GRADUATE SCHOOL OF BUSINESS

STANFORD UNIVERSITY
PALO ALTO, CA

Family Business

GSBGEN 334

COURSE SYLLABUS

PLEASE READ THIS ENTIRE DOCUMENT!

IT CONTAINS IMPORTANT INFORMATION THAT WILL

IMPACT YOUR PERFORMANCE IN THIS CLASS
Winter Quarter 2020
Mondays (and a couple of Wednesdays), 6:00-8:50pm

YOUR HUMBLE INSTRUCTOR (YHI):

Leo Linbeck III

CLASSROOM
P107

CONTACT INFORMATION:
leo3@linbeck.com
GSB Office: E234
GSB Phone: TBD
Houston phone: 713.966.5862
Cell: 713.469.1955 (call or text anytime, text preferred)

ASSISTANTS:
Carolyn Noack
cnoack@linbeck.com
713.966.5811

Sharon Lumagui
sharonml@stanford.edu
650.497.8755

OFFICE HOURS:
By appointment
Please schedule through Carolyn Noack

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 Course Description

Family-controlled private and public companies are the dominant form of enterprise
worldwide, comprising more than 90% of all businesses. This course is about those
businesses.

This course is designed for people looking for an alternative to the steady stream of Silicon
Valley propaganda about changing the world by making a billion dollars building the latest
endorphin-stimulating app that turns kids into zombies by training kids to kill zombies.
Like it or not, the vast majority of the world’s economy is controlled by family businesses,
and that fact is unlikely to change in our lifetime, or ever. And these are the businesses that
make things we actually use, and provide the services that we truly need, and really change
the world – whether that change is for the better, the worse, or just to survive.

If you’re looking for a course from which to drink more deeply from the chalice of Sand
Hill Road, this is not that course, and you are encouraged to look elsewhere.

Course Pedagogy

A brief comment about pedagogy. We will use the case method as the foundation of the
course, so your preparation and participation is crucial to the success of the class. In fact,
class preparation and participation is a big chunk of your grade. And YHI reserves the right
to cold call, so come prepared, or else…

A brief comment about humor. We will use humor extensively in our class discussions and
written materials. Do not be deceived, however. The subject matter and issues will be taken
very seriously. Your Humble Instructor (YHI), however, does not take himself at all
seriously, and expects the same from all his students.

WARNING: THIS COURSE WILL NOT BE A “SAFE SPACE.” YOU WILL BE

PUSHED AND CHALLENGED, AND YOU WILL LIKELY BE OFFENDED,
HURT, CONFUSED, IRRITATED, ANGRY, AND SO ON AT VARIOUS TIMES.
THIS IS AN ELECTIVE COURSE, SO IF YOU CANNOT HANDLE THIS SORT
OF ENVIRONMENT, PLEASE TAKE ANOTHER COURSE. YHI WILL NOT
PULL PUNCHES TO PROTECT YOUR FEELINGS, NOR DOES HE EXPECT
YOU TO DO THE SAME FOR HIM – HE HAS FIVE CHILDREN SO HE IS USED
TO CRITICISM FROM YOUNG PEOPLE HE LOVES.

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 Course Format

The class is structured to maximize the happiness of YHI. Generally speaking, that
maximum is at or near the maxima of the students. YHI has found that to approach these
hedonic apogeal proximities requires a veritable plethora of pedagogical techniques.
IOW, we’re gonna do a bunch of different things, but it should be fun.

The most common technique is case discussions. These discussions will explore issues
around the strategies and practices for managing and transitioning the organizational
practices, human processes, and financial resources of family-controlled companies. We
will also have query-based discussion sessions on a number of broadly important
business topics. These are called Twains, for slightly obscure reasons you will come to
understand.

YHI has also secured participation from a number of guests who are involved in a family
business, or regularly deal with family businesses. These guests will give a presentation
to the class. The general format of said presentation is 30ish minutes of background on
the guest and the family business, followed by 40ish minutes of Q&A. The objective is to
give you a sense of the diversity and depth of challenges and opportunities associated
with a family business.

Oh, and we also watch and talk about movies.

Classes will generally be divided into two parts: a case study from 6:00-7:30pm, and a
guest or open discussion from 7:40-8:50pm. There will be a 10-minute break between
Part I and Part II for caffeine and other biological needs. Attendance at both parts is
mandatory to avoid receiving an impolite absence (see below). Since the end of class will
be the end of a long day, YHI plans to hang out after class with some kind of relaxing
libation, and students and friends-of-students are welcome.

