Day Pitney remains committed to providing quality legal counsel, while protecting our clients and employees, and transforming our communities into more just, equal and equitable spaces. For more information, please visit our COVID-19 Resource Center | Racial Justice and Equity Task Force.

Insights

Publications Events

Generations Winter 2022 - A Tale As Old as Time: Family Succession Drama

Publisher: Day Pitney Generations Newsletter
March 15, 2022
Day Pitney Author(s) Jaclyn M. D'Esposito

On June 5, 2021, M. Richard (Dick) Robinson Jr., the longtime head of Scholastic Corp., died suddenly while on a walk in Martha's Vineyard. Since then, Robinson's surprising estate plan has garnered headlines due to the real-life Succession drama that he left behind.

Robinson's Estate Plan

Scholastic was founded by Robinson's father and is most renowned as the publisher of J.K. Rowling's Harry Potter series. Robinson served as chief executive officer and chairman of the board of Scholastic for 46 years and worked full time until the moment of his death, according to his published obituary.

Robinson's obituary further indicates that he was survived by his children, John Benham Robinson and Maurice Robinson; his "former wife and close confidant," Helen Benham, who also worked at Scholastic for 33 years; and four siblings.

Notwithstanding the deep family ties to the business, Robinson's will left all his personal possessions and 53.8 percent of Scholastic's Class A common stock to Iole Lucchese, Scholastic's chief strategy officer and Robinson's rumored longtime romantic partner. As a result, Lucchese became the sole owner of the majority of the voting power of Scholastic.

Robinson, 84 when he died, was reported to be a fitness buff and appeared to be in excellent shape. Family members and Scholastic colleagues—including Lucchese—were surprised by his passing and by his estate plan. The Wall Street Journal reported that Robinson was private about his estate planning and his personal life, but his motivations for giving Lucchese control of the company were clear to no one. This was particularly surprising because it was perceived that Robinson and Lucchese had ended their "open secret" romance years ago.

Robinsons' sons and ex-wife shared their dismay and shock upon learning of the estate plan and expressed concern about someone outside the family having control of Robinson's stock holdings. Other observers felt that Robinson's will raised questions about the future of Scholastic as an independent concern.

Robinson's Failure to Plan for Succession

Robinson's estate plan has all the hallmarks of a made-for-TV movie, which contributed to the newsworthiness of his passing. Perhaps of greater consequence to Scholastic was Robinson's failure to have any succession plan in place for the operations and management of the company in the event of his death or incapacity.

Robinson never groomed a successor, and neither of his sons expressed any interest in running the business. As a result of the confusion that followed Robinson's death, it was unclear for weeks who was in control of the company. The Wall Street Journal reported:

On June 28, Laura Twomey, a partner with Simpson Thacher & Bartlett, LLP who handled Robinson's estate planning, asked a probate court in New York to take action on his will. She wrote that the company was unable to respond to 'time sensitive corporate decisions or emergencies' because stockholders were unable to reach a quorum.

Scholastic eventually, and unceremoniously, named a new chief executive officer, but Robinson's lack of planning for his succession left the company in disarray and disrupted management's ability to conduct the company's affairs following his death.

Start Planning Early

The disorder at Scholastic following Robinson's passing is perhaps an extreme example of the consequences of a failure to plan and a failure to communicate, particularly for a company of Scholastic's size. That said, failing to plan for succession is a problem that afflicts many family businesses. Succession planning takes great effort and requires families to have difficult but important conversations, which leads some business owners to put off these discussions until it is too late.

The story of Scholastic demonstrates that succession planning is a process, not an event or a point in time. It also reminds us that the person responsible for managing the family business could become unfit or unable to provide services to the company with little or no advance warning, and it is incumbent upon family leaders to ensure that the business can remain operational in that person's absence. In this regard, succession planning should be viewed as part of the same process that includes estate planning.

The specific actions that families can take will vary and depend on the size and nature of the business, but it is never too early to start having conversations about succession planning and governance. It is equally important to be transparent about the management of the business and to clearly communicate the business owner's intentions throughout this process. Basic steps to take in family business succession planning include:

  • Openly discuss and articulate the roles and rights of all stakeholders in the succession process, including who will have ownership interests and who will take on leadership roles.
  • Agree whether a family member or an outsider will be groomed as the successor.
  • Involve the successor as early as possible in the operations of the business and the decision-making process so that he or she is capable of fulfilling that future role.
  • Organize the company's corporate governance structure to reflect the succession plan and the family's intentions.
  • Ensure that more than one person at the business has decision-making and signatory authority in the event that the principal officer is incapacitated or dies.

By having these discussions early in the process, families may be able to alleviate the stress and tension that accompany succession planning. Good planning may spare the business from uncertainty and unnecessary expense and often affords the business and the successor the best opportunity to succeed following the transition.




Would you like to receive our Day Pitney Generations Newsletter? Sign up here.


Recommended
Related Professionals
Parsippany, NJ
T: (973) 966 8077