Ford investors are reportedly irked that Ford Motor Co. seems to be pursuing the dynasty management route by issuing elevated positions to individuals of the correct bloodline. Like it or not, Ford has been a family business for the majority of its existence, but it’s facing new scrutiny after adding 32-year-old Alexandra Ford English to the board of electric truck manufacturer Rivian and making 39-year-old Henry Ford III (great-great grandson of the big dog himself) the face of investor relations.
The Ford family currently holds the largest slice of the corporate pie, thanks to their special class of stock, and 40 percent of the voting rights. But the business faces severe headwinds, hampered by the coronavirus and a share price that’s trended stubbornly downward since 2014. This has prompted concern among longtime shareholders and split opinions on whether or not Ford should continue keeping things within the family.
We don’t know what the ultimate plan is — at least not in terms of the grooming of Henry and Alexandra as the next wave of the Ford dynasty. Bloomberg made it seem fairly clear-cut that the pair were intentionally elevated to high-level positions as part of a continued ascension to automotive royalty:
Henry Ford III and Ford English are likely years away, if ever, from assuming the uppermost leadership roles. Jim Farley, promoted March 1 to chief operating officer, is the clear heir apparent to current CEO Jim Hackett. But each is now moving through a variety of jobs at the company. Henry, known as “Sonny” among friends and family, was director of corporate strategy before taking the investor relations job. He is the son of Edsel Ford II, a board member and now a company consultant.
Ford English, the daughter of Bill Ford, assumed a corporate strategy position similar to the one previously held by her cousin, while also being named to the board of Rivian Automotive, the electric-truck maker in which Ford has taken a significant ownership stake.
Each declined an interview request through a Ford spokeswoman.
Their seasoning is similar to what their fathers received while rising in the ranks in the 1980s and ’90s. Bill and Edsel Ford landed on the company’s board of directors in 1988 while still in their 30s and agitated successfully for more prominent roles as directors. Edsel eventually rose to president of Ford’s highly profitable credit unit before retiring in 1998, and Bill became company chairman in January 1999 and served as CEO from 2001 to 2006.
Both received Ivy League educations prior to earning their business degrees, working in fields outside of the automotive landscape before swiftly rising through the ranks at Ford Motor Co. This raised concerns of nepotism that are both difficult to prove and fairly normal among large companies. Still, the matter came up during Thursday’s shareholder meeting via a proposal to strip the family of its special class of stock and swap to a one-share, one-vote arrangement. The suggestion garnered a support rate of 35 percent support — a slight improvement over last year’s 34 percent.
The concern is that family-controlled entities often perform worse on the stock market because you’re often gambling with new leadership. Rather than finding someone competent from the outside, you’re grooming someone from within the family who hopefully has enough of their forebear’s DNA to not sink the business.
“That’s why we don’t have Kings and Queens anymore — it’s a roll of the genetic dice,” said Nell Minow, vice chair with ValueEdge Advisors, a shareholder advocacy firm. “We’ve seen in companies like Motorola and Anheuser Busch that it hasn’t worked out to continue to pass the baton from generation to generation.”
You could just as easily make the claim that relations to the founding members of a business have more reason to want to see a company thrive. The Ford family’s track record also hasn’t been all been that bad. Imperfect, to be sure, but comparatively successful at avoiding drama when you consider other automotive dynasties throughout history.
That’s assuming the Fords are actually being groomed for something greater, which Minow argued is probably the case. Henry Ford III isn’t being given a cushy position where he can quietly earn a paycheck until his inheritance comes in. He’s having to work as a go-between for investors and the business — a task we do not envy.
“Investor relations is the best place that you can put somebody that you’re trying to groom for leadership because they are going to be dealing with complaints all the time,” Minow said. “It will give him a real reality check.”
Meanwhile, Ford English has a comparatively easy position on the Rivian board, though it’s not an unimportant placement. She also worked a stint in the automaker’s mobility arm, giving her a taste for the industry. “I was originally hesitant to join Ford because I don’t have a technical background and it’s a company built upon engineering,” she said in 2018. “But I knew what I could bring to the company and I was very aware of those skills.”
What do you think? It’s not like Ford has a history of elevating familial relations without some skin in the game, but it does have a history of promoting them. Are the subset of investors attempting to uncouple that legacy on the right track, or is this all just a distraction from Ford’s real problems?
