecting their Class B stock from dilution'

Then,in2006,asittriedtomountaturnaround'Fordbeganaseriesofeffortstoraise

2010, Ford issued another 274 million co

sion.Asthenumberofoutstandingsharesincreased,thefamilytrelativestakedeclined. ln 2010, g6 extended fami$ mJnbers hold a[ 71 million

class B shares, plus a negligible

amount of common stock. Ford's total common shares outstanding, including the class

Bshares,isapproximately3.8billion.Dilutionaside,allthoseextrashareshelpedsavethe company. with the extra liquidity, Ford was able to reduce its

debt by $12'8 billion this year'

lo-"ri.rg its annualized intJrest costs by nearly $ 1 billion. A healthier balance sheet in turn

helped drive uP Fordt stock Price'-GivenwhathappenedtoGM'spreviousshareholdersinbankruptcy,investorsate

likely to orrerlook "ny

distaste for the fact that their shares are being diluted while the

familyremainsfirmlyentrenchedsaidPatrickMcGurn,specialcounselforlnstitutional Shareholder services. 'Itt one thing to see your ownership diluted

ovel time" he said' 'It's

another thing to see it wiped out altogetheri

* t. How does the Ford family control and inJluence the firm?

2. What agency problems do you recognize?

3. How should the various agency problems impact Ford s performance?

4. What are the advantages ird disad"antages of the Ford family's control?

5, Overall, is the Ford familyt control a curse or a blessing for the firm?

6. Would you buY Ford stock?

Source: Adapted from an article by loann Muller' forbes com' December 2' 201 O