Family Business Succession Case: Sam Steinberg (Part 2)

The rest of the story: from glory to oblivion

After Sam died, Steinberg’s problems surfaced fast.

There was no succession plan, union contracts were neglected, and costs shot up; without its leader, the company lost its way. A non-family CEO briefly improved results in 1984, but the power struggle among the four daughters only grew fiercer.

The shares were split equally but had to be voted together; the result was that nobody could really make the call. Mitzi took firm control, alienated the others, and in the end even resigned. By the late 1980s, squeezed by infighting, costs and competition, the company was forced into an auction. In 1992 it went bankrupt and the brand disappeared. All that lived on for a while were the real-estate company Ivanhoe (later folded into Quebec's pension fund, CDPQ) and the Pik-Nik restaurant chain.

The Steinberg family is still wealthy, but the business is gone.

Here's the timeline in detail:

Sam first appointed his son-in-law Mel as company president, though he knew himself it wouldn't work.

Mel wasn't the most qualified person; really, the job should have gone to a professional manager.

But Sam loved the feeling of "family building it together, running it together," and didn't want to deprive the family of "the chance to run the company."

Four years later, Sam put his eldest daughter Mitzi in charge of the discount department store Miracle Mart, despite strong objections from senior non-family managers. The business kept losing money.

In 1978, Sam died.

The trouble began immediately: there was no succession plan.

Union contracts were poorly managed, driving up costs.

With no leader, the company lost direction.

In 1984, a non-family CEO took over.

Voting rights were split equally, but had to be voted as a bloc.

Nobody could really "have the final say."

Mitzi began taking control of more and more, but alienated many people. In 1985 she resigned.

She wanted to sell the company, but her sisters blocked her, and it ended up in court.

Some improvements were made, and the share price rose.

But by then a power struggle had broken out among the four daughters.

By the late 1980s — family infighting, power grabs, rising costs, fiercer competition — the company was forced into an auction, valued at US$1.5 billion.

Loblaw’s tried to buy it but was blocked on antitrust grounds.

In 1989 it was sold for US$1.3 billion to a shipping company and the Quebec pension fund (financed largely with debt).

Operations improved for a while, but to service the debt they started selling assets, selling the Ontario stores to Loblaws.

Because rent now had to be paid, profitability declined.

Bankruptcy in 1992

Recession, heavy debt, suppliers losing confidence, rising wages.

Loblaws tried to buy it again, but the Quebec government vetoed the deal and arranged a sale to a local competitor.

In June 1992, Steinberg's supermarkets and department stores vanished entirely. (Only 14 years later.)

Aftermath:

Its real-estate company Ivanhoe still exists today, but now belongs to the Quebec pension fund CDPQ.

The restaurant chain Pik-Nik held on until the mid-2010s.

The Steinberg family remains wealthy.

To be fair, Sam's succession arrangements did at least keep the family wealthy, in three ways:

1. Wealth and tax planning

He set up four parallel trusts: after the IPO in the 1950s, he established a separate trust for each of his four daughters.

Each of the four trusts held 25% of Rockview, which in turn held 40% of Steinberg’s voting shares; add the 12% Sam held personally, and the family controlled 52% in total.

Voting trust: even with the shares dispersed, while Sam was alive he could still exercise the votes collectively, preventing his power from being diluted.

This helped the family avoid a huge hit from estate taxes, and ensured the family stayed wealthy after Sam's death.

2. Passing on culture and values

During the war he insisted on low prices and honest dealing, refusing to go "black market," and stamped "customer first" deep into the company's DNA. That customer-centric thinking left the family a brand reputation and a cultural legacy.

3. A sense of family involvement

Sam placed his brothers, sons-in-law and nephews in the company. There were problems in execution, but at least it ensured that "family members were present." This kept the family feeling like "owners" of the business, rather than just indifferent shareholders.

Still, it's a real pity to see such a glorious business disappear. For a family business to carry on, it always has to face one question: how do you turn "one person's certainty" into "an organization's certainty"?

Many family businesses don't lose because they can't make money. They lose at the moment of shifting gears. The day "the successor is announced" is like someone yanking out the router.

Why?

Class notes

I. What’s at stake: what exactly is being passed on? Four dimensions 1) Interests (Wealth & Tax)

What's passed on isn't "money." It's the structure of the money:

Equity layer: voting rights (who gets to vote).

Dividend layer: cash flow (who gets the returns).

Tax layer: trusts, multiple jurisdictions (how to minimize leakage).

Liquidity layer: buybacks, exits, buy-sell clauses (who can get in and out).

Tool Card A | Ownership map

Draw four layers: voting / dividends / tax / liquidity.

For each layer fill in: current state → target state → how to close the gap.

2) Power (Power & Governance)

What's passed on is verifiable power. Not "I'm the one who decides."

But who decides what, within which boundaries, and how.

It has to be visible, traceable, and clear enough to question.

Tool Card B | Decision-rights matrix

Left column: list of major matters (M&A, share issues, key appointments, budgets, red lines).

Top row: shareholders' meeting / board (nomination and compensation) / CEO / EXCO.

In the cells: right to recommend / right to decide / right to veto (tick).

3) Values (Values & Culture)

What's passed on is "who we are."

Values aren't slogans on the wall.

They have to be built into processes, metrics, rewards and penalties.

Tool Card C | Values implementation checklist

Value → which process → which metric → how rewards and penalties are triggered.

Example: integrity → supplier onboarding → pass rate of two-person review → any violation is an automatic veto.