[Images: Ford Motor Co.]
The Ford Company has hired some real incompetent leaders. So-I don’t know if any body in the “Ford Family” can be any worse.
They are an essentially a one product company-as information that has been in the news-they are collaborating with Volkswagen.
I’m wondering how far they are going to let the ship sink before the sell (it will be orchestrated as a merger).
In other news water is wet, wind blows and nepotism is a thing.
Their name is literally written in script on the big blue oval. So I’d say that gives the family a bit of a priority on being part of the decision making process.
And I guess you think that tim Hortons family still runs that firm?
Done right, having someone from the family up top can help the company keep their eyes on their long term future instead of chasing short term profit as stockholders would like. This is particularly true of older companies that no longer have a strong tie to their founding ideologies (if there was one).
GM and Nissan are good examples of companies losing their plot with CEO’s looking only at appeasing stockholders and inflating their own golden parachutes. Toyota and Suzuki are doing well with founding family in a strong grip of the company pushing long term vision.
Of course, we also have examples like Takata where an incompetent heir promoted by bloodline alone can completely destroy a firm, so yeah… I think it’s a matter of whether the family operate as part of healthy check and balance or operate more as a dictator. In Ford’s case, it seemed to have worked in their favor more than against so far, but we’ll see.
Beretta has done pretty well over 500 years as a family owned and run company. Not quite sure the Ford family has what it takes.
Yeah, but guns are addictive, like cigarettes or narcotics, but even better, because the target buyer is never satisfied. They buy one to try to make their fears go away, and when that fails, they buy another and another and another. It’s kind of hard to fail in a market like that.
I don’t mind a family owned company being operated by family members. I do mine a “public” company working that way.
Hire qualified management people with a distinct vision.
Through the years, Ford has mostly failed on that requirement.
So 35% voted for the change. The family have 40% and obviously would vote against so that seems to be a majority of non Goes family stock holders wanted the change.
Compared to GM and what used to be called Chrysler, Ford hasn’t done so badly. All three companies could benefit from a clone of Lee Iacocca.
Ford’s entire history post-Model T has effectively followed this cycle:
1. Ford Family plunges the company into the toilet
2. Someone from outside the family comes along and fixes it (Robert McNamera, Lee Iacocca, Donald Petersen, Sir Alexander Trotman, Alan Mulally)
3. Said executive is forced out by the Fords.
4. Ford Family takes back over themselves or install a passive yes-man in said executive’s place
5. Ford Family plunges the company into the toilet
6. Repeat from step #2
When you allow the Ford Family to run an organization completely unchecked without having to answer to oversight, you get the Detroit Lions.
I wouldn’t recount Ford history quite that way. Ford’s first 40 years of existence, it was ruled by the founder, whowas amazingly successful the first 30 years, and screwed up the last ten years in his dotage.
After about five years being run by crooks, the grandson of the founder, Henry II, took over for the next 40 years, and had his ups and downs, but left the company in great shape.
After Henry II, there was a revolving door of Caldwell, Peterson, Poling, Trotman, and Nasser, none of them lasting more than a half-decade, while the F150, the Taurus, and the ageing Panther patform supported the company.
The current Top Dog is Bill Ford, with a couple CEOs under him, one good, one not, and a third waiting to make or break the company. Whether Jim Farley makes CEO or not may depend on whether Bill Ford is willing to go young and put Henry III in charge.
Hackett probably has a couple years left, by which time Henry III would be 41, and have gotten an earful from investors, and heard no small amount of criticism of Jim Farley. Bill Ford’s best move might be elevating Henry III over Farley. If the Ford empire dies, it might as well be by the family’s own hand.
Who was the good one – Mulally? lol
Absolutely, the way Wall Street chase after quarter to quarter profit with pump and dump, I’d say family businesses actually works better. Toyota doesn’t have the same problem Chrysler and GM have, it is really about Wall Street having less gravy when you take the longer term vision rather than quarter to quarter.
