Does nepotism exist in publicly traded corporate America? Of course it does, though it's not usually in the negative connotation that one often associates with favoring the practice of keeping it in the family. We're not talking about incompetent heirs like those you will find in the bumbling Bluth family in the brilliant Fox (NYSE: FOX) series Arrested Development. In some public companies it's just instinctive to roll with the familiar. No one questions why it's now the daughters running the show at Lifeway Foods (Nasdaq: LWAY) or Playboy (NYSE: PLA) or why there's a Ford at Ford (NYSE: F).
And then there's Disney (NYSE: DIS), a company that was run by a pair of brothers, later led by Walt's son-in-law, and then brought back from the brink of being broken up by Roy's son. So why did the SEC decide to rap Disney's knuckles over certain family hiring practices yesterday?
The answer is a matter of disclosure. Three of the company's board members had grown-up children working for the company from 1999 to 2001, making between $60,000 and $150,000 a year, while one's wife had an even more prolific job at Disney's partly owned Lifetime network.
When you compare these acts to those such as the toga party soiree thrown by Tyco (NYSE: TYC) ex-chieftain Dennis Kozlowski on his company's tab as a birthday surprise to his wife, it certainly does seem petty.
I mean, really. You almost have to check your feelings at the door on this one because we really don't know how good these employees were for the company or what role their connected parents played in their hiring and pay. Yet that's not the point here. Keeping it in the bloodline is fine -- assuming the person is rightfully qualified for the post -- but companies need to let their shareholders know.
Disney was not fined for the oversight, though the settlement requires that the company makes sure it doesn't happen again. We live in much more vigilant times than we did even five years when the allegations in this case started taking place. We've lived through Enron, Janus (NYSE: JNS), and Marsh & McLennan (NYSE: MMC), so it's just instinctive to be jaded these days.
So you say you still want to be a public company and be able to hire whoever you want without letting your investors know of any family ties that bind? Oh, brother!
Are you more shocked by Disney's family hiring practices or the fact that it now costs $59.75 for a one-day ticket into one of its Florida theme parks? What are some companies in which keeping it in the family has not panned out? All this and more -- in the Disney discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz has owned shares of Disney since the 1980s though he has never asked to be adopted by a Disney family member. He is a member of the
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