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WA The Gucci Family - A Tragic Italian Opera

Source : Family Wars – Grant Gordon & Nigel Nicholson

ORIGINS

The Gucci narrative is a turbulent journey of a family firm that began with an entrepreneurial founder, flourished through the following generation, and ended with the brand surviving but the company failing. As one of the most prestigious and successful designer fashion houses in the world, Gucci continues to be at the top of the list for all fashion enthusiasts. Like many great brands, Gucci began with modest beginnings.

He had four children with Aida Calvelli, one of whom passed away infancy. They adopted Ugo, Aida’s kid who was not her biological child. Guccio established the first Gucci retail store in Florence using his meager funds and 25,000 lire from an investor. In addition to purchasing high-quality leather goods from Tuscan producers and importing them from Germany and England, he also established a small workshop beneath the shop where he produced his own leather goods. Guccio was known for its outstanding customer service and superior craftsmanship.

All of his children—aside from Ugo, who showed little interest—worked for the family business. Guccio was a tough disciplinarian who commanded respect from his children as a father. He parented them in a remote and authoritarian way.

THE GUCCI BROTHERS

Aldo, Guccio Gucci’s oldest son, was a skilled businessman who began working for the family business in 1925. His ideas were rejected by Guccio, but he secretly recognized his son’s aptitude for business. Aldo had three sons from his marriage to Olwen namely, Giorgio, Paolo, and Roberto.

Aldo’s brother, Rodolfo was less interested in the industry and left as soon as he was old enough to work. After the war, Guccio asked Rodolfo to join the family business. Maurizio, Rodolfo’s son, ran the Milan store and eventually assumed leadership of the Gucci handbag design.

When Guccio passed away in 1953, Aldo assumed the role of the company leader and was the main force behind the business. Guccio’s parenting style pitted his boys against one another and barred his daughter Grimalda from inheriting any shares.

ALDO’S REIGN

Aldo became the head of the family and had an inclusive management style. His sons Giorgio and Roberto joined him at his office in New York, but Giorgio was left to take over the management of the store in Rome. On the other hand, Paolo established himself in Florence and was blunt and uncontrolled in his speech.

Gradually, Aldo and Rodolfo became the sole controlling shareholders of the Gucci Empire with 50% ownership each. Aldo split a small percentage of his shares between his three sons, giving 3.3 percent each to Giorgio, Paolo, and Roberto.

During this time, Rodolfo lost his wife Alessandra to a sudden illness, making him more protective and possessive towards his son Maurizio. Maurizio found Patrizia and her family to be a source of strength and protection, and he began to distance himself from his father. On Uncle Aldo’s advice, Maurizio went to work for the family firm in New York.

PAOLO GUCCI

Paolo, the second of Aldo’s three boys, was a creative and eccentric man who wanted to be his own man and felt frustrated by his failure to secure a larger role in the family firm. He launched his own line, the Paolo Gucci (PG) Collection, which enraged Rodolfo and his brothers.

Aldo had no intention of letting his son compete with the family business while still employed by Gucci, so Paolo was fired in September 1980. Meanwhile, Rodolfo was being treated for prostate cancer and was encouraging his son Maurizio to become more active in the business.

All this while, Aldo was shifting a significant amount of company revenues into a subsidiary, Gucci Perfumes, in which Rodolfo only had a 20% stake. Roberto confronted his brother over the issue of ownership inequity, but Aldo was not interested to back down and gave Rodolfo a larger chunk of the new business.

Aldo was now daggers drawn with his brother and sought an ally whom he knew shared his feelings: Paolo. He asked Paolo to pledge his allegiance at an upcoming shareholder meeting, but Paolo declined. This didn’t go well with Aldo and he smashed his son with a crystal ashtray.

PAOLO’S REVENGE

To bring his family together, Aldo invited his son for Christmas in 1982 and proposed to give each of his sons an 11 percent stake in the firm, while he would retain 17 percent. He further declared that this arrangement would make Paolo the vice chairman of Guccio Gucci Spa and he would lead a new division that would commercialize the products that Paolo had included in his own PG line.

