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Family Inc. : The Waiting Game

JUNE/JULY, 2007


BW SMALLBIZ -- FAMILY INC.
By Ernesto Poza

Posted on Mon, Oct. 24, 2005 - The State.com

By Jim DuPlessis, Staff Writer

No successor has been announced to lead S.C. textile giant

ROGER MILLIKEN

90-year-old magnate holds company's reins

Spartanburg textile executive Roger Milliken turns 90 today, still running one of the world's largest textile companies.

Milliken has spent almost 60 years at the helm of Milliken & Co., a huge family-owned business that employs 11,000.

No other family members are involved in managing the company, and its famously secretive chief executive will not talk about his plans for a successor.

Milliken is a South Carolina icon.

A bitter foe of unions, he runs an international company but opposed the North American Free Trade Act as unfair to U.S. workers. A staunch Republican, Milliken helped bankroll the 1992 effort of flamethrower Pat Buchanan to unseat incumbent GOP President George H.W. Bush. Milliken also has spent millions modernizing his family's textile plants, which have annual sales of $3 billion, and millions more planting trees, a private passion.

But whither Milliken & Co. after Milliken, the state's richest man?

Numerous people with ties to the textile industry said they either did not know or would not talk about Milliken & Co.'s future.

“I'm not touching that one,” said W.M. “Mat” Self, president of GMI Holding, the parent of family-owned Greenwood Mills and Greenwood Development.

After surviving a helicopter crash in 1984, Milliken appeared to name a successor, giving up the title of president and naming Tom Malone as president and chief operating officer of Milliken & Co. When Malone retired in 2002, Milliken gave the same titles to Ashley Allen, who has a doctoral degree in chemistry from Cornell University.

But then, “titles are a little bit informal in Milliken,” former Milliken executive George Jackson said in 1987. “There's Mr. Milliken and then everybody else.”

Milliken remains chief executive. “I'm going to keep on doing what I'm doing,” he told The Wall Street Journal in 1995. “I'm going to die in the saddle, fighting for American manufacturing supremacy.”

AVOIDING THE FATE OF MANY S.C. TEXTILE FIRMS

When Roger Milliken was born, Milliken & Co. was being run by his grandfather, Seth Milliken, who founded the company in 1865.

Roger Milliken, long a fixture on Forbes magazine's list of richest Americans, has a large extended family. Ownership of Milliken & Co. now extends beyond four generations. Roger Milliken and his late wife, Nita, had five children.

However, if the past is any guide, the future will be challenging for Milliken's textile business. South Carolina was the home of many of the leading families of the Southern textile elite when Milliken took over Milliken & Co. in 1947 after his father, Gerrish Milliken, died from a heart attack.

Since then, many of the state's family-owned textile companies have disappeared. Names that once were recognizable icons of wealth and political power are falling into obscurity.

The Baileys of Clinton Mills, the Montgomerys of Spartan Mills, and the Dents of Mayfair Mills once owned textile companies that were among the largest employers in their communities. In the past 10 years, however, those companies closed, declaring bankruptcy.

Springs Industries — a Fort Mill-based, family-controlled company with sales that rival Milliken in size — agreed this month to put its core sheets and towels business into a joint venture to be based in Brazil.

ALL IN THE FAMILY

Experts say it is important that family-controlled businesses devise succession plans well before executives retire. A recent study shows only one in three firms survives to the second generation, and less than 20 percent are passed along to the third generation.

Despite those odds and his advancing years, Roger Milliken clearly wants to keep Milliken & Co. in the family.

In the late 1980s, Milliken fought an attempt by a branch of his family to sell their company stake to outsiders. A fraction of the family's stock was sold to two Greenville textile executives, but further purchases were blocked.

At the time, court documents showed Roger Milliken owned only a minority of shares in Milliken & Co. but had majority voting rights. In other words, he controlled the company but did not own it. Those documents show Milliken was concerned about the ability to keep the company in the family. Selling stock to outsiders at a high price could result in higher future estate taxes, forcing family members to sell some stock to pay inheritance bills.

But some family members thought they were getting too little return for their shares.

Some have said that has been a key to Milliken & Co.'s survival. While other textile heirs spent the profits of their S.C. mills, Roger Milliken has plowed back much of his company's profits into new equipment and research.

‘LESS INTEREST IN THE COMPANY STORE'

One of the company's shareholders has no relation to the Milliken family.

Greenville businessman Erwin Maddrey bought a small number of Milliken & Co. shares in the late 1980s when he was chief executive of Delta Woodside Industries, a Greenville-based textile manufacturer.

Milliken responded to investment by outsiders Maddrey and Bettis Rainsford, Delta Woodside's chief financial officer, with a legal battle that lasted years. Eventually, Maddrey and Rainsford kept their 520 shares, representing less than 0.1 percent of the company.

Maddrey said he doesn't know much about Milliken. If he did, he added, he couldn't comment because of confidentiality agreements he signed to buy the shares.

But Maddrey said the privately owned textile companies in South Carolina that have disappeared have tended to suffer from a shortage of money to invest in new equipment. Public companies can raise more money by selling stock.

“They just can't get the capital to stay in business, so some of them decide to sell off,” he said.

The rare family-owned companies like Milliken & Co. that survive with family ownership for more than 100 years do so with careful planning.

Financial strategies, boards with independent outsiders to plan succession and family councils to give family owners a voice in the company are needed, said Ernesto Poza, a professor of management at Case Western Reserve University in Cleveland.

That sort of planning becomes increasingly important as the number of shareholders multiplies, Maddrey said.

Founders commit their lives to a business. But as ownership spreads over generations to the founders' growing progeny, many more family members have small stakes in the business.

“Eventually, because there are more people involved in it, there's less interest in the company store,” Maddrey said.