Any other business
Five of the biggest power struggles in business history
10 min read
18 August 2015
Whether it be arguments about funding, personnel or strategic direction, conflict is often par for the course when it comes to growing companies. However, in these extreme cases, it can prove pretty harmful to ultimate success.
Entrepreneurs, and those at the helm of successful and expanding companies, more often than not have big personalities. This trait is a key component in beating away the competition and convincing customers their product is superior, but can sometimes upset the very ecosystem it is there to serve.
(1) Eduardo Saverin vs. Mark Zuckerberg
We start with a pretty famous one that all dates back to a dorm room at Harvard University. As a poor undergraduate, Zuckerberg did not have the funds necessary to acquire the kind of technology infrastructure to take Facebook from being a university-based platform to one covering more ground.
And so it was that he turned to his wealthier friend, Eduardo Saverin, who made a reported $300,000 through “strategic investments” in the oil industry while at Hardward. Saverin stumped up the $15,000-$20,000 needed for servers and became one of the co-founders in the business.
As the company developed, Saverin became responsible for the business and financial side of things while Zuckerberg was product-focused. The result of this was that they were on different sides of the US and experienced a epic founder fall-out.
The introduction of Sean Parker, founder of Napster, seems to have been the catalyst. When Saverin took the decision to freeze the Facebook bank account, it started a chain of events which saw Saverin’s shares in the business diluted though a complex new company creation and distribution of stock.
The upshot saw Saverin ejected from the company with little more than 0.03 per cent to his name. Eventually, and probably backed up by the family money that had allowed him to buy into Facebook at the start, Saverin managed to sue Facebook for “breach of fiduciary duty” and reacquire a four or five per cent share that is now worth billions.
This is probably an example of a catastrophic disagreement that probably ended with each getting what they wanted – Zuckerberg control and Saverin justice and money.
(2) Khalid Shaikh vs. YouSendIt
While Saverin took his former company to court, and won, Shaikh decided the best act of retribution after feeling slighted was to launch a cyber attack.
Rewinding a bit, Yousendit was founded by Ranjith Kumaran alongside Shaikh – who was responsible for writing the original code, building the first servers and ultimately becoming its maiden president.
YouSendIt is an online file-sharing service which was subsequently renamed Hightail in 2013, perhaps attempting to move on from the drama that came about with this founder argument.
After the company acquired customers at a rate of knots in the early days, extra funding became necessary to buy more servers and increase capacity. It soon became clear that Sheikh was only of value when it came to all this technical, and had little ability to converse with investors or partners.
After a $5m Series A deal was closed, and an external CEO recruited, decision began to be made which put pressure on the technological infrastructure and the man (Shaikh) who was at the helm of it.
Then, in an effort to impress a new CEO, Shaikh became aggressive towards colleagues when outages occurred, racked up spending on his corporate credit card at conferences and ultimately began auctioning off hardware to raise funds.
Having been booted out of the company, and spent a few years trying and failing to set up other businesses, Shaikh decided to “test” the server strength of the company he had helped built by flooding it with traffic. In total, he brought it down for four and half hours, but attracted the attention of the FBI and was eventually prosecuted.
Visit page two to find out how power struggles have straddled the sports, motor vehicle and cosmetics industries.
(3) Adi Dassler vs. Rudi Dassler
If only all arguments between brothers ended up with two of the biggest companies in a particular sector being built. Having started the Dassler Brothers Sports Company together, rivalry and suspicion (supposedly heightened by involvement with the Nazis) saw them go their separate ways in 1948.
The result was the creation of Adidas and Puma, two of the largest sporting goods companies in today’s market. Vowing never to speak to each other again, the two brothers went about building their own ventures in the post-WWII era.
Competition, both business and personal, saw huge budgets spent to out do the other when it came to endorsements and marketing.
The power struggle extended into the 1960s and 1970s when, in an era of cold war suspicion, it is reported that Olympic athletes were handed secret payments to wear one of the rival brands.
Apparently, Brazilian footballer Pele earned part of his £70,000 endorsement during the 1970 World Cup by tying his shoelaces shortly before kick-off – ensuring the TV audience got a nice shot of his Puma boots.
A reconciliation of sorts was found in 2009 when a one-off charity football match was played between the two companies – although an Adidas spokesperson quickly said that there were no future plans for joint ventures or activities.
(4) Ferdinand Piech vs. Martin Winterkorn
A fairly recent one, the chief executive (Winterkorn) and chairman (Piech) had a rather public falling out at colossal German car manufacturer Volkswagen.
The result was that Piech was forced into a position of having to resign, aching been with the company for 20 years and sat as CEO between 1993 and 2002.
It all began after Piech criticised Winterkorn in German magazine Der Spiegel. While the issue up for debate was not revealed, the Volkswagen board gave its backing to the CEO, rather than the chairman.
Outlets such as BBC have reported that the bone of contention may have been how to tackle the US market, with Volkswagen currently the second largest maker of cars in the world after Toyota.
Ironically, Piech had dismissed the chances of Winterkorn one day becoming chairman. His resignation now actually frees up the path.
This may not be the end of the story though. Piech is an indirect shareholder in Volkswagen so still has influence in that way. It’s probably safe to say that Piech won’t be launching a cyber attack like Sheikh, as he won’t want to damage his stake in the business, but after two decades he probably won’t go quietly.
(5) Liliane Bettencourt vs. Francoise Bettencourt-Meyers
A return to inter-family wars, this time in the form of two L’Oreal heirs. Now a business which is 106 years-old, the tiff began when Francoise accused those around her mother (Liliane) of taking advantage of her in her old age.
Now 92, Francoise wanted her mother declared mentally incompetent. It stemmed from the gifts lavished on Liliane’s long-term friend Francois-Marie Banier – thought to total €1bn.
Believing her mother was not competent and might be being swindled out of part of her €17bn fortune, Francoise acted and began court proceedings.
Played out in front of the full might of the French, and global, media, the then president, Nicolas Sarkozy was brought into the fray after it was suggested Liliane might have funded his latest run at office.
The court case culminated at the beginning of 2015, and it was later announced that eight people had been found guilty of exploiting the heiress.
Mother and daughter have since put their differences between them and L’Oreal is still worth over $100bn.