Governance in family-run companies: Corporate governance positively influences economic success

• Corporate structures: Global market leaders surveyed voluntarily set up supervisory bodies, 90 per cent of family businesses also have a formally organised shareholders' meeting
• Challenges: 82 per cent of companies see increased demands on supervisory work, the agenda of supervisory bodies is becoming more complex due to digital transformation and regulatory requirements
• Sustainability measures: 57 per cent of companies have sustainability reporting, trend is moving away from a value-driven approach towards data-based reporting

Family-run companies make up 91% of all active companies in Germany and are therefore an important part of the German economy. In their day-to-day work, they are generally characterized by good governance with clear structures, but even the most successful companies can still develop further. This is shown by the second edition of the study "Learning from the best: The governance of family-run family businesses", which was conducted by Esslingen University of Applied Sciences together with KPMG AG Wirtschaftsprüfungsgesellschaft.

Dual ontrol, strong networks: the special governance of family-run global market leaders

One striking difference between the supervisory bodies of family-run global market leaders and those of non-family-run companies lies in their structure. In addition to a statutory supervisory board, global market leaders often set up another body called an advisory board, administrative board, industrial advisory board or family advisory board, which holds the reins of governance. Here, governance is very similar to the Anglo-Saxon monistic system or the Swiss boards of directors. But even if they are not obliged to set up a supervisory body, committees are established voluntarily.

The members often come from personal networks or the family. In over 80 percent of companies, majority shareholders are also represented on the supervisory board. The selection of members is mainly based on entrepreneurial management experience, and 89% of companies also have proven experts on the board. Financial and industry experts are represented particularly frequently. According to the data, most board members invest four to six days per year in their personal development.

"The study shows that global market leaders place a high value on their company supervisory board, with members often coming from personal networks or family. However, this emotional connection can make decisions more difficult. A clearer governance structure helps to make more objective and well-founded decisions," says Simone Zeuchner-Egli, Esslingen University of Applied Sciences, author of the study.

Only a quarter of companies have set an age limit for board members. The majority of members are male and German, with a quarter of the boards having at least 30 percent female members. Competence and shareholder status are the key criteria for election to the supervisory board.

75 percent of companies hold four or more regular meetings per year. The provision of information for board members is predominantly rated as good. 82% of companies see increased demands on supervisory work, particularly in the areas of specialist knowledge and meeting preparation. 71% of companies attach great importance to artificial intelligence and 57% of companies have sustainability reporting, with one third of companies addressing sustainability once a year on the supervisory agenda.

Close ties and structured governance in family businesses

Family businesses are characterised by a special emotional bond between the shareholders, based on shared family and company histories. In 90 percent of the companies surveyed, there is a formally organised shareholders' meeting, often integrated into advisory or supervisory board meetings. 36 per cent also have a shareholders' committee. Almost half of the companies have a family charter and a third organise regular family days.

 

Conclusion: Clear roles and strong leadership ensure good governance

The survey results show that good governance in family-run companies is more complex and depends largely on clear roles, strong family governance and effective communication. The chairperson of the supervisory board has a central role in ensuring that the roles are adhered to and the potential of all members is utilised. Trusting cooperation on an equal footing between supervisory bodies and management is essential to ensure professionalism and good governance.

 

About the study:

The study sheds light on the special features of governance in family businesses and its impact on economic success. It is based on 29 interviews conducted in 2023/2024 with supervisory board chairmen, main shareholders, CEOs and CFOs. The interviews provide insights into the nature, composition and working methods as well as the most important success factors of this group of companies. The connection between family governance and corporate governance was also analysed. The study, conducted by Esslingen University of Applied Sciences in cooperation with KPMG, analyses the governance structures of leading family-run global market leaders from various sectors and derives best practices.

You can download the study here.

KPMG AG Wirtschaftsprüfungsgesellschaft

Clemens Reisbeck

Deputy Head of Corporate Communications
KPMG AG Wirtschaftsprüfungsgesellschaft

T +49 89 9282 1722
creisbeck@kpmg.com

 

Hochschule Esslingen

Christiane Rathmann

T +49 711 397-30 08
Christiane.Rathmann@hs-esslingen.de

www.hs-esslingen.de

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