Long-lasting Family Business
Guido Corbetta
Chair AIdAF-EY of Strategic Management in Family Business
In memory of Alberto Falck
Helsinki, 19th September 2014
Family Business is the most diffused form
of capitalism in many countries
Country
% of family
businesses
Large sized or listed family
businesses
BRASIL
90% *
70% of large sized groups
USA
80-90% **
35% of Fortune 500 companies
CHINA
85% *
37% of listed companies
FRANCE
83%
40% of the 250 biggest
companies
ITALY
82%
58% of large sized groups
GERMANY
79%
50% of listed companies
INDIA
67%
67% of listed companies
* Non listed companies.
* * North America businesses.
-2-
250
Family Business may outperform
non family businesses
200
Share price
(Index: June-2003=100)
250
+133%
150
200
+65%
150
100
100
50
Jun-03
Jun-0450 Jun-05
Jun-03
Jun-04
Jun-06
Jun-05
Jun-07
Jun-06
Jun-07
Jun-08
Jun-08
Global family
owned
businesses
Global
family owned
businessesIndex
Index
Jun-09
Jun-09
Jun-10
Jun-10
Jun-11
Jun-11
Jun-12
MSCIUSD
World
MSCI World
Index
USD Index
Jun-12
-3-
Family Business may outperform
non family businesses
Cumulated revenues growth
(Index: 2001=100)
250.0
Italian family
Familiari
AUB
230.0
companies
Italian
non family
Non
familiari
218.7
203.4
210.0
195.2
184.2
190.0
177.7
164.9
170.0
131.3
130.0
115.3
107.1
102.3
193.0 190.6
178.9
169.4
143.3
150.0
110.0
224.9
companies
158.5
160.7
144.4
129.9
120.1
110.2
90.0
Source: AIDA
database
01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
-4-
Family Business may outperform
non family businesses
Return on Investment
3.5
3.0
Italian family
Familiari
AUB
companies
Italian
non
Non
familiari
family
companies*
3.2
2.6
2.5
2.0
1.8
2.0
1.5
1.7
1.5
1.0
1.3
1.2
0,9
0,7
0,9
0,3
0,2
0.5
0.0
1.9
-0,2
0,2
-0,4
-0,5
-0.5
-1.0
2003
Source: AIDA
database
2004
2005
2006
2007
2008
2009
2010
(*) Average of the relevant industries based on all the limited companies in the AIDA database
2011
-5-
Family businesses may last for more than
… 100 years (1/2)
-6-
Family businesses may last for more than
… 100 years (2/2)
-7-
Family businesses may last for more than
… 200 years
-8-
But Italian data confirm that the first
generation builds, the second maintains
and the third...
Generation
Δ ROI
Δ ROE
Δ Growth
First generation
+0,6
+2,1
+1,5
Second Generation
=0,0
-0,4
= 0,0
Third and
following generations
-0,8
-2,5
-2,1
Data processing is related to the period 2000-2008
Source: Aida database
-9-
And Italian data confirm that some
experience is good, too much is bad
Age
of the leader
%
Δ ROI
Δ ROE
Δ Growth
Less than 40 years
7,5%
-0,4
+2,4
+1,5
40-50
20,2%
+0,3
+1,2
+0,9
50-60
26,0%
-0,2
-0,7
+0,5
60-70
27,7%
-0,2
-0,6
-0,9
More than 70 years
18,6%
+0,4
-1,1
-1,2
Data processing is related to the period 2000-2008
Source: Aida database
- 10 -
We can conclude that there are some
weaknesses and traps of family ownership
For all FBs:
• Strong resistance to change of the senior
entrepreneur and managers
• Nepotism
• Conflicts between family members
• Sub-optimal strategies (control versus growth)
Mainly for SME FBs:
• Poor strategic management processes
• Ambiguous organizational structure
systems
and
- 11 -
How to overcome weaknesses and traps ?
John Elkann’s ideas
Groups like ours typically go
through three stages in their
development:
a time of strength,
a time of privilege
and a time of vanity.
For me the first is the only one that
counts.
Giovanni Agnelli
- 12 -
How to overcome weaknesses and traps ?
John Elkann’s ideas
• Conservative capital structure
(little/no debt)
• Frugality
• Diversification
- 13 -
How to overcome weaknesses and traps ?
Ermenegildo Zegna’s ideas
An ownership capable of supporting
enterprise with “patient” capital:
the
 an owner family is a positive factor for an enterprise when
it’s capable of balancing its own short-term interests and
the enterprise’s long-term development
 a conception of ownership that sees the enterprise as a
precious asset which, whilst being the property of a few,
must be managed with a deep sense of responsibility
towards all stakeholders and not just the majority
shareholders
- 14 -
How to overcome weaknesses and traps ?
Ermenegildo Zegna’s ideas
A corporate leadership capable of effective
entrepreneurial change:
 a selection process that strictly avoids the risk of nepotism
Professional governance enabling talented nonfamily (and family) directors and managers to be
attracted and retained:
 having a clear distinction of roles and responsibilities
between owners, directors and managers. In this context,
the make up of the board of directors with independents
deserves special attention
- 15 -
How to overcome weaknesses and traps ?
Ermenegildo Zegna’s ideas
… Vision
… A bit of luck
… A lot of energy
- 16 -