Course Requirements

The course is open to all GSB students and, space permitting, other Stanford students.
There are no prerequisites. The following outline presents the course requirements:

A. Group Project – You will self-select into a group of 5 to 7 students. Each

group will choose a family business to study. That business may be the family
business of one of the study group members, but it is not required. Each group
will identify and interview at least one person working in that family business.
The interviewee can be a family member working in the firm, a non-family
member working in the firm, or a family member who is not working in the
firm. The only constraint is that the interviewee(s) cannot be a member of
your study group. The objective is to learn about the firm, its ownership
structure, its governance processes, and the manner in which the family and

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 management team are organized. More specific information on the Group
Project is available on Canvas and will be discussed on the first day of class.

This submission is to be no more than 5 pages of text, plus a reasonable

number of exhibits, and is due midnight Monday 24 February 2020.

B. Individual Reflection – You must turn in one individual work product, an essay on
family business in relation to one or more of the following movies:

a. The Godfather, Parts I and II

b. Big Fish
c. Pride and Prejudice

There is no page limit on this essay. The purpose of this reflection is to say
something meaningful and interesting (to YHI, in his sole opinion) about family,
business, family business, etc., tying in readings and class discussion.

This submission is due at midnight Friday 16 March 2020.

C. Attendance and Class Participation – The success of this course is based on the
students’ consistent preparation, regular attendance, and active participation in all
class discussions. Students’ informed contributions to the learning process are
expected on a regular basis; therefore, attendance is mandatory.

There are two types of absences: polite and impolite. All absences are considered
impolite unless YHI receives an email from you prior to the start of the class you
will miss, with an explanation for your absence. YHI reserves the right to drop
from the rolls any student with an impolite absence. No student will be
dropped for having polite absences. However, the impact of polite absences on
your grade will be a function of their frequency and rationale.

USE OF LAPTOPS OR SMARTPHONES OR ANY

OTHER ELECTRONICS IN CLASS IS STRICTLY
PROHIBITED. BE FOREWARNED: VIOLATIONS
CAN RESULT IN A LOWER GRADE.
YHI realizes that you have spent the better part of your life tethered to some kind
of artificially intelligent device. YHI also loves technology, has 4 issued patents,
owns a substantial number of devices, and enjoys writing software for both
computers and embedded systems. But if you want to take this class, you will
somehow have to figure out how to live without said devices for 3 hours a week.
He does it. So can you!

Moreover, you will have the opportunity to hear from some very interesting and
successful visitors in this course. YHI is reasonably tolerant of student disrespect
of his person, but he is utterly intolerant of disrespect shown toward visitors who
make the time and spend the effort to come to his class. If you are observed by
YHI using electronics while a visitor is speaking, he will strike down upon thee
with great vengeance and furious anger.
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 YHI will generally not disrupt class by calling out students for violations of this
policy. However, YHI sees all and knows all in his classroom, so he knows
who is naught and who is nice. So, if you use electronics in class, be prepared
to accept the consequences in the form of a lower grade. If this policy seems
too extreme, GSBGEN 334 is not the class for you.

D. Evaluation and Grade – YHI does not like to grade, and students generally don’t
like to be graded. However, until such time as a better system is developed, we’re
going to stick with what we’ve got. Here’s how your performance will be
weighted for purposes of grading:

Group Project 35%

Individual Reflection 30%
Class Participation and
Student Presentations 35%
TOTAL 100%

YHI grades to the standard GSB curve, without exceptions. That means that some
percentage of you will get an LP – a grade you undoubtedly believe you do not
deserve as you are a special, as evidenced by your admission to the GSB. YHI
feels your pain, and yet he is unmoved.

Course Materials

REQUIRED AND BACKGROUND READING FOR CLASS DISCUSSION:

Course Reader

REQUIRED FILMS TO WATCH:

The Godfather (Parts I and II)
Big Fish
Pride and Prejudice (1995 6-part BBC miniseries)

FURTHER READING (in order of decreasing importance to your life):

War and Peace, Leo Tolstoy (you really should read this book)
Pride and Prejudice, Jane Austen (you really should read this book)
Thinking, Fast and Slow, Daniel Kahneman
Grooming, Gossip, and the Evolution of Language, Robin Dunbar
Wealth in Families, Charles Collier
Family Wealth, James Hughes

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 My Availability

YHI has many responsibilities but is here for you and your benefit. If you need help in
any way, all you have to do is contact Carolyn Noack and set up a time to chat. And by
taking this class, you get his lifetime guarantee. Please feel free to take advantage of this
exclusive offer.