4) Identity (Identity & Legacy)

What's passed on is the identity narrative.

How the founder steps down with dignity.

How the next generation steps up with dignity.

Giving up a position is easy; giving up an identity is the hardest thing of all.

How long does a first-generation founder actually need for a handover?

The answer I heard at Harvard: succession plans of 10 years or more, every time.

Maybe you could start with these three questions:

1) When do I stop managing day-to-day operations?

2) Which boundaries do I keep (strategy only / culture only)?

3) When there's a disagreement, whose "final word" do I accept?

II. Why so hard: why is this so difficult? (Four factors) 1) Emotion and mortality

Talking about succession = talking about death, about losing control. So everyone naturally avoids it.

"The company is my child" — you can't bear to let go. (Sam's famous moment: the board voted "7 for, 2 against," and he laughed, "The opposition wins." A strongman culture makes systems useless.)

2) Complexity rises exponentially

Scale × geography × business lines × regulation × relatives = an explosion of complexity.

The era of phone calls plus gut feeling is over.

You need a new order of process + rhythm + data.

3) Legitimacy shift

Before, employees believed in the person.

After the handover, they have to be made to believe in this system + this team.

Renewing trust is the essence of family business succession.

4) Role confusion and the in-law variable

Family vs. professional managers

Siblings vs. spouses

Shareholders vs. operators

Multiple identities inevitably create friction. (Sam staked positions on his son-in-law and nephews, professional managers were sidelined, and the conflict spilled over into the company.)

Every person's role here comes with unclear, or mutually contradictory, interests, rights and responsibilities.

And once the family starts fighting, management won't be in much better shape.

Family members aren't necessarily shareholders, but they work in the family business;

Shareholders aren't necessarily family members, but their interests are aligned with the company;

Operators aren't necessarily family members, nor necessarily shareholders — so how do you motivate them?

How should each of these three identities — family member, shareholder and operator — conduct itself? Has this question been thought through?

Tool Card D | Seven questions on family participation

1 What's the bar for joining?

2 What are the qualifications for each role?

3 What are the recusal rules?

4 What are the reporting lines?

5 What are the limits on promotion?

6 What's the exit mechanism?

7 How is pay benchmarked against the market?

III. Five common kinds of "failure" (counterexamples are the most instructive)

Collapse once the patriarch leaves: everything is tied to one person.

Fix: separate the layers — ownership, management and culture, running in three parallel lines.

All-or-nothing roles: the founder goes from "all-powerful king" to "invisible emperor" or "completely out of touch."

Fix: put the Chair/CEO boundary in writing; an annual "power check-up."

The ghost that won't leave: a shadow CEO pulling the strings. (Sam left the chairman's seat but still had the most say.)

Fix: a list of major matters; a reverse-delegation process; "three vetoes and it goes to the board."

The chosen one: bloodline over competence.

Fix: separate positions from dividends; succession follows a "competence path" (rotations + P&L + mentors).

Everyone for themselves: the board, the family council and management at war.

Fix: a majority of independent directors; nomination/compensation committees lead appointments and succession; the family council handles family matters only.

Tool Card E | Failure-path self-check

Go through the five ways to lose and tick each one that applies.

For each, write one "stop-the-bleeding action you can take today."

IV. Spelling out "fairness": Merit × Inherit, a mixed order of competence and kinship

Fairness has to be broken apart:

Pay = contribution in the role (Merit): benchmarked to the market, not tied to bloodline.

Dividends = returns on equity (Inherit): by shareholding, regardless of performance.

Governance = qualification to govern: determined by experience/competence/recusal rules, and you can move up or down.

Hard rules (3)

1) Pay for a role uses market bands; dividends follow ownership percentages.

2) A family employment policy: hiring bar, recusal rules, performance-based exit.

3) Scoring for governance seats: competence is assessed when terms expire, and violations trigger exit.

Tool Card F | Three-way split table

Three columns: pay / dividends / governance.

In each column write: who participates, how it's calculated, when it's adjusted, exit conditions.

V. From "event" to "process": the timetable is what really matters

Succession isn't "the day it's announced."

It's a project you work backward on over 10 years.

When the moment arrives, it's always too late — fix the roof while the sun is shining.

Frankly, the late Zong Qinghou started passing on the business early, but the passing on of his wealth seems to have been settled only very late. That's a big problem too.

Four milestones:

1) Target state: org chart + boundaries of authority and responsibility + values implementation table.

2) Candidate pipeline: rotations, P&L, mentors, a shadow board, succession drill days.

3) Board upgrade: a majority of independent directors; nomination/compensation committees; annual stress tests.

4) Emergency plan: a one-page succession checklist (who takes over, for how long, who supports, how it's evaluated).

To be fair, what old Sam did well:

If Sam could do it all over again...

"Never put your life in the hands of a developer." → Don't put your life in the hands of luck and connections; put it in the hands of process and structure.

"The opposition wins." → Let the system constrain the strongest person, not the other way round.

"Ten years from now I must never look like that dim little shop." → Ten years from now, the organization can't be running on a single phone call.

We've talked about plenty of failures; in the final part we'll look at what success looks like. As the saying goes...

All happy families are alike; every failed family fails in its own way.

Coming up in the final part: The ARC blueprint — turning "interests / power / values / identity" into a systemic capability of Assets × Roles × Capabilities.

The family business episodes and lessons in this article are all inspired by the case of Sam Steinberg (HBS Case, condensed version), and abstracted from the course materials and practical experience.