Putting On Heirs

CHRIS SISARICH/IDC FOR TIME
Ernesto Bertarelli, 37, leads Serono, the Geneva-based drug company once run by his late father Fabio

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Thomas Baer says it became clear five or six years ago that Raymond was the clan's best young leader. "The big danger of family companies is that the older generation cannot find the right moment to hand over the reins," says Thomas. He is not only giving up the chairmanship but also relinquishing his seat on the board to his son and will have more time to spend at his Tuscan vineyard.

About 30 members of the family are involved in key decisions at the bank. They are signatories to a family shareholders' pooling agreement meant to ensure that control of the bank stays in Baer hands. It's a practical form of family governance that was first drawn up in 1974, when the bank switched from being a partnership to a limited-liability stock corporation.

The family allows its members to work at the bank only "if there's a reasonable chance of reaching the top," says Thomas. Once the family has decided, big appointments still need to be approved by the board, most of whose directors are not family members. But Thomas says there are huge advantages in having family involved. "If it's your money and your name is on the door," he says, "it's to be expected that you act in a more responsible manner."

Like most banks these days, Baer is focused on cutting costs and recently took the unusual step of laying off 50 workers.

Mohn
BERTELSMANN

The family's privately held, worldwide media conglomerate, based in GUTERSLOH, GERMANY, includes publisher Random House, a majority stake in TV network RTL and the BMG music group

Annual Sales: $18 billion

Reinhard Mohn inherited the modest German publishing house that his great-grandfather founded in 1835, and he turned it into a global media giant called Bertelsmann. Today that firm owns book publisher Random House, the BMG music group and a majority stake in the European TV network RTL, among other properties. Mohn, 81, stepped back from active management a decade ago, but the company's transition to outside executives has not been smooth.

Bertelsmann stock is not publicly listed, and Mohn and his second wife Liz, 61, control the firm through a holding company and keep a watchful eye on management. Three years ago, supervisory board chairman Mark Woessner left after a falling-out with the Mohns, and last July the family ousted celebrated CEO Thomas Middelhoff, who had spent billions trying to propel Bertelsmann into the digital era, committing the company to a public offering in 2005 that it is trying to wriggle out of.

Liz Mohn, a former secretary in the book-club division, has played a prominent role behind the scenes and was instrumental in firing Middelhoff. She and her husband have three children, two of whom work at Bertelsmann: Christoph, 37, who is the chief executive of the Internet affiliate Lycos Europe, and Brigitte, 38, who works at a company foundation. If Liz is trying to position her children to take over Bertelsmann, she isn't saying so.

But the company has been rattled by ferocious criticism from Reinhard Mohn. Last month, in a book about his management philosophy and in an accompanying essay published by a German newspaper, he wrote that he had underestimated the vanity of some executives: "The search for glory has incited many a manager to 'acts of heroism,' and not infrequently led to irresponsibly big investments." Reinhard added that he wants his family, led by Liz, to play a more forceful role at Bertelsmann by, for example, implementing the "fundamental principles of a humanistic corporate leadership," which in practice means avoiding layoffs whenever possible and managing by consensus rather than confrontation. The statements appeared to undermine current management, which has publicly expressed its irritation. CEO Gunter Thielen sent a memo to all Bertelsmann employees stressing that under German law, the executive board members not the shareholders are responsible for the management of the company.

Agnelli
GIOVANNI AGNELLI & CO.

The future is cloudy for this family's flagship business, the carmaker Fiat, based in TURIN, ITALY. Losses are mounting, and their holdings' value has declined

Publicly Traded Assets: $4 billion

When Giovanni Agnelli died in January at age 81, all Italy mourned the passing of a legend. Handsome, dashing and impeccably connected, he personified Italy's growing postwar affluence. But by the end of his life, his family's affairs were a mess. In the two months since his death, his brother Umberto, 68, has stepped out of the shadows and is moving swiftly to realign management and shore up the finances of the Agnellis' prize asset, the 104-year-old automaker Fiat, which posted a $4.6 billion loss last year.