Colin Mayer, the dean of Saïd Business School at Oxford University believes that somehow the British have lost the secret of keeping family firms going as such for more than two generations

(http://executive-magazine.com/getarticle.php?article=12655) Executive Issue 126, January (2010)

The biggest loss to the business, he believes, is the disappearance of a long-term vision, with the emphasis switching to short-term financial results.

Read this Economist article (Small Island For Sale) , Professor Mayer’s paper and a Harvard Business Review working paper on the matter. Here’s another piece that looks at FBs within the national context:  Our Company Right or Wrong

Contribute here by making a comparison between the British FB experience over the last 100 years and your home country’s experience and tradition of managing corporate control in FBs.

1. Are there many FBs for example coming to the markets now as your home economies internationalize and seek to take advantage of growth opportunities?
2. What is the legal framework in your country regarding corporate control and how does it protect FB interests in maintaining corporate control?
3. Do you think the UK’s approach to creating environments that do not sustain multi-generational FBs are beneficial or detrimental to the national economy?

WARNING: In responding to all of the above questions please provide evidence, facts and qualitatively sound research-based arguments with sources. Do not provide anecdotal, personal opinion and jingoistic journalism. If you want to offer these then please do so in the in-line remarks adjacent to your editing of this post

Here’s a series of FT Articles on Family Dynasties from various nations that highlight the tension between corporate control and sustaining Multi-G FBs to stimulate your research into your nation’s institutional frameworks for Corporate Control.

Here’s the Abstract to Mayer’s arguments:
Family ownership was rapidly diluted in the twentieth century in Britain. Issuance of equity in the process of acquisitions was the main cause. In the first half of the century, it occurred in the absence of minority investor protection and relied on directors of target firms protecting the interests of shareholders. Families were able to retain control by occupying a disproportionate number of seats on the boards of firms. However, in the absence of large stakes, the rise of hostile takeovers and institutional shareholders made it increasingly difficult for families to maintain control without challenge. The result was a regulated market in corporate control and a capital market that looked very different from its European counterparts. Thus, while acquisitions facilitated the growth of family controlled firms in the first half of the century, they also diluted their ownership and ultimately their control in the second half. (Franks, J., Mayer, C., and Rossi, S. (2004), Spending Less Time with the Family: The Decline of Family Ownership in the UK, ECGI )

The World Economic´s Forum describes Venezuela as ranking last in Latin America for the attractiveness of its environment for private investment in infrastructure. Some reasons for this:

· Venezuela is the worst performer in the General Investment Environmental Factors sub-index.

· Quite predictably, given the Chavez administration’s ideological stance, it displays a rather high risk of expropriation.

· The banking system is not perceived as being particularly sound

· Venezuela ranks a very low 10th in financial market enablers. Expensive lending rates (17%), limited availability of long-term credit and an insufficiently developed bond market add to the difficulty of funding projects.

· The government’s readiness to deal with private investment is particularly poor as witnessed by the 11th rank in this pillar. In particular, the survey of experts reveals that little effort is put into developing public-private partnerships.

Because of the above explained facts many Venezuelans are moving to Colombia in order to invest a have a more stable life. Specifically the Colombian city of Cucuta, which is on right after crossing the Venezuelan border, saw an increase of 85% in investments made by Venezuelans.

“We’re seeing a growing number of Venezuelans coming to Cúcuta to start up small and medium-sized business, like fast-food outlets, bakeries and textile shops. They’re attracted to Colombia’s legal and economic stability and many say it’s easier to open a business and make money here than in Venezuela,” says Pedro Sayago of the Cúcuta chamber of commerce.

Neptalí Barrios, an electrical engineer, left Venezuela at the beginning of Mr Chávez’s tenure in 2001 and relocated to Bogotá, where he works for a multinational company.

“I was forced to leave Venezuela because of the devaluation of the local currency, inflation and the high cost of living,” he says. “Increasing political and economic instability meant it was difficult to plan for the future and because I didn’t have pro-Chávez friends in high places, I couldn’t develop my career.”(Moloney, Venezuela migrants go in search of the Stable life in Colombia, 2008, The Financial Times Limited 2010)

Colombia is ranking amongst the 3 more stable countries for private investment in Latin America, according to the World Economics’ Forum report above mentioned.

The exodus of middle and upper-class Venezuelans is a trend not just apparent in Colombia but across the world. The article also mentions that Venezuela was not a migratory country, however today every Venezuelan has a relative living abroad.

After analysing these two readings we can conclude that although there is a trend for internationalising markets Venezuela is not particularly offering a stable position for FB to be started o for private capital investment.

On the contrary we see many FB being sold in Venezuela order to raise capital that will be invested abroad.

