IndyCar Growth depends on IMS Board

Your faithful IndyCar Montagnards recently perused this Roundtable Report from the Minnesota Chapter of the National Association of Corporate Directors. We invite citizens to read the following conclusion, keeping in mind the present state of corporate governance at the Indianapolis Motor Speedway and its related entities.

"Too often, family businesses maintain an informal, 'family only' board
long after business needs have outgrown this structure. Growth of the
business and the shareholder group eventually require governance with a level of
objectivity, discipline, and strategic focus that family members alone can
rarely provide."

We are not here to tell the Hulman George family how to run its business. But we do care deeply about the future of IndyCar racing and the Indianapolis 500. Therefore, we shall briefly consider IMS corporate governance, the one issue that must be resolved satisfactorily if IndyCar is to have a viable future in the competitive marketplace.

The More, the Scarier

The business of the Indianapolis Motor Speedway has grown substantially since Tony Hulman re-opened the track for business in 1946. New events, product lines and strategic business units (SBUs) have been added. Like the business, the family has grown. In a sense, Tony and Mary Hulman had it easy; they handed the family business to one daughter. Predictably, Mari Hulman George has had a more difficult time, balancing the interests of her four children.

The job now becomes even more complicated as a new generation of the family comes of age. Who will be in charge? How will equity in the company be distributed? What rights will equity holders have? Will family members actively manage the company; if so, then which family members? These questions are the first of many that are extremely difficult to answer.

Deliberations among the five members of the Hulman George family who currently serve on the Board of Directors must achieve certain goals if the Indianapolis Motor Speedway and the Indy Racing League are to thrive. Professor John A. Davis of Harvard Business School identifies them here.

• Clarity on roles, rights and responsibilities for all (family) members...
• Encouraging family members, business employees, and owners to act responsibly
• Regulating appropriate family and owner inclusion in business decisions
  

Professor Otis Baskin of the Graziadio School of Business at Pepperdine University puts it this way.

If family relationships are divisive, those negative relationships carry over
into the business and often are more destructive than they would be between
co-workers or managers who have no other relationship.

Recent empirical evidence suggests that this is indeed the case at the IMS. A well defined system of corporate governance can alleviate such problems, allowing family members to trust each other and empowering professional managers to lead the firm toward market competitiveness. We hope that this is currently Job One, Two and Three at the Indianapolis Motor Speedway.

IndyCar racing will not thrive without an empowered, knowledgeable product manager. Sales and racing operations appear to be in good hands, but that is not nearly good enough. Salesmen will sell whatever and whenever they can, regardless of whether or not it is strategically advantageous. Racing operations is a cost center that at best aids business growth via operating efficiency. Direction, strategy, customer focus, product development and supply chain management are all severely lacking.

It does not have to be this way.

Roggespierre