The directors unanimously rejected his proposals on the grounds that a cheaper product line would damage the Gucci brand. Paulo felt he had been tricked. Matters were coming to a climax. In the next board meeting, in July 1982 Paolo recorded his grievances and board’s statements in a tape recorder. The uncanny behavior of Paolo recording the meeting agitated Aldo, leading to a physical tussle between the two.

This ended with a bloodstained Paolo leaving the meeting and filing lawsuits against the family firm, seeking $30 million in damages. The press was gleeful and made the Gucci infighting nation’s favorite soap opera. In the course of his investigations, Paolo discovered that millions of dollars were being siphoned to offshore companies by Aldo under a system of false invoicing. Now he had a nuclear weapon in his arsenal, and he was going to use it to claim his right to market the PG brand.

MAURIZIO GUCCI

Following the death of his father in 1983, Maurizio inherited his father’s 50 percent stake in the business and saw this as his chance to become the ruler of the empire. Meanwhile, Aldo had not anticipated how much the loss of his brother might disturb his own grip on the business, and he underestimated the forces ranged against him, on three counts.

• First, he failed to apprehend the scale of Maurizio’s ambition to shake up Gucci and reshape the policies that had made the company successful.
• Second, he was too dismissive of his son Paolo’s determination to win the right to do business under his own name.
• Third, he had put out of mind the very real danger presented to him by the US Internal Revenue Service for his tax evasion.

All this made Maurizio believe that his uncle could go to jail soon. Hence, he decided to seize the initiative and enlist the support of Paolo to create a new company called Gucci Licensing. This would control all licensing under the Gucci brand, in which Maurizio would hold a 51 percent stake and Paolo the balance. In exchange for this, Maurizio asked Paolo to cast his 3.3 percent vote with Maurizio’s 50 percent, giving him de facto control of the company. He also made an agreement to buy Paolo’s stake for $20 million on condition that all pending legal suits were dropped.

PLOTS AND MANOEUVRES

Maurizio set in motion his plan to oust his uncle Aldo, and Domenico de Sole, a legal brain hired by Rodolfo in 1980, called for the board to be dissolved. Aldo was toppled from the empire. Post gaining money and power in his hands, Maurizio had become increasingly assertive and neglectful of his wife Patrizia and their daughters. In 1985, Maurizio packed a small suitcase and left, never to return to his family.

Aldo’s retaliatory move against Maurizio was to file a case against him, supported by his sons, alleging that he had forged his father’s signature on his share certificates after his death to avoid paying inheritance taxes. Paolo’s earlier betrayal of his father to the tax authorities had set a legal juggernaut in motion, and Aldo Gucci was sentenced to a year and a day in prison for taking $11 million out of the company for himself and members of his family.

Maurizio’s plan to ally with Paolo was short-lived, as Paolo sent photocopies of documents to tax authorities. Maurizio was found guilty of tax fraud, for which he was given a suspended jail sentence and a large bill to pay millions in taxes and fines.

THE FINAL CURTAIN

Maurizio, facing mounting pressure on his personal finances, found a financial partner to buy out the shares owned by his cousins. With the support of Gucci’s new partner, Investcorp, he succeeded in this agenda and bought out the shares of Roberto and Giorgio, leaving Aldo with his 17 percent stake. Shortly afterward, Aldo passed away and Paulo, his maverick son, died bankrupt.

Under Maurizio’s management, the company’s strategy was refocused on luxury products and sales started to decline. His financial investors concluded that Maurizio was ineffective as a business manager and moved to buy out his 50% share, ending the Gucci family dynasty.

Patrizia was angered to learn that her husband had deprived her children of their heritage by selling his stake. On 27 March 1995, a hired killer shot Maurizio on his way to his office, and Patrizia was arrested and tried for the murder. She was found guilty and sent to prison for a sentence of 29 years.