Der Spiegel Was One of the Most

Der Spiegel was one of the most well-known magazines in Germany with a long history of journalistic excellence. Starting in 1947, the magazine was known for bold investigative reports that revealed the hypocrisies of the political system and challenged status quo. After buying shares of the magazine from Richard Gruner and John Jahr, Rudolf Augstein becomes the sole owner of the magazine in 1960s. However a major strike at the rival magazine Der Stern inspired the employees at Spiegel to initiate a similar move and pass a statute that would give employees overreaching powers. Instead of agreeing to this move, Augstein sells 50% stake of his company to his employees thus giving them more say in important decisions. He sells additional 25% to G+J. this leaves Augstein with 25% stake in the magazine. All is working fair till Augstein dies in 2002 leaving his children the heir to his 25% stake.

PAST AND PRESENT PROBLEMS:

All was well at Spiegel till Augstein's death but once he was no longer there, things took on a bizarre turn. His children who were left with 25% stake found themselves short of another 1% when a strange clause gave G+J the power to buy additional 1% from Augstein's heirs. Augstein had apparently forgotten about the clause but the other party knew and hence Jakob found himself in a poor position at Spiegel when he became the third biggest stakeholder with apparently no say in major decisions.

This happened because Spiegel had a clearly written rule that required 76% stake to veto a decision or influence it. Jakob and his siblings no longer had that stake and now they lacked influence in the magazine and on the board. Jakob realized during some strategic decisions that all he could do was voice his opinion but without any veto rights, his power had dwindled significantly. Now any decision could be made by the employees and G+J since they together had 76% stake in the company and Jakob was nowhere in the picture.

POSSIBLE SOLUTIONS

Augstein family now had to decide what they would do since they had few options left. Jakob could either sell the remaining stake in the company to some interested party, or he could hold on to what they had and try to buy back his 1%.

Other possibilities would include:

Stay on the board with 24% and not think of having an influence since they would still earn 8 to 12% of the profits.

Look for interested sellers among shareholders, offer a huge price and get additional stake in the magazine.

Start a rival publication after selling what was left of their share.

Allow his brothers and sisters to make a decision in this regard and go along with majority decision.

RECOMMENDATIONS:

It would be in the best interest of Jakob and his siblings if they kept their 24%. This is because selling the shares would mean losing 8 to 12% of profits which are sizeable considering the massive circulation of the magazine. The heirs are used to good money and losing all that any other option would suddenly affect their quality of life. Secondly Jakob needs approval of all his siblings in selling decision and they may not be interested.

However since Franciscka and Jakob understand the subtle details of this business, they should start a rival magazine while maintaining their stake in Spiegel. This would help them generate additional profits over the years and when the time is right, they could sell their stake or buy back additional stake and deal with the issue of Spiegel. For now, they must keep their share and focus on another magazine that would be as good in quality as Spiegel but also offer the sharp pinch that Spiegel had apparently lost.

This would allow Jakob to fulfill his passion for journalism and allow his sister to take care of the management side. Secondly the heirs already have a huge name supporting them and hence they do not need to worry about establishing themselves. They can simply cash in on Augstein name and fulfill their journalistic dreams.

This would give them back the power they had lost at Spiegel.

CONCLUSION: