Steve, now 53, and Dennis, 51, both received bachelor’s degrees from the University of California, Berkeley, as well as MBAs. Steve became an international financial consultant and CFO of Salesforce.com, which he helped to take public; Dennis became a successful banker. Bruce, 48, studied viticulture and oenology at the University of California, Davis, where he received his bachelor of science degree in 1978. Although Jack might have felt at the time that his children were abandoning ship, their flight bore fruit, quite literally, in the second phase of Jack’s own career: Cakebread Cellars, one of Napa Valley’s most respected operations, whose small-production, luxury wines range from fine Sauvignon Blanc and Chardonnays to complex and elegant Cabernet Sauvignons.

This venture also began as a happy accident. While up in Napa Valley to work on a freelance photography project, Jack, who studied under Ansel Adams, happened to mention to some family friends who owned a cattle ranch and walnut orchard that he would be interested in buying the property if they ever decided to sell it. By the time he returned to Oakland, these friends had phoned to take him up on his offer. Embarrassed, Jack and his wife, Dolores, explained how they had only $2,500 to their names. That, replied the owners, would do nicely as a down payment.

TOP VIEW Concerned about choosing one of his three sons to succeed him as head of the family’s thriving company, Napa Valley wine pioneer Jack Cakebread resolved to have them choose the successor for themselves. Equipped with a family mission statement and a third-party consultant, the Cakebread sons spent a year and a half defining not only their own roles in the business, but laid foundations for the third generation as well.

For nearly two decades, Jack and Dolores moonlighted between the Cakebread Garage and Napa Valley, working with their mechanics in the morning, pulling stumps and planting vineyards in the afternoon. Their sons shared in the effort, often recruiting friends for days of hard labor on weekends and during summers. The 1973 vintage of Cakebread Chardonnay, the first, consisted of 157 cases—every one of which sold to a wine merchant in Yountville, Calif. “I started the Cakebread Vineyard Management Co. and Cakebread Cellars when I was 43,” recalls Jack. “My hands kept getting fuller and fuller. So in 1990, I sold the Oakland garage, because the wine business had grown to a pretty good size, and I needed to be here full time.”

Jack’s transition from garage owner to garagiste to industry legend was complete: Today, the Cakebread family has more than 300 acres of vineyards under cultivation and annually produces 95,000 cases of wine priced from $20 to nearly $100 a bottle. Yet, like most entrepreneurs contemplating the future of their hard-won enterprises, he began to struggle with the inevitable question as to which of his three sons should succeed him. Unlike many, however, he had laid some important groundwork.

First, years before, he had drafted with his wife and sons a family pact, a legal and personal document that not only defines each family member’s interest in the business, but also the family’s shared goals and values. Secondly, rather than manage his firm entirely from the kitchen table, so to speak, he and Dolores had appointed a board of directors, comprised of both family members and salaried nonfamily members, to advise on the direction of the business.

Each of his children had his merits. Steve’s management experience in the technology industry gave him a broad perspective on how entrepreneurial businesses become big business. Dennis had spearheaded Cakebread Cellars’ sales efforts since 1986, establishing its name as one of the top sellers in restaurants around the country. And Bruce had served as winemaker since 1979.

“That was another mistake I made,” Jack says of Bruce’s hire. “One of the worst things you can do as a family business is to take your child right out of school and put him to work. The kid hasn’t had the opportunity to be in the real world. But I got lucky—it worked out for me. My son Bruce is the youngest, but he’s been here the longest. He’s been here almost 30 years now.”

Any of his sons could handle the job—provided he had the support of the other two. This fact inspired what may have been Jack’s fourth lucky mistake. Although many experts maintain that successful changeover from one generation to the next requires the founder to appoint his or her successor (see “Wine Estate Planning”), Jack determined that his children should decide among themselves. He discussed the idea with Dolores, then sat his sons down and explained what he wanted them to do. Over the course of several meetings, under the guidance of consultant Dr. Craig Aronoff, cofounder and principal of the Family Business Consulting Group in Atlanta, the three men ultimately chose Bruce—the youngest and the son with the least business experience—to step into their father’s shoes as president and chief operating officer. In the following conversation, all four Cakebreads consider their unusual approach to resolving the succession question.

Timing is Everything
Jack: The passing of the baton is a very delicate operation, because some families are dysfunctional, and others seem to make no effort whatsoever. In our case, I have an outside board (they don’t own anything, but they are retired CEOs), and their comment to me was: “Jack, it’s time for succession planning, or do you want to have the boys do it in the sedan coming home from the cemetery?"

Bruce: The idea was to do our succession planning when everybody was healthy, the business is strong, and we can all deal with the issues. When you wait for someone to die, you don’t have control over the timing. It makes sense to do it early. But it does take forward-thinking people throughout the whole family to realize that this is best for the business—and to decide whether this is a business-business or a business run for the family.

All three could handle the job, but if I picked one, I was going to alienate two.

