You may have seen this recent article in the New York Times: “Succession at Scholastic Seemed to Be a Shock, Even to the New Chairwoman,” which discusses the surprising recent transfer of power at Scholastic, a more than 100 year-old publisher and distributor of children’s books. It’s known for thousands of beloved series, including Clifford the Big Red Dog, Hunger Games, and Harry Potter, and is a publicly traded company worth between $1.2 and $3.0 billion.
We’ll take a look at some of the details surrounding this unfolding story while delving into why it’s so crucial for all business owners, no matter what their age, to have clear contingency and succession plans in place to ensure continued operations, smooth leadership transition, and limited personal and business upheaval.
Scholastic’s Own Sensational Story
On June 5, 2021, M. Richard Robinson Jr., the 84-old chairman and chief executive of Scholastic – who took over the company reins in 1975 – died unexpectedly. On June 6, Iole Lucchese, a company senior executive and 30-year veteran of the company, still reeling from the news, received what may have been an even bigger shock – being told that Robinson had named her Chairperson and left her 53.8% of Scholastic’s Class A stock.
“It was overwhelming,” she told the NY Times. It also has made her “one of the most powerful women in book publishing, and the stock provides her—the daughter of a construction worker and a homemaker—with significant wealth,” according to the article.
She wasn’t the only one who was shocked by the news of her sudden windfall. The newly named CEO, the company attorney, Robinson’s two sons, and T. Rowe Price, the company’s largest shareholder after the family, were as well.
“The gift also shifts the business, which had been passed from father to son, to a person outside the family and puts Scholastic in an extremely unusual position for a public company: adapting to a succession plan many key players did not know was coming.”
Controversy Surrounding Succession Extends to Personal Life
David Wallack, a portfolio manager for T. Rowe Price, who was in regular touch with Robinson for the last 20 years, explains: “He [Robinson] would tell me, ‘When I die, there is a safe, and there is an envelope in the safe, and the board of directors will open the safe and see what my wishes were.’ I thought it was hyperbole.”
Wallack said he had hoped that after Mr. Robinson died, the board would conduct a broad search of both internal and outside candidates for the chief executive role and elevate a board member to chair. He said that in July, when the board named Peter Warwick, who had been a board member since 2014, as CEO and brought Ms. Lucchese onto the board as chairwoman, “we were shocked for sure.” (Company announcement: Peter Warwick Named Chief Executive Officer of Scholastic Corporation)
In addition to the surprising news to those involved and invested in the company, Robinson’s unorthodox transition plan extended to his personal estate plan. Lucchese was also named a co-executor of his will “with the request, but not the direction” that she distribute his personal property to his children in what “she believes to be in accordance with my wishes.” There have also been rumors of previous romantic involvement between Lucchese and Robinson, which of course adds to both the business and family drama. In the will, Robinson describes her as “my partner and closest friend.”
Robinson’s two sons, who are in their 20s and 30s, are considering legal action, as are Robinson’s siblings, according to one report. “Reece, a filmmaker, describes his father's 2018 will as ‘unexpected and shocking,’ while Ben, who operates a sawmill and workshop, describes it as ‘salt in an open wound.’
Contingency and Successions Plans are Required at Any Age or Company Size
Succession planning is arranging for the replacement of the CEO so the business can successfully operate without interruption. Working hand-in-hand, contingency planning includes the nuts and bolts of how to protect against business disruption in case of an unforeseen event of any kind. It helps company leadership to prepare for and respond to an emergency situation, such as the death of the owner or key employee, natural disaster, cyberattack, etc. It’s a plan that should outline how your business will continue on and include information about company operations and where to find them. The company should also purchase insurance that will enable it to avoid the financial disaster that sudden, negative life events can cause.
A contingency plan should not be confused with an owner’s estate plan that should address how the ownership of all of their assets, including the business, will pass to others. All of these need to be in place for both the continuity of the business and to protect the family’s financial future.
Just like their publicly traded counterparts, the owners of privately held businesses need to address their own mortality. It’s a difficult and uncomfortable thing to think about, but it’s necessary to maintain business value. After all, the shareholders, employees, and the owner’s family members are all dependent on the long-term success of the business. And, business owners who don’t groom a successor and have a transition plan in place are setting the business and their family up for a potential disaster.
Robinson’s final legacy will be crystallized over the next several years but it will certainly include unorthodox business succession and family drama. What do you want your legacy to be – for you, your business, and your family? If you’re not sure if your business could run without you, it’s time to start planning. Plan for the long-term to ensure your legacy and the future of the business you’ve worked so hard to build.
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