The Nature of Family Business

Abstract

“What signifies knowing the names, if you know not the nature of things?” reflected Benjamin Franklin. So what are family businesses all about? They come in various shapes and sizes, often reflecting how old an organization is, the type of industry it is in, and what kind of legal and tax environment it operates in. When a family owns a significant share of a business (over 20 % of capital shares or a majority of voting rights), it can influence important decisions, for example, the election of the chairman and CEO. The shares can be held directly or indirectly (via a holding or a foundation organization) by an individual or a group of family members and descendants. “Family partnerships” can also control a business together over generations (e.g., Miele AG in Germany and Switzerland’s Maus Group), and “families in business” can operate portfolio holdings that manage minority and/or majority stakes in a set of companies (e.g., COFRA Holding AG of the Netherlands and Camargo Correa Group in Brazil) or build and control multi-billion conglomerates, as we often see in emerging markets (e.g., Grupo Bimbo of Mexico and Hong Kong’s LI KA SHING Group). The common denominator of all these different types of family businesses is the vision to sustainably grow the business over the long term and eventually pass it to the next generation.