All in the Family

In a day when U.S. business is typified and dominated by such publicly owned giants as General Motors, prof its are also pouring into the coffers of quite a different kind of company: the family-owned firm. Many big and brawny U.S. companies are still family-owned-and have no intention of shar ing with outsiders their hard-earned prestige or profits. They tower in fields as varied as mining, retailing, proprietary drugs and investment banking, and turn out such well-known products as S. &H. Green Stamps, Caloric ranges, Johnson's Wax, Mennen toiletries, Ex-Lax and Old Fitzgerald-the last of which has a president with the wonderful name of "Pappy" Van Winkle.

Though their numbers have gradually declined with the spread of merger-seeking corporations, firms that have stuck to private ownerships have proved that they can compete with and outdo the Goliaths by concentrating on specialty products. San Francisco's family-owned Levi Strauss & Co., the behemoth of blue jeans, has a new wrinkle-or, rather, an unwrinkle. It has just begun worldwide marketing of hot-selling "Sta-Prest" pants, which are treated with resin, then baked in 325DEG ovens until they have a permanent crease.

Strauss President Walter Haas Jr. is convinced that almost all clothes will eventually be so treated to make them wrinkle-free.

No Pressure, No Proxies. Like Levi Strauss, which is run by four heirs of its founder, most family-owned businesses stay that way simply because the owners want to be their own bosses. There are other advantages of family ownership, of course. The family firms have the asset of secrecy, a particular plus in the brutally competitive clothing or package-goods businesses, where products are often pirated. Relieved of shareholders' probing questions and pressures to declare dividends, family managers can reinvest all their profits or, for that matter, take a bad loss without having to worry about criticism. Says Roy Goodman, president of Brooklyn's prospering Ex-Lax Co. (500 million chocolate tablets a year): "We have flexibility in the decision-making process. We can get many things done without going through a hierarchy of management."

On the other hand, family firms have some congenital weaknesses, and Wall Street has tended to play these up in its constant importuning of such businesses to go public. Among them: the problem of signing up and holding able executives who know that the sweetest plum is often reserved for the boss's son. Perhaps the worst fate that can befall a family-owned company is to have at its head a grandpa who thinks that the old ways are still the best.

Profitable Intangibles. Some clannish companies eventually sell out or merge: Q-Tips, for example, recently merged into Chesebrough-Pond's, and Breck Shampoo into American Cyanamid. A much larger number of successful and independent businesses find ingenious ways to overcame the hurdles. Charles Cassius Gates Jr., president of Denver's Gates Rubber Co., has led his company abroad and diversified it so widely that it now has both egg factories and a mutual fund. To overcome the disadvantages of nepotism, Seattle's Simpson Timber has ruled that the only job open to the owners' family is the chairmanship, which is currently held by William G. Reed, 56. Racine's wax-making S. C. Johnson & Son turned the presidency over to an outsider to give 36year-old Samuel Curtis Johnson a chance to get further seasoning as executive vice president.

Family firms often woo and motivate able executives by holding out generous profit sharing, and quite a few have found excellent managers among the men who had the good sense to marry the bosses' daughters. There are also valuable imponderables. "We have a consistent record of good growth," says Mennen Co. President George Mennen, "and family pride has something to do with it. After all, the products carry our name." Another factor that helps to produce good results is the feeling of tradition, purpose and loyalty that pervades family-owned firms. These are attributes that big manager-run companies, for all their size and strength, find a lot harder to produce.

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