You have a choice when you learn; thank you for choosing GSBGEN 334.

Course Outline

WARNING: While what follows is the expected structure of the course at this time, YHI
reserves the right to shuffle things around if shuffling will make the course better (in the
sole opinion of YHI).

FREE ADVICE FROM YHI: We have two Monday holidays this quarter, and the
sessions those weeks are moved to Wednesday. This gives you two “long weeks” (one
of which is also the mid-term break) and YHI encourages you to watch the three
films required for this course during those periods. You should particularly note
that Pride and Prejudice is a 6-part miniseries and the two Godfather films are long.
Taken together, the films have a length of 14 hours. For the binge-watchers among
you that is not particularly intimidating, but for those who have a life it’s actually a
lot of screen time. Just sayin’…

Session 1 Monday 6 January 2020, 6:00-8:50pm

Course Introduction and Overview
Various details of the class will be discussed.

Content
YHI Background
Class Expectations
Syllabus Review (how meta!)
YHI Family Business
YHI AMA

Session 2 Monday 13 January 2020, 6:00-8:50pm

What You Should Know, Chapter 1 and 2
A series of loosely-coupled, query-prompted, open-ended dialogues with
YHI and your classmates.

In theory, there is no difference between theory and practice.

In practice, there is.
Unknown software engineer

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 Optional Readings:
Tolstoy, War and Peace, Book 1 of the First Epilogue
Kahneman, Thinking, Fast and Slow, Intro and Chapter 1
Dunbar, Grooming, Gossip, and the Evolution of Language,
Chapter 4: “Of Brains and Groups and Evolution”

Chapter 1
System 1 and System 2
Identity
Rules and Discretion
Tribes and Family

Chapter 2
Perception and Reality
Roles and Role Conflict
Top-Down and Bottom-Up
Governance

Session 3 Wednesday 22 January 2020, 6:00-8:50pm

NOTE: GROUP PROJECT TOPIC SELECTION DEADLINE

Part I
What You Should Know, Chapter 3

A transfer of a family business from one generation to the next is

composed of two different elements: transfer of control and
transfer of assets. This session will focus on how assets are
transferred from one generation to succeeding generations.

Estate Taxes
The Bucket Game
Trusts and Family Limited Partnerships
Philanthropy

Part II
Visitor: David Weekley
David Weekley Homes

Session 4 Monday 27 January 2020, 6:00-8:50pm

Part I
Following in the Founder’s Footsteps
Succession is one of the oldest organizational problems. From
early tribes of hunters and gatherers to modern, sophisticated,
multinational corporations, the problem of the selection,
preparation, and empowering of the next leader has been a critical
issue. The succession problem in a family business is further
complicated by the “founder’s syndrome,” relationships among
family members, family norms and history, and cultural influences.

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 In this class, we will explore the succession issue of a small,
private, founder-run company.

Case: Corbin-Pacific

Study Questions
1. What are Corbin-Pacific’s strengths as a company?
Weaknesses?
2. What are the key elements of the Corbin-Pacific culture? Does
that culture help or hurt the financial performance of the
company?
3. How critical is the Corbin family to the success of the
company? How would you characterize the fit between the
family’s values and the company’s values?
4. If Mike Corbin hired you to help him with succession planning,
what would you advise him to do?

Part II
Visitor: Daniela Fernández and Paulina Garza
FEMSA

Session 5 Monday 3 February 2020, 6:00-8:50pm

Part I
The final installment of WYSK. After this, YOYO.

There is no knowledge without theory.

W. Edwards Deming

What You Should Know, Chapter 4

Privacy and Transparency
Genius and Heresy
Managerial Succession
Routinization of Charisma

Part II
Selling (and Buying) the Business
One of the most difficult decisions faced by a family business is
the decision to sell. There are many ways to sell or raise outside
capital, but each option comes with its own set of pros and cons. In
a family business, the sale decision also triggers emotions that are
deep-seated and powerful – often the identity of a family is
wrapped up in a business, and the decision to sell can seem like a
decision to disband the family. In this session, we will look at a
variety of options for selling or raising capital, and learn to
evaluate those options in the broader context of personal, family,
and business perspectives.

