The good, bad and ugly of passing the empire on to the kids

Building a business from nothing means taking chances and going against established logic, and Dollarama founder Larry Rossy followed that pattern this week when he handed the keys of the billion-dollar chain to his son Neil.

Sure, any proud parent would love nothing better than to bestow the family empire upon the promising heir. But experts say doing so is more than likely a bad move for the business as the second generation proves it wasn’t built from the same stuff as the first (or that they maybe SHOULD have just gone to film school after all).

Some founders resist the urge, like Jim Pattison, who has said he won’t hand his $8 billion empire over to his son, even though the son holds a senior position within the company.

That said, some businesses do thrive, and there seems to be a right way and a wrong way to do it. Here are some Canadian examples of scions that took the business to new heights and others that ran them into the ground:

1. THE ROSENS

If Rossy is looking for an example to make him feel good about his decision, the Rosens are a good place to start. Harry Rosen launched his suit-and-tie empire on Toronto’s Parliament Street in 1954, and now it’s a model retailer and the go-to place for guys who need that one good suit for job interviews.

While Harry will always be the name on the bag, in 2000 he handed the CEO job over to his son Larry, who had spent the previous 15 years in the company working his way up from buyer. Under Larry, pictured above, the company has expanded its presence, overhauled its stores, and launched an online sales platform. In 2014, the Retail Council of Canada named him Distinguished Retailer of the Year. So we’ll chalk this one up as a case of sonny-boy makes good.

2. THE WESTONS

Perhaps the Canadian blueprint for well-managed family succession, the Westons have been baking bread and slinging produce since the 1800s, all while keeping the leadership more or less in-house. Current Chairman W. Galen Weston overturned the traditional logic that the third generation dooms the business when he pulled the company back from the brink after taking over in the early 1970s. His son, Galen G. Weston (the guy with the glasses schlepping microwaveable canapés on the President’s Choice ads) now runs the crown jewel Loblaw’s grocery chain, and doesn’t seem to have screwed it up yet, based on the fact that the stores are larger than football stadiums, usually crowded, and hitting it out of the park with the bakery and made-to-order counters. I mean, honestly, those places are gorgeous.

3. THE THOMSONS

One of the more interesting succession stories are the Thomsons, firstly because they’re the richest people in Canada, but also because the jury is still out on third-generation boss David, to the left in the above picture, who also happens to be as eccentric as he is wealthy.

Founder Roy Thomson famously built one of the world’s great newspaper empires from humble beginnings selling radios in 1930s northern Ontario. His son Ken took the family fortune from the millions to the billions by shifting the company from newspapers (good foresight there… ugh) to publishing and business information.

Under David, things looked like they might go off the rails when he bet the company’s future on a $17 billion takeover of news provider Reuters just ahead of the financial crisis, but things have stabilized somewhat. With the ship still afloat, we’ll give him the benefit of the doubt for now. But he’s no Roy.

4. THE BRONFMANS

If the jury is out on David Thomson, it reached a verdict long ago on third-generation Seagram heir Edgar Bronfman Jr. The Bronfmans would have done well to heed the old saying, “shirtsleeves to shirtsleeves in three generations” which posits that it’s the third generation that will sink the enterprise. The idea is that the children of the founder sees the hard work and sacrifice that it takes to create the business, but the third generation is raised in wealth and privilege.

In, 1994, Edgar Jr. took over an operation that under patriarch Samuel became the dominant liquor producer in North America, and which under Edgar Sr. diversified into oil and chemicals, which is a lot less sexy, but pays the bills.

The younger Edgar turned the company towards entertainment, buying up assets and ultimately dealing the company away to France’s Vivendi in 2000, just before the tech bubble. The deal proved disastrous to the family fortune and legacy. Edgar Jr. has landed on his feet, with various executive positions at other companies, but the Bronfman ship ran aground long ago.

5. THE ASPERS

This one never made it to the third generation. After building up a media empire from the purchase of one Winnipeg television station in 1975, Izzy Asper handed the reins of Canwest Global off to his son Leonard in 1999, just before the company sank itself deep into debt to buy up Conrad Black’s Hollinger newspapers in 2000. But rather than make moves to cut the debt, including selling its Australian TV network that had been coveted by his farther, Leonard held on to the assets and then bought Alliance Atlantis Communications for $2.3 billion. Canwest went into bankruptcy protection in 2009.

THE VERDICT: Maybe the lesson from this is the old “bigger they are the harder they fall”. While Larry Rosen got the gist of the retail business watching his dad sweat it out measuring inseams, it gets tougher when a younger generation riding on private jets is forced to develop business savvy. And divesting a failing business line can be tough if it had sentimental value to the old man.

The truth is there are a lot of great business minds out there looking for an opportunity. Hire one of them to take over the company and let the kids live off the dividends. Film school isn’t such a bad option.