Steve: From the founders’ side of this, my mother and dad get a lot of credit for being open enough to let those discussions go on before a management change was even contemplated. This is hard to do when you’ve put so much passion into building a company. But the beliefs that, fundamentally, the family is successful when the business is successful and the business is successful if the family is successful really go hand-in-hand.

The Family Pact
Jack: I thought, “Let’s decide now.” But I agonized over this. All three of them could handle the job, but if I picked one, I was going to alienate two, and it’s never been pulled off in this valley that a family business has transitioned from one generation to the other without losing a family member somewhere along the line. So I came up with this brilliant idea that it’s not my problem—it’s their problem. I got all three of them in the office, and I said, “OK, here’s my plan.” We got them some professional help—we didn’t just throw them off the deep end of the pool—and it took them about a year and a half to figure out which one of them the other two would support and trust.

Steve: It was fairly insightful of my parents, the board and my two other brothers to perceive that, if the three of us didn’t agree on who the successor was, that individual would have one hell of a time leading the company. Once we got to that conclusion, it was really down to the three of us hashing out who was the best person to take the company forward.

Dennis: This winery has been in business for 32 years now, and certainly the idea of how to keep it ongoing is not a new topic. Years ago, we drew up a family pact—basically a set of key ideas, ground rules and agreements on how things would happen. Our independent board of directors and parents had kind of empowered us to go do our own version of this document. [Our parents] had a lot of input on how the first one went, because it was their family. But once they step down, then it becomes our family pact.

Steve: We had a dialogue about common visions. These discussions were more than just Dennis, Bruce and I trying to sort out the business, but laying down guidelines so other family members as they joined—or as the kids grew up—could understand how we want to operate. And that’s how we came to the family pact. We had to negotiate our selected interests and challenge ourselves, because we were not writing just a document to allow Steve, Dennis and Bruce to operate, but something for future generations as well.

Dennis: There are some legal aspects to the document—a buy-sell agreement for estate planning if parents are gifting stock or passing on stock or selling stock. It ensures that if someone gets divorced—or if someone walks out—then we know how those shares get repurchased or sold.

Bruce: It’s always a reference. But that doesn’t mean that it can’t change as the family evolves. It’s something that you can come back to every 10 or 15 years and ask, “Are these ideas still true today?” and be able to have that kind of frank discussion.

Steve: The first point [of the family pact] was recognizing that a successful business was important to the family’s success. Family members also required ways to come and go in and out of the business. The third was that we needed a way for family members themselves to participate in the business if they chose. And the family pact reflects those three tenants.

Making the Decision
Bruce: We conducted the succession negotiations over three different meetings, spaced out over three or four months. We had a third-party facilitator, Craig Aronoff, with us during this process to make sure we stayed on track and considered key issues. There were some initial discussions; then we drew up a plan. We made sure that we had buy-off at the third meeting before drafting our presentation for our parents and the board.

Dennis: Part of our challenge was that my parents ended up with three kids who all demonstrated that they could do the job. But our conclusion was that we were better off sticking together, and figuring out how to solve all those problems.

Steve: Our talents and passions are complementary in many ways. My passion is running businesses successfully. In the board meetings, I speak to Dennis and Bruce from a third-party perspective. Bruce’s passion has always been the vineyards and making wine. Dennis’ is the outbound marketing and communications. Three siblings compromising isn’t the easiest thing in life, but we learned how to share and meld visions. We’re trying to transition our parents’ vision and passion to a next generation, and yet still enable future generations to bring on modified visions and passions and carry on the success of the business.

Bruce: Dennis has a big responsibility working with sales and marketing—we thought that was important. Steve was involved in a business not related to the winey [Salesforce.com]. I had a successor for my role in the assistant winemaker. That allowed me to move, and so that’s how it worked out.

Jack: They came back to me after the three meetings and said, “OK, we’ve got it figured out. You’re going to stay on as CEO for six or seven more years, because we picked Bruce, the youngest, and the only one without an MBA.” He had to get some additional training. But, my God, it’s been three years, and we haven’t lost any family members. I won’t say that everything is perfect—no family is. But we have a 10-year plan, and a strategic plan that evolves through our board of directors. All three sons sit on the board. But we have more independent directors than family members.

Steve: Our outside and independent board of directors operates not within the strict standards of public company governance, but certainly they are there to ensure that the family doesn’t take advantage of the business and, if there are opportunities to make significant strategic changes, to talk those through with full awareness of the family pact and the direction that we’re trying to take.

Bruce: As the three of us get older, we’ll probably reexamine our pact to see what has changed. A family business transitioning from first to second generation is one issue. The percentage of failures is huge at that stage of a business. It’s our obligation to make sure we don’t join that statistic. But a family business that goes from multiple brothers to a third generation with cousins, is a whole different matter.

Illustration by Jonathan Barkat.

 Back to main Aritcle: Wrestling for Control of the Business

Additional Information
Beating the Odds
Wine Estate Planning