The Icarus Factor: The Rise and Fall of Edgar Bronfman, Jr. - Hardcover

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Rod McQueen, one of Canada’s best-known and respected writers, is the author of a number of nationally bestselling and award-winning books. They include The Eatons, which won the Canadian Authors Association Award for Canadian History, and Who Killed Confederation Life?, which won the National Business Book Award. Can’t Buy Me Love, Rod McQueen’s most recent book, was short-listed for the National Business Book Award. He and his wife, Sandy, live in Toronto.

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In June 2000, Edgar Bronfman Jr. sold Seagram Co. to French media giant Vivendi in a $34-billion deal. Young, handsome and fabulously rich, Edgar Jr. seemed finally to have silenced the detractors who for fifteen years had scorned him, calling him a naïve dilettante and "the star-struck whisky king."

As the third-generation president and CEO of a family dynasty in the booze business, Edgar Jr. had made controversial corporate decisions. In 1995 he sold Seagram's holding in the secure but boring DuPont to buy Hollywood studio MCA. In 1998, he acquired PolyGram, thereby creating the world's largest record company. In 2000, when convergence was the corporate mantra, he merged Seagram with Vivendi.

At fifteen, Edgar Jr. had been designated by his grandfather, Sam Bronfman, Seagram's legendary founder, to eventually head the business Mr. Sam had built as a bootlegger during Prohibition. For Edgar Jr., that choice turned into a curse as he agonized over Mr. Sam's prescient 1966 warning: "Shirtsleeves to shirtsleeves in three generations. I'm worried about the third generation. Empires have come and gone."

In 1994 when Edgar Jr. succeeded his father, he announced: "I'm not going down in history as the one Bronfman who pissed away the family fortune." Despite all his efforts, Edgar Jr. could not avoid his destiny. The value of the Bronfman family holdings in Seagram – swapped for shares in Vivendi – fell by almost three-quarters from $8.2 billion to $2.2 billion between 2000 and 2002. Business Week featured Edgar Jr. on its "Worst Managers List," calling him the "most desperate billionaire around."

In this unauthorized biography, acclaimed and award-winning business writer Rod McQueen tells the gripping story of an empire's demise. Based on 150 revealing interviews with high school friends, associates from his Hollywood and Broadway days, as well as former colleagues, officers and directors at Seagram and Vivendi, The Icarus Factor tracks Edgar Jr. on his meteoric rise and spectacular fall. In addition to Edgar Jr. himself, McQueen interviewed many powerful media and entertainment leaders including Frank Biondi Jr., Jack Valenti, Barry Diller, Ron Meyer, Doug Morris, and Herbert Allen Jr.

What emerges is a compelling and intimate portrait of a man who wrestled with his own fervent dreams and family responsibilities. This is a story about duty and destiny, passion and performance, family and failure. Above all, it is a cautionary tale about the complex relationship between a father and a son with catastrophic consequences.

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That which you inherit from your fathers, you must earn in order to possess.
—Goethe, Faust

Introduction

The two chief executive officers were perched on stools at the Internet Café in Paris. Edgar Bronfman Jr. looked formal, even European, in his Armani suit. In a classic case of role reversal, Vivendi chairman and CEO Jean-Marie Messier had taken off his suit jacket as if he were trying to emulate an American businessman ready to roll up his sleeves.

As the third-generation CEO of the family-controlled Seagram Co., Edgar Jr. had his heritage very much in mind that morning. Before the two men announced the $34-billion merger of their two companies, Edgar Jr. took Messier aside and told him, “You know what they say in the U.S. about entrepreneurial families? The first generation creates, the second makes the fortune, and the third destroys it. I represent that third generation. But with this, I’m assuring the future of the generations to follow.”

Even the date was auspicious. June 20, 2000, was the seventy-first birthday of Edgar Bronfman Sr. “I can think of no better present to give my father, his children, his grandchildren, and his great-grandchildren than this world-beating company we are creating today,” said Edgar Jr. at the news conference. “I’m proud of what we’ve accomplished. It completes Seagram’s translation from a traditional company into a leading force in the global media and entertainment industry.”