Hi guys,

I found a very interesting powerpoint presentation which has made use of an indepth study of family businesses in Europe and their transition phases. Unfortunately, I was not able to copy the slides out which concern Germany and would be of interest here, hence I will paste the whole link which will enable you guys to read for yourself. Furthermore, it also talks about Italy, France and the UK. Franks, J., et. al (2010) Vienna, The Cycle of Family Ownership.

www.ihs.ac.at/vienna/resources/…/20100128_Mayer_Presentation.ppt

http://209.85.129.132/search?q=cache:43kebPqK4LcJ:www.ihs.ac.at/vienna/resources/Economics/Papers/20100128_Mayer_Presentation.ppt+transition+from+family+to+public+companies+in+germany&cd=3&hl=de&ct=clnk&gl=de&client=firefox-a

An article which I found interesting as it describes a very successful family business Haniel in Germany.

Germany itself has a long history of family firms. Many have been around for decades. Others, like multi-billion-euro earner Haniel, are hundreds of years old. It stands to reason that since these companies have been around for so long, their leaders have been doing something right, but not without making a few mistakes as well.

In Germany, 75% of the workforce are employed by family businesses, who contribute 66% of the GDP. Reidel (1994) categorizes 80% (about two million companies) of all Germany’s companies as family controlled and concludes that they are the “backbone” of the German economy.

Over 100 years ago, Haniel, now involved in everything from pharmaceuticals to recycling, was run by three brothers who did not get along. They decided to fix the problem by allowing each brother to run the business for four months of the year. This was disastrous, says Dietze. After realizing they were running the business into the ground, the brothers decided no member of the Haniel family would be allowed to hold a day-to-day operational job ever again.

The declaration holds true to this day: There are about 650 shareholders who are family members and not a single one works within the company.

Amereller sees the major advantage in how German businesses are organized. “The Germans are particularly known for their structures. Frankly, I have seen no other countries which have had such a great focus on family structuring,” he says.

DW-World, a website dedicated to doing business in Germany, reports that family businesses account for 41% of all sales in Germany and provide some 57% of the nation’s jobs. According to the site, Germany’s 500 biggest family businesses increased their staff by 10% between 2003 and 2005 to 2.2 million, whereas the number of jobs decreased by an average of 3% nationwide during the same period.

….

“I met a man running one of the largest German family businesses. He told me: ‘I don’t see myself as running a company; I see myself as keeping it for my children and grandchildren. It’s not my company, it’s my children’s and grandchildren’s company,’” says Dietze. “This can be a definite strength for family businesses.” bt

Grazy J., (2008), Making it Big in Family Businesses

http://www.businesstodayegypt.com/article.aspx?ArticleID=8202

“A family-owned business thinks in generational terms,” he said. “They’re not only concerned about making as much cash as quickly as possible or surviving the next shareholders meeting.”

The term “family owned” does not have to mean a mom and pop operation — the study looked at companies employing from 20 to 256,915 workers – and included big players such as Würth, a maker of fixing and assembly materials which operates in 83 countries, Sennheiser, which makes audio equipment, and Trumpf, a leader in laser technology. Many have found success in specializing in high-quality products for niche markets and have become export champions

While these firms are all active internationally, many still have ties to the region where they are based. Many owner-families have run the companies for generations, and have closer links with employees. That can result in a greater sense of responsibility for their well-being unlike at the giants, where increasing shareholder value often trumps any other concern.

Other advantages family-owned business can enjoy are increased flexibility, and with owners and managers being either the same person or enjoying a close relationship, they can make business decisions responding to market developments often much faster than large concerns, where decisions often have to work their way through committees and boards.

Despite the good performance, Heidbreder says family-owned firms still face hurdles that others do not, particularly in the areas of international accounting standards and inheritance taxes.

When the owner of a family-owned business dies, the firm can be faced with a tax bill of up to 50 percent of the value of the company. That has led to many, he said, having to sell the business or simply shut their doors.

Kyle J., Deutsche Welle, German Family Owned Businesses often upstage the big guys

http://www.dw-world.de/dw/article/0,,2516814,00.html

China family businesses, which are run by ethnic Chinese and be headquarter anywhere, are said to make up the world’s fourth economic power after North America, Japan, and Eurpo.

Arctually, in the mainland of China, majority of business style is state-owned style.
The percentage of FB is very low. But in Hong Kong, Taiwan, the Family-owned business is opposite.

More interesting place is in oversea, the chinese firm is very general.

here is two acticles talk about chinese firms:

Corporate governance and the global reach of chinese family firms in singapore

http://econ.snu.ac.kr/~ecores/activity/00sympo/yeung_soh.pdf

Internationalizing the family firm: a case study of a chinese family business

http://www3.interscience.wiley.com/journal/119016136/abstract?CRETRY=1&SRETRY=0