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The Agnellis And Fiat Family Business Governance In A Crisis A Case Solution

Solution Id Length Case Author Case Publisher
1618 1405 Words (5 Pages) John A. Davis, Bernardo Bertoldi, Roberto Quaglia Harvard Business School : 812128
This solution includes: A Word File A Word File

Fabbrica Italiana Automobili Torino Group Automobiles, known as Fiat Group Automobiles, is a 100 years old business started by Giovanni Agnelli in 1899 and to date, this business is owned by the Agnelli family in its fifth generation. The FIAT group comprises of several automobile manufacturing subsidiaries, including FIAT Automobiles, manufacturing several automobile brands (Bozzolan, et al., 2015).

Following questions are answered in this case study solution

  1. Introduction and Problem Identification

  2. Analysis

  3. Solution 

  4. Recommended Action Plan

Case Analysis for The Agnellis And Fiat Family Business Governance In A Crisis A Case Solution

Everything was going well with the business until the terrorist attacks of 9/11, after which the business situation started worsening and FIAT Group landed itself in a heavy depth form banks. Gianni Agnelli and later Umberto tried managing the business' condition and for this reason, Giuseppe Morchio was brought in to design a rescue strategy for FIAT. Morchio was the fourth CEO in three years' time and he was brought with a hope for improvement (Davis, et al., 2013).

But during the year 2004, FIAT Group faced a critical situation after three consecutive deaths in the family including Gianni Agnelli (the chairman of the FIAT group and Agnelli family leader) in 2003, followed by Umberto Agnelli (who resumed chairmanship after Gianni’s death) in a year. Following Umberto’s death, the new family leader John Elkann had to face the new leadership crisis when Morchio called a board meeting that he should be made the chairman along with the CEO (holding both positions simultaneously) to give out a positive message to investors and stakeholders in a crisis situation (Davis, et al., 2013). But this was a critical decision for the Agnelli family as this was against the family’s traditions and they wanted to protect the ownership and family leadership in the business.

2. Analysis

FIAT Group, being a family business is facing a very critical situation. It is heavily indebted under a convertible debt. If it is not repaid in the given time, it will be converted into shares of the business which will be a threat for the Agnelli family as they would not be able to maintain the majority stake in the business.

Morchio has been somewhat effective in deriving and implementing a rescue plan. Morchio has been the fourth CEO in three years’ time. The Agnelli family has been satisfied with Morchio’s efforts but the recent happenings have put John Elkann into deep thought. At Umberto’s funeral Morchio has been the center of attention receiving every one's condolences. Furthermore, he has called a special meeting on Sunday and John Elkann has got to know that the agenda for thus meeting is to take the board’s approval for Morchio’s suggestion to be the joined CEO and Chairman of FIAT. This again has put John into suspicion as Morchio had never consulted John before giving out this suggestion, nor even he had discussed the proposal with John who, being the family leader, is the official Chairman of FIAT. 

John had discussed this with their loyal old advisor, Gabetti and acting on his advice he had called an emergency meeting with the entire members of the Agnelli family to discuss the situation and know their opinions and advice on Morchio’s performance. He made it clear in the meeting that this isn’t a question of assessing Morchio’s personality, his management style, achievements or personal life. Instead, this was the question of the family business' succession (Molly, et al., 2010).

Should Morchio’s proposal be accepted seeing the gravity of the situation, which would then lead to compromising the family tradition of no outsider being the Chairman of FIAT Group and especially holding joint CEO and Chairman position. This tradition has been broken only once after the second world war when the same person had been both the CEO and Chairman of FIAT to stabilize the business situation in the post-war era. To the Agnelli family, having separate CEO and Chairman for its businesses has been a source of effective governance and ensuring stability (Dalton & Dalton, 2011). Morchio suggests that having the same person as the joined CEO and Chairman may increase the risk of jeopardizing the Agnelli family’s ownership in the business.

3. Solution    

In the family meeting called by John, several suggestions were poured in considering the gravity of the situation. One alternative could be to let Morchio be the joined Chairman and CEO, this would give out a positive message to the stakeholders as proposed by Morchio himself (Rechner & Dalton, 1991). As suggested by another family member, Mr. Montezemolo; who had been previously heading the Ferrari business, could be a great fit for the Chairman’s post; this would save the Agnelli family from the risk of jeopardizing their ownership. After thorough discussion, the second option seemed acceptable but this was subjected to Montezemolo’s availability and acceptance of the designation (Dalton & Dalton, 2011). Montezemolo was asked his availability over the phone and he approved. 

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