Perhaps one of the best case studies of how a will can make a big beneficial difference to a business is the Hearst family and the business they own, Hearst Corporation.
The founder of the family business, William Randolph Hearst, is one of America’s most famous tycoons thanks largely to the popularity of the film Citizen Kane, which is loosely based on his life. But, unlike in the film, where Charles Foster Kane, played by Orson Welles, leaves his business empire in ruins, William Randolph’s business legacy has been one of the greatest and most successful of all 20th century tycoons.
That success is no doubt due to many factors, but William Randolph’s shrewd estate planning plays a defining role in the strength of the Hearst Corporation today. When he died in 1951 at the age of 88, his will barred his five children (all sons) from running Hearst Corporation. William Randolph made it clear the running of the business was to be in the hands of professional managers – not family members.
He did this by setting up the Hearst Family Trust, which reserves five of the 13 seats on the board of trustees for descendants of the family. The other eight seats are reserved for current and former senior executives at Heart Corporation. The 13 trustees also sit on the corporation’s 20-member board of directors. These remaining seven seats are filled by a combination of Hearst family members and Hearst Corporation executives. The structure means that Hearst family members don’t have enough seats to control the business, but get great dividends if the business performs well, which it has for many of the years since the death of William Randolph.
Another master stroke by William Randolph was the threat of disinheritance if any heir challenges the will. And the trust remains in operation until the last of his 15 grandchildren dies, which, is expected to be at least 20 years away.
Here’s what a Forbes article said back in 2000 about William Randolph’s legacy:
“That the Hearst Corp. survives at all today—and remains privately held, as W.R. Hearst wanted—says something about the wisdom of his estate plan. He left behind some ranch land, 15 dailies, most of them evening newspapers destined to be run out of business by television, and a handful of magazines (including Good Housekeeping and Town & Country). Had the people running the business sat on their hands, there might be nothing left today.”
Hearst today is huge, with revenues of more than $10 billion annually and a staff of more than 20,000. Hearst is involved in more than 360 businesses, which include 30 TV stations, many of the country’s best known newspapers, and 300 magazines, including among America’s biggest selling titles like Cosmopolitan, ELLE, and Car and Driver. It owns stakes in some of the most dynamic new media groups like VICE and BuzzFeed.
And it’s still paying pretty good dividends to the 65-plus members of the Hearst clan.
That’s some legacy…although the only slight worry is what will happen with the last of the William Randolph’s grandchildren dies?