On Friday, January 21, major newspapers reported that Edgar Bronfman, Jr., the primary heir of the Seagram fortune, was charged with insider trading on a massive scale. Here is part of an article from the Globe and Mail: “A French court, in a surprise ruling, on Friday convicted and fined Warner Music Group chairman and chief executive officer Edgar Bronfman Jr. for insider trading and former high-flying Vivendi CEO Jean-Marie Messier for misusing company funds and misleading investors. Mr. Bronfman, a former executive vice-president of Vivendi Universal, was fined €5-million ($6.7-million U.S.) and given a 15-month suspended sentence for insider trading around the Vivendi media conglomerate when he was a top executive there. Mr. Messier was handed a three-year suspended prison sentence and a €150,000 fine.”
What interests me about this incident is Bronfman’s behavior as an inheritor of a very large fortune. Bronfman has been very visible in the business world for some time. He might be described as a “adventurer heir.” After Bronfman bought Warner Music Group, his business empire started to fall apart. A recent book about Bronfman called Fortune’s Fool, according to Kirkus Reviews, is a “compellingly told story of the Seagram heir’s music-business adventures at Universal and Warner Music, and what went terribly wrong.” And now Bronfman is in big trouble again—big, big trouble. So far Bronfman has only been charged, and, of course, he has denied the charges. Time will tell whether he is guilty as charged.
Bronfman’s behavior is not characteristic of heirs of large fortunes, although there are execptions. Bronfman is a risk taker, and so far most of his business risks have failed miserably. One aspect of this history is that it is usually the founders of large fortunes, the “wealthmakers,” who are risk takers. Without the willingness to take big risks, and, for the most part, without the willingness to work extremely hard, and, most important of all, without a skillset of business talents, such individuals would have failed, as have done many who did not succeed in becoming rich. In general, their children and grandchildren (Bronfman is in the third generation of the Seagrams empire) are not risk takers. Most important is that the willingness to take big risks with money must be coupled with the business abilities needed to translate their risks into successes. So far, Bronfman has not shown much success. Can he learn from his mistakes? Follow this interesting story.