House of Gucci’s broken family capitalism

Even by fashion’s dysfunctional standards, the Gucci saga of family and corporate tragedy is unrivalled. The story of how Maurizio Gucci was gunned down in the hall of his elegant Milan office by a hitman hired by ex-wife Patrizia Reggiani has for years enthralled the luxury world. By then, however, the Italian dynasty had already lost control of its eponymous brand through infighting and ineptitude. It’s an extreme reminder of what can go wrong with family-controlled companies.

Ridley Scott’s star-studded “House of Gucci”, released earlier this week, focuses on how the relationship between Reggiani, the daughter of an obscure trucking magnate, and fashion heir Maurizio Gucci turned from sensual to fatal. Reggiani, played with superb trashiness and heavily accented English by Lady Gaga, is a social climber who mesmerises the aristocratic but vapid Maurizio (Adam Driver) with a cocktail of impertinence and erotic allure.

Defying opposition from his distant father Rodolfo (Jeremy Irons), a failed movie actor who has inherited 50% of the Gucci brand, Maurizio moves in with Reggiani’s parents and takes a lowly job at her father’s firm. In one memorable scene, Reggiani lures her well-heeled fiancé to a steamy encounter in a shabby office shed. When the couple eventually marry, the Gucci family does not show up at the church. However, Reggiani is beaming: she is finally a Gucci.

The happy relationship doesn’t last. Maurizio’s decision to divorce Reggiani, depriving her of the Gucci name, is the ultimate trigger for her murderous machinations. “I had no idea I married a monster,” Reggiani tells her estranged husband. “You didn’t. You married a Gucci,” is Maurizio’s flat reply.

While the movie’s main story line focuses on the couple’s downfall, it also offers a glimpse of the sprawling Gucci dynasty and the complicated relationships between its litigious members. It’s a lesson in the broken family capitalism that has plagued many companies in Italy and elsewhere. Creativity and entrepreneurial spirit are rarely passed from one generation to the next. As families expand, so does the infighting.

Founded by Guccio Gucci in Florence in 1921, the brand started out as a maker of saddles and leather accessories. But it was under Guccio’s entrepreneurial son Aldo, portrayed with verve by Al Pacino, that it expanded into a global phenomenon. By the time the third generation of Guccis came of age, the brand had started to lose its exclusivity. It had become a somewhat mass-market product that competed with cheap fakes. In the movie, an irate Reggiani finds knockoffs of Gucci bags stockpiled in a New York market.

Maurizio, who inherited 50% of the company from his father, understood the brand needed a drastic revamp. He struck a deal with Gulf investment fund Investcorp to systematically buy out the other family members. He exploited the conflicts that existed among some of them, particularly Aldo’s son Paolo, who resented not being allowed to have a creative role at Gucci. In the movie Jared Leto unfairly portrays him as a complete idiot.

Maurizio and Investcorp, which had acquired half of the company by 1989, worked jointly on the turnaround with the help of U.S. fashion executive Dawn Mello. Yet, the recovery was not as fast as the investors had expected. And Maurizio, by then Gucci’s chief executive, was not willing to step aside, accept the role of chairman and let professional management do the restructuring job. His reluctance stands in stark contrast with another Italian dynasty, the Agnelli family, which handed executive control of their automaker Fiat to accomplished managers like Sergio Marchionne.

In the end, Maurizio was pushed out and forced to sell his 50% stake to Investcorp in 1993 for perhaps some $120 million, just before the brand took off on a global scale thanks to the creative genius of designer Tom Ford. The company listed on the stock market in 1995 and was subsequently absorbed by luxury conglomerate Kering (PRTP.PA). With revenue of 9.6 billion euros in 2019, it’s the largest brand in tycoon François-Henri Pinault’s empire. No Gucci family member has a role in the brand today. Giving up control at the right time could have made all the difference.