November 7, 2021

How an employee came to control $1.6b Scholastic

By ellen

(NYTIMES) – When her phone buzzed on June 6, Ms Iole Lucchese was still absorbing a shock that had come the day before. Her long-time boss M. Richard Robinson Jr, chairman and CEO of the Scholastic publishing company, had died suddenly while taking a walk.

Now, Scholastic’s general counsel Andrew Hedden was delivering a second surprise. He had called to inform her that the 84-year-old man – who turned his father’s book and magazine business into the largest publisher and distributor of children’s books such as Hunger Games and Harry Potter – had left Ms Lucchese 53.8 per cent of Scholastic’s Class A stock.

The company where she had worked for 30 years, rising from a junior employee in the Canadian market to one of its top executives, was now controlled by her.

Being handed control of the company, which is valued at US$1.2 billion (S$1.6 billion), has made Ms Lucchese, 55, one of the most powerful women in book publishing, and the stock provides her – the daughter of a construction worker and a homemaker – with significant wealth.

The gift also shifts the business, which had been passed from father to son, to a person outside the family and puts Scholastic in an extremely unusual position for a public company: adapting to a succession plan many key players did not know was coming.

In his will, Mr Robinson described Ms Lucchese as “my partner and closest friend”.

But an article in The Wall Street Journal described them as “longtime romantic partners”.

“We were great business partners and close friends,” said Ms Lucchese, a senior executive responsible for strategy and the company’s entertainment division.

She declined to address the Journal’s claim that she and Mr Robinson had been involved in a relationship, which the employees believe ended a few years before his death.

“Dick understood that I shared his passion for Scholastic, and what this company means to the teachers we serve, to the children we serve, to everyone,” Ms Lucchese said of his decision to leave his Class A shares to her. “He trusted me with that legacy, and I think it’s because we worked together and he knew that we were aligned.”

That bequest bypassed Mr Robinson’s two sons, John Benham Robinson, 34, known as Ben, and Maurice Robinson, 25, known as Reece. The men declined to comment for this article.

Wall Street does not know her as well as some players in Hollywood do. Scholastic’s largest investor, after the Robinson family, was not aware of Mr Robinson’s succession plan.

“On a number of occasions, I asked Dick,” said Mr David Wallack, a portfolio manager for T. Rowe Price investment firm which has more than 18 per cent of the company’s common stock.

“He would tell me, ‘When I die, there is a safe, and there is an envelope in the safe, and the board of directors will open the safe and see what my wishes were’,” said Mr Wallack, who was in regular touch with Mr Robinson for 20 years.

In its statement, Scholastic described the transition process this past summer as smooth and efficient, saying that an interim team had taken over, as planned, immediately after Mr Robinson’s death and that six weeks later, new CEO Peter Warwick and Ms Lucchese, the new chairman, had been appointed to their new roles.

Mr Hedden, the company’s general counsel, a board member until this summer and co-executor of Mr Robinson’s estate, said in a statement that he was not aware of Mr Robinson’s plans. “From my knowledge of Dick, I know that he made his decisions around his will privately, as was his nature, and that he had the best interests of Scholastic and the continuation of his legacy in mind.”

But Mr Robinson’s legacy includes a messy succession drama that spills into family drama as well. His will names Ms Lucchese a co-executor and gives her his personal property, “with the request, but not the direction” that she distribute it to his children in what “she believes to be in accordance with my wishes”.

The fact that the leadership of a public company hinged on the surprising bequest could represent a breach of duty on the part of the board, said senior associate dean Jeffrey Sonnenfeld, who teaches leadership studies at the Yale School of Management. “If he were 40 years old, they should have had a plan, And when you’re talking about an octogenarian, the odds are not in his favour,” he added.

Scholastic has been a family business since it was founded by M. Richard Robinson Sr in the sewing room of his parents’ house in Western Pennsylvania in 1920.

Mr Robinson’s siblings still own about 47 per cent of the Class A shares, which are held by trusts. His death came as a surprise to many in his personal and professional lives. A daily exerciser, he was fit and in full control of day-to-day operations at Scholastic, and anyone who knew him even a little bit would say the company was his life’s obsession.

A cartoon of his face, showing him looking off into the distance like a superhero, hangs on a gallery wall in Scholastic headquarters, near portraits of Harry Potter.

Ms Lucchese said that when the Manhattan office was redesigned a few years ago, Mr Robinson hadn’t wanted any pictures of himself displayed but she sneaked that one in.

Given his devotion to Scholastic, it was fitting that his memorial service was held there recently. A virtual event with just a few people in attendance, it included a video eulogy delivered by his son Reece.

“We will cherish the memories of the holidays and weekends we spent with him during Covid-19, when he wasn’t working 12-hour days,” the younger Mr Robinson said of his family’s relationship with his father.

The service had all the star power of a Hollywood collaboration, with video messages from Goldie Hawn, Bill Clinton and J. K. Rowling punctuating remarks from former employees and board members. The final speaker, Alec Baldwin, described the friendship he had developed with Mr Robinson as neighbours in a downtown apartment building and expressed his condolences to Mr Robinson’s family, the Scholastic community and Ms Lucchese. He was the only speaker who mentioned her name.

Ms Lucchese, one of Mr Robinson’s closest business associates and the woman in control of the company, chose not to deliver remarks herself. Instead, she wrote a note in the programme that appeared under a picture of Mr Robinson’s broad smile.

“Dick knew that Scholastic could uniquely empower children to overcome obstacles,” she wrote. “He knew this work was worth doing, and he inspired in all of us the passion to get it done.” The message was signed: “Iole Lucchese, Chair of the Board.”