Case: The Fojtasek Companies and Heritage Partners: March

1995 (1998 version will be provided in class)
Reading: Linbeck, Valuation Note

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 Study Questions
1. What is the long-term prospect for the Fojtasek Companies?
Are their markets good or bad?
2. What are the drivers for the decision to sell or recapitalize?
Which of these drivers make sense for the Fojtaseks?
3. Evaluate each of the options facing the Fojtaseks. What are the
pros and cons of each?
4. Which option would you pursue? Why?
5. Is this a company you would want to purchase if you were a
private equity investor? If so, at what price and on what terms?

Session 6 Monday 10 February 2020, 6:00-8:50pm

Part I
Governance of the Family Firm
Whether in business, government, or any other human
organization, governance is about answering the question, “Who
decides?” In a family firm, there are special considerations when
designing a governance system. In this session, we will look at a
second-generation family firm that built a sophisticated
governance system and is thinking about how that system might
need to evolve as the firm passes to the next generation.

Case: Simpson Seeds: Growing the Next Generation

Study Questions
1. What do you think of the Simpsons' decision to restrict
ownership to active participants in the business?
2. If you were Sandra, how would you feel about the ownership
structure and governance system of the family business?
3. How might the governance system have to change from G2 to
G3?
4. From Greg's perspective, what is the biggest risk to this
business, and how can that risk be mitigated?

Part II
Visitor: Thomas Brenninkmeijer
COFRA Holding AG

[WINTER BREAK OCCURS HERE]

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Session 7 Wednesday 19 February 2020, 6:00-8:50pm
World Premiere of YHI’s First Case Study
YHI has taught a family business course at the GSB since 2005. He has
never developed a case study – until now. You will be given a front-row
seat at its unveiling, and the case protagonist will be with us. Come
prepared!

Cherif Elkhoury
Burj Al Haman

Session 8 Monday 24 February 2020, 6:00-8:50pm

NOTE: ALL GROUP PROJECTS TODAY!!!

Management Conflict and Conflict Management

One of the most difficult aspects of managing a family business is conflict
management. Because of the multiple roles involved (manager,
shareholder, sibling, parent, child, etc.), the emotional content of conflicts
is greatly heightened. In this session, we will look at a specific kind of
conflict that occurs quite frequently in a family business: the conflict
between siblings with various levels of involvement in the management of
the enterprise.

Part I
Case: Yung Kee: A Family Feud Divides Hong Kong

Study Questions
1. Discuss the evolution of the rivalry between Kinsen and
Ronald.
2. What was the ownership design that Kam Senior had in mind
when he divided the shares among his family?
3. Why do you think Yung Kee Holdings was registered in the
BVI?
4. How did Ronald go about taking over control of Yung Kee?
5. Why do you think Kinsen took Ronald to court?
6. Do you think Kinsen should have avoided taking the case to
court?
7. Describe the role of mother and daughter in the dispute.
8. What are the cultural clashes between the traditional Chinese
approach to ownership and the modern approach?
9. Discuss the alternatives that were available to Kam Senior in
planning the succession.
10. Is there still a way out of this family feud?

Part II
Visitor: Laura Zung
Lancaster Health Group

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Session 9 Monday 2 March 2020, 6:00-8:50pm
To Be or Not To Be in a Family Business
Part I
Negotiating for a job is never easy. It becomes more difficult when
you’re negotiating with a family member, and more difficult still
when the job fulfills a life-long dream of working in your family
business. In this session, we will explore this issue in depth from a
variety of perspectives, but with special attention paid to the
situation of the next generation of family who is just now entering
the business.

Case: Atherton Clothing Company (A)

Atherton Clothing Company (B), in class

Study Questions
1. How would you describe the Cohen families’ relationship? Is it
better or worse than other families we have studied in this
class?
2. What are the three biggest issues facing Atherton Clothing?
3. What is your assessment of how Zachary has handled
discussions thus far? What would you have done differently?
4. What would you change in Zachary’s memo in Exhibit 3?
5. How likely is it that Zachary will end up going to work for
Atherton Clothing upon graduation from business school?

Part II
Visitor: Brendan and Riley Bechtel
Bechtel

Session 10 Monday 9 March 2020, 6:00-8:50pm

All’s Well That Ends Well

Class Wrap-Up
Final Thoughts
Closing Dinner at Stanford Faculty Club

REFLECTIONS ARE DUE MIDNIGHT FRIDAY 13 MARCH 2020.

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