Having dispatched Dick, Pelletier was greeted as a savior. The adoration didn't last long, though. He inflamed old wounds by criticizing family members in front of one another. Charlie is too old to run the mill, don't you think? he asked. Family members grew more and more alienated.
The most alienated were two members of the fifth generation. Charlene Vaughn and Norman "Woody" Vaughn Jr. had inherited small stakes in L. Vaughn, bringing to eight the number of relatives holding minority stakes in the company. "I could see the potential of the company growing," says Charlene, "and I could see [Pelletier] wasn't pursuing that." In 1985, consistent with Pelletier's strategy of shrinking the company while he put new controls in place, sales dropped to $10 million.
In January 1986, the family fired Pelletier.
As they took their seats in the conference room, each family member was given a copy of a letter. L. Vaughn, the bank said, had allowed its ratios to fall too low. As a result, the bank was freezing its line of credit. To get it back, the family would have to provide personal guarantees.
The family immediately began attacking one another. Some of the Vaughns were ready to offer up their houses as collateral. But the Gaddes wing of the family steadfastly refused. You were wrong to get rid of Pelletier, they said, and that's why the bank has prepared a noose for us. "It was a horror," recalls Woody Vaughn. "We were afraid they'd foreclose."
Soon after that meeting, Pelletier relayed a short message to the family. He wanted to meet with the owners in the conference room at a nearby Sheraton hotel.
His presentation was brief and to the point. I know the bank is ready to foreclose, he said, so I'm going you a way out. I'll buy the company for $500,000. Dick Vaughn couldn't believe it: sell the company their parents and grandparents had passed on to them?
As soon as the family was alone, Dick spoke up. What an insult, he said. It's bad enough to think about selling the company, but for $500,000? Why, our real estate alone is worth more than that! He looked around the room, expecting to see heads nodding in agreement. Instead, the others were mostly sullen. It's all over, one family member said. Anyway, added another, there's no way we can raise the money in a short enough time to keep the company alive.
They took a vote, and the company was gone.
Dick Vaughn may have felt alone as he drove away from the Sheraton, but for once he wasn't. His cousins Charlene and Woody, both newcomers from the fifth generation, were his natural allies. After all, it was their inheritance that was being sold. "I felt like I was burying a family member," says Charlene.
Woody and Charlene owned only minor chunks of stock. Nonetheless, Charlene says, "it was time for some of the younger people to step forward and show that we were interested in pulling together and getting the funding we needed." The next morning, she, Woody, and Dick agreed to work together. They conferred with a lawyer. "From that point on, we went forward," says Dick Vaughn.
Following their lawyers' advice, their next stop was the bank. The whole family cant's agree, they told the banker, ignoring the fact that the family had voted to sell out. Dick and Woody agreed to pledge their houses in return for $250,000. The bank went along.
But the deal with the bank would mean nothing unless they could reverse the vote to sell the company. Dick Gaddes, a one-third owner with his sons, held bitter feelings against the Vaughns; that left only Charlie Vaughn, Charlene's father, as the swing vote. He had voted in favor of selling the business, but nobody believed that he really wanted that. Dick, Charlene and Woody hammered away at him. We're strong enough to keep this company going, they told him. And the Vaughns should stick together. Charlie refused.
Finally, Woody Vaughn offered Charlie a deal. Sell your stock to me, he urged. I'll give you the same price as the outsider. Charlie couldn't believe it. He thought for a minute. If you people are that confident, he said, then count me in.
Now, they had the majority they needed. The Vaughns -- "we had finally banded together," says Dick Vaughn proudly -- presented a solid front. We are not selling L. Vanghn, they announced.
Soon after, the Gaddeses sold their shares to the Vaughns.
Dick Vaughn is standing by the doorway, waiting for the new president of L. Vaughn to sign his pink expense form.
The president is Mike Carroll. After rescuing the company, the Vaughns finally created a strong leadership position at the top of L. Vaughn, and they acknowledged that the family itself had nobody strong enough to take the helm and overcome the difficulties of a company still plagued by minority ownership. Carroll owns 10% of the stock, and 30% more is now owned by outside investors. He has a three-year contract that stipulates "strict operational control." Says Carroll, "somebody has to have complete control. There is now no question who runs this company." The Vaughns are a minority on their company's five-member board; Dick is chairman.
Under the new arrangement, the company is it its second straight profitable year. "What matters to me now is perpetuating the Vaughn name in the woodworking business. It's very selfish to worry about who will carry that out," Dick says. "A family has to accept its shortcomings, or it won't have a business. That's the only way to survive."
But have things really changed? Already two members of the fifth generation own stock. At least one other is expected to climb aboard. "It's our job to pass it to the next generation," says Dick.
And they'll do it just as they always have, splitting the family legacy into pieces. "There's a sense that they want to pass it that way forever," says Carroll, sighing. "If there were 20 Vaughns, they'd split it into 20 pieces."
