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Monday, 27 April 2015

Family businesses

In business, family companies continue to thrive. More than 90% of the world’s businesses are family-managed or -controlled, including some of the biggest, such as News Corp and Volkswagen, a carmaker in the throes of a boardroom battle between its two main family owners. The Boston Consulting Group calculates that families own or control 33% of American companies and 40% of French and German ones with revenues of more than $1 billion a year. In the emerging world the dominance of family control is greater still. (The Economist, 18 April 2015)

The importance of power families would have surprised the founders of modern economic and political theory. Political dynasties were supposed to fade as ordinary people got the vote. Family businesses were supposed to lose ground as public companies raised money from millions of small investors. This never happened - partly because many advantages of kinship proved surprisingly enduring. Family companies can be more flexible and far-seeing than public companies. Family owners typically want their firms to last for generations, and they can make long-term investments without worrying about shareholders hunting for immediate profits. (The Economist)

The former translates as follows, in which O.P.M. stands for Other People's Money:










Power families have also prospered from big, and welcome, social and economic shifts. Their prominence reflects the increasing prosperity of Asia, where families traditionally play a large role. The emancipation of women is doubling the talent pool. (The Economist)

Family power also has its dark side - especially where business and politics are entwined in an exclusive nexus of money and influence (see article). A study found that in 2003 firms representing almost 8% of the world’s market capitalisation were run by relatives of their countries’ political leaders. Even without political connections, business families can exercise an unhealthy influence over the wider economy. Pyramid ownership structures enable a small chunk of capital to exert a large degree of control. Another study found that the richest ten families controlled 34% of market capitalisation in Portugal and 29% in both France and Switzerland. (The Economist)

Both my father and mother and their family have been operating family businesses. I am self-employed since 2005. It's my experience that most families show a trend in this respect. I wouldn't be surprised at all that one of my kids - or both - will opt for running their own business.

“Chase the vision, not the money, the money will end up following you.” (Tony Hsieh)