The extended Ford family was given all of Ford’s class B stock at Ford’s IPO in 1956. This gave the extended Ford family a still existing voting majority of 40%. This class B stock can be sold to other class B stock holders; new house, college expenses, etc. It also allows them to vote themselves dividends. If Ford class B stock would be sold, it is converted to class A stock and that percentage of voting rights is diluted. The extended Ford family meets periodically about Ford Motor Company governance.
Having the family name has to be equal curse and blessing.
Since not every Ford gets into the business, I’d imagine it takes some guts for those who do – to walk into the office and automatically be expected to perform, with the capital “F” emblazoned on your person – a scarlet “F”, if you will.
Credit Bill Ford with stepping aside in 2006 when he realized somebody else (Alan Mulally) could do the job better.
More than the dynasty question, the investors should be asking about the ROI on the billions being blown on “mobility”, and how consumer confidence can be restored after the recent botched product launches.
Bill Ford stepped aside as CEO, but he remained at the top as Chairman. There’s a certain cache about going to the top at Ford Motor and talking to Mr. Ford. The closest GM ever got to that was when a South American country had a military coup and one of the generals put in charge of transportation wanted to talk to “General” Motors himself.
Besides aging fairly gracefully, what “skills” does Alexandra Ford English bring to the company?
She knows what they are, but she’s not telling…
Meanwhile, the stock has risen from a crash low of 4.00 up to 4.90 a share, with a healthy 12.5% dividend.
@RHD
I imagine both Henry Ford III and Ford English are in learning mode. If they prove to be capable students — and note that some never learn — then specific skills are less important.
BTW, Ford has temporarily suspended their dividend payout.They haven’t given an ETA when it would resume.
Ford would do really well to find someone from within or outside the company who knows how to build trucks and cars. The never ending stream of recalls has both bled billions from the bottom line and permanently alienated buyers from the Ford brand. Why are engineering/production problems not being solved at an earlier time in the production cycle and at a lower level of responsibility?? What a miserable job of the chain of command in a large company, in allowing known defectIve vehicles go out the the factory year after year after year. Whoever even touched the Focus automatic transmissions should be fired from Ford and banned from ever working in auto production. I say this both as a former Ford vehicle owner and as a former owner of stock in Ford.
This dual class share structure thing really needs to be abolished. It’s been a mess for Bombardier shareholders, and only marginally worse for Ford.
I am not insider, but what Jim Farley is trying to do? Or put differently why all the criticism? I thought he tries to change the culture. Mulally tried, apparently worked short term and Fields is out of door anyway. I lived in USSR I know how difficult to change culture, it takes several generations and lots of concentrated effort to do that and still change is not dramatic.
General statement: We don’t live in a straight up meritocracy. Who your parents are matters. How attractive you are matters. Lots of things matter.
Specific question addressed: Ford’s equity structure may not be “fair” but you know that going in as a shareholder – don’t buy the stock knowing that and then expect them to change to satisfy you.
Thought question: “…it’s a company built upon engineering…” Are we sure?
General statement: Yes, that’s a fair point.
Specific question addressed: Shareholders buy-in accepting the equity structure. It’s just that Ford’s prolonged poor performance relative to their competitors and to the market as a whole has prompted activist proposals. The 35% vote is a wake up call.
Thought question: Probably less on mechanical engineering and more on financial engineering.
Having worked at Ford, I don’t see any disadvantage to letting the kids play with their toys. There are a lot of really bright people in Detroit. But they never make it into top management. Those jobs are filled with politicians, butt kissers and marketers. As the history of the US automobile industry has shown, none who would fail any less effectively than the Ford children.
The Ford family would never resign they’re current majority voting power. If it actually reached a point where 40% controlling stake was not enough (someone else buys up a large stake and attempts to strong arm the rest of the investors) the ford family would buy more class a stock to maintain they’re control. It’s not the stock thats valuable but the voting rights that include determining how much dividen they get. You do whatever you have to in order to maintain that as for some of them, that’s they’re livelihood.
Worked for Toyota. Didn’t work for Wang Labs. We shall see.
Investors should refuse to buy stock in companies which issue “special voting rights” shares to certain people. Ford was one of the first to pull this trick decades ago, Facebook/Zuckerberg have done it in modern times.
In fact, IMO the SEC should simply make this practice illegal. But without that hammer, investors can and should just say no. Why should a bloodline determine who gets top jobs at Ford, or anywhere else?