CASE 19
NEW WAY DISTRIBUTING
“PaPa” Steve Smith began delivering newspapers by bicycle. He discovered that some of his
wealthier customers would pay him to pick up groceries and deliver them along with the
newspapers. So he founded New Way Distributing, Inc. and within 15 years, he had 25 trucks
PaPa died in 1960, survived by two sons who continued to expand the business, in substantial
part by establishing small- and mid-size grocery stores in ethnic neighborhoods. The approach
Because of the retailers’ ever-increasing financing needs, the family left most profits in the
business and lived frugally. However, by the early 1990s, New Way’s annual sales exceeded $2
billion and the company was generating substantial profits. Compensation to the two brothers
increased significantly.
Three of Big Joe’s six children work in the business today. One of Peter’s four children had
worked in the business for years, but she recently adopted a baby and is on maternity leave. It is
unclear whether she will return to the business or become a stay–at-home mother.
A few years ago, the family’s trusted advisor recommended beginning to pay dividends to
New Way’s CFO spends a fair bit of time, along with another full-time New Way employee,
handling financial matters for family members, including preparing tax returns and numerous
nonbusiness-related tasks. They also coordinate the employment of outside lawyers and
accountants. With the help of an investment consultant, New Way’s CFO (a CPA who has spent
her entire career involved with operating businesses) also oversees the family’s modest
Last year, the family had its first shareholder meeting, which was led by Peter. Key
management personnel made presentations about the company. The family shareholders not
DISCUSSION QUESTIONS
1. If you were Peter, would you hold another shareholder meeting next year? List issues that
you think the family should address in next year’s meeting.
2. List any other actions that you believe Peter should be taking as part of his current