Edgar Jr. had indeed done well. In 1994, when he succeeded his father as CEO, the family’s Seagram shares were worth $4 billion. In June 2000, based on the negotiated price per share of $77.35, the family’s holdings had doubled in value to $8.2 billion. Mind you, the broad measure of the stock market — the Dow Jones Industrial Average — had almost tripled during the same six-year period. Still, praise for Edgar Jr., who in the past was widely criticized as a naive dilettante, had never been so fulsome. “Bronfman, one of Hollywood’s favorite punching bags, may finally get some respect,” said Betsy Streisand in U.S. News & World Report. “If they ever erect a family business hall of fame, the Bronfmans should be a shoo-in on the first ballot,” wrote Gordon Pitts in The Globe and Mail. “Few could match their accomplishments: They guided their liquor giant Seagram Co. Ltd. into the third generation; rebuilt its business model; and sold when the time seemed right, amply rewarding family and non-family shareholders.”

Editorial writers at The Gazette in Montreal, the city where Seagram’s head office had been located for more than seventy-five years, were not so sure. “It’s the end of an era in Canadian business. The deal is a confirmation of Samuel Bronfman’s concern . . . that the financial colossus he built might not survive the third generation,” said The Gazette. The editorial paid tribute to the legacy of Mr. Sam, as he was called, congratulated the second generation for their philanthropy, but damned Edgar Jr. with faint praise. “The high price for the company is seen by some as a vindication of chairman Edgar Bronfman Jr.’s strategy to transform it into an entertainment giant in the six years he has run the company.”

The Gazette was wise to withhold applause. Within two years, Vivendi Universal became crippled by $19 billion in debt, the share price plummeted, and the high-flying Messier was ousted. What was supposed to be the capstone of Edgar Jr.’s career would instead become his epitaph. “There’s something in life called The Great Equalizer. I don’t know what it is, I don’t know where it is, I don’t know how it is,” says David Culver, former CEO of Alcan Aluminum Ltd. and a long-time Seagram director. “I only know one thing about The Great Equalizer. If you’re flat on your back on the floor, He’s paying no attention. But if you’re on the cover of Time magazine, He’s waiting there. I think it happened to Edgar Jr. The history is there. How many billion dollars has the family lost? That’s The Great Equalizer at work.”

Because the Bronfman family swapped all of their Seagram holdings for shares of Vivendi, the losses were devastating. From that peak of $8.2 billion, during the next two years the value of those family holdings, including proceeds from shares they sold along the way, fell by almost three-quarters to $2.2 billion. Mr. Sam had predicted this dynastic tragedy in a 1966 interview with Fortune. “Members of a family don’t want to work as hard as employees — and you can’t fire them. I tell my sons and son-in-law that they have to think about what the little children will do. The thing is that it depends on how those little minds develop. You’ve heard about shirtsleeves to shirtsleeves in three generations. I’m worried about the third generation. Empires have come and gone,” said Mr. Sam.

The sale of Seagram and the financial ruin that followed is too much for the old-timers, who blame Edgar Sr. for letting his son run amok. “Even to this day Senior thinks Junior is a genius. I think his admiration of his own son exceeded his good judgment,” says Mel Griffin, who joined Seagram in 1945, rose to become a senior officer and director, and then retired in 1988. “I don’t know whether he recognizes that his son has wrecked the company.” As for what Mr. Sam might think, “He’d be rolling in his grave, I’m sure. He was pretty single-minded about Seagram and the liquor business. There’s hardly anything left of the Seagram Co. I knew,” says Griffin.

Mr. Sam, who died in 1971, has no equal in Canada as an entrepreneurial founder and family business leader. Through sheer determination, gut instinct, and a few corners cut as far as the law was concerned, Mr. Sam made Seagram a household word in more than 150 countries. George Weston, who started a biscuit company that became a food conglomerate, and Roy Thomson, in media and oil, also launched vast Canadian-based global family empires that prospered into the third generation, but both of those families relied on professional management. Seagram was different. The Bronfman family not only maintained control of the company but also held the top job into the third generation. Everything went well until Edgar Jr. sold his heritage with such disastrous results.