The Violent Family Feud That Nearly Destroyed the Gucci Empire

The Family Feud That Nearly Brought Down the Gucci Empire

In the recorded history of business, there are family feuds, bad family feuds, and then there is the story of the Gucci family. Their saga turned out to be a textbook example of how to run the family business into the ground. It had everything – greed, ego, sibling rivalry, foolish expansion, and even murder. Perhaps the most instructive aspect of the story is that it serves as a great example of the all too common trend of the failure of the 3rd generation – compounding the stereotype of 3rd generation family members destroying a successful family business that their father or grandfather worked so hard to establish.

In the case of Gucci, the founding patriarch was Italian fashion giant Guccio Gucci, who first started his company in Florence in the early days of the 20th century. Prior to that, he worked as a bellhop in the Savoy Hotel in London. There he discovered the role that luggage and bags played as a great status symbol for the wealthy and elite. So he returned to Italy, learned the leather manufacturing trade, and launched his line of quality luggage and handbags.

The rest, of course, is history. Seemingly in no time, anything with the Gucci logo was the must-have item for movie stars, heiresses, and even first ladies. Gucci had been launched into the fashion stratosphere.

The Next Generation

When Guccio died in 1953, the business was left to Aldo, the oldest of the three sons. Whereas the father was reluctant to expand globally, Aldo couldn’t wait to open Gucci shops all over the world, wondering why should people have to travel all the way to Italy to buy their products, when they could sell them in Gucci stores in New York, Paris, Tokyo, and London. This kind of rapid expansion could sink a company if not fully prepared, but in this case, Gucci thrived. In fact, President John F. Kennedy referred to Aldo Gucci as the first ambassador of fashion.

When Aldo’s brother Vasco Gucci died childless in 1974, the company was split 50-50 between Aldo and the lone surviving brother, Rodolfo. Aldo gave each of his three sons 3.3%, leaving him with 40% while his brother retained 50%. Despite the imbalance, Aldo maintained control of the company and kept it stable and profitable during his reign.

The Grandsons of Gucci

Trouble started to arise when the third generation began to take more of an active role in running the family business. Aldo’s son Paulo had visions of creating his own fashion line but when his father and uncle rebuffed the idea, he went behind their backs and launched it anyway. They fired him and cut off all ties between him and Gucci.

In a 1982 interview with People Magazine, Paulo explained, “I wanted to expand, to bring in other financial backers and make the business run on more modern lines. But the Guccis have medieval concepts of business. So I became the black sheep.”

Paulo would seek his revenge by exposing Aldo’s tax issues that saw him eventually serve a year in federal prison for tax evasion. When Rodolfo died in 1983, his 50% stake was passed on to his son Maurizio, who sought to team up with his cousin Paulo to take control of the company. Of course, this arrangement didn’t last long. Soon the cousins turned on one another and when Maurizio found himself in trouble with the authorities over tax troubles, he had to flee to Switzerland until he could sort out his problems. Once again, Paulo was responsible for tipping off the authorities.

Be Careful What Your Wish For

In the end, both cousins got what they wanted, with disastrous results. Paulo eventually launched his own fashion line which quickly crashed and burned. Maurizio ran the Gucci empire through the late 80s and early 90s but by the end of 1991, he had run the company into the ground as well. At that point, Gucci had a negative net worth of $17.3 million. With more than $40 million in personal debt, Mauricio was finally forced out of the company by Investcorp, the company that now owns the majority stake in Gucci today. Under stable management, Gucci was able to right the ship and restore the Gucci brand to its former glory. The ending wasn’t happy for Mauricio: In 1995, he was tragically gunned down in a mafia hit in Milan, a crime for which his ex-wife was tried and sentenced 29 years.