Keeping it in the Family

Tensions are running high at Europe's biggest media firm, Bertelsmann since a row erupted last week between Supervisory Board Chairman Gerd Schulte-Hillen and the founding Mohn family.

The trouble began when Bertelsmann founder Reinhard Mohn attacked the firm's managers, who run a media empire including the leading German television channel RTL, the publisher Random House and the BMG record label.

In an essay published on Sunday in the weekly Welt am Sonntag, 81-year-old Reinhard Mohn said some of the company's managers had priorities at odds with Bertelmann's best interests.

Although he had earlier made public his intention to limit family influence over the company after his death, he suddenly announced that his wife Liz would take an active role in the firm's activities. The family retains majority voting rights at Bertelsmann.

Backlash from managers

Supervisory Board Chairman Schulte-Hillen hit straight back, telling the Mohn dynasty to stop interfering in the day-to-day running of the organization.

"Should the family increase its influence, as Mohn intends to, the risk of misguided decisions will not decrease," he told the news magazine Der Spiegel early this week.

And if Mohn was "refuting decades of loyal and successful management" in an attempt to justify greater family influence, then this would be "not fair and not appropriate," former CEO of 16 years Mark Wössner told the German newsweekly Focus.

Bringing Bertelsmann back to its roots

The Mohn family has not taken an active interest in the firm for years. Reinhard Mohn (photo) stepped down as operative head when he was 60. At 70, he left the company board to concentrate on running the Bertelsmann Foundation -- the majority stake holder and chief beneficiary of the group's profits -- and started writing business-related books. Last week Mohn published his latest offering: "The Social Responsibility of Entrepreneurs."

But after the media boom in the late 1990s, the company began to backslide, and the Mohn dynasty decided it was time to change strategy. In July 2002, then CEO Thomas Middelhoff was ousted after pursuing an aggressive management style and planning to make Bertelsmann public offering in 2005. The conservative Mohn family objected to Middelhof's strategy and replaced him with Gunter Thielen, described as a man loyal to the company who enjoyed the kind of trust from the Mohn family that Middelhoff never did.

Who's in charge?

But although Reinhard Mohn has named his wife -- 20 years his junior -- the family's representative at Bertelsmann, it is unclear what this will actually mean. "[I am] neither secretly nor officially the ruler of Bertelsmann," Liz Mohn told the German news channel, n-tv last week.

But with a seat on the board alongside two of her children and calls for executives to have "strength, character, modesty and integrity," Liz Mohn is not to be underestimated.

Whether what insiders at the company are describing as "open warfare" will result in the return of Bertelsmann to an inward-looking media dynasty is uncertain. Asked by Der Spiegel whether greater influence by the Mohn family would cause the company to implode, Schulte-Hillen said, "This is not necessarily a certainty, but we cannot exclude it either," he said.