Family businesses stay close to family

Family businesses stay close to family

When your family has built and developed a company through multiple generations, you usually wish to maintain strong links through majority ownership and taking day-to-day management roles within the company. This is certainly true for the members of WomenCorporateDirectors (WCD) who served as respondents in the survey “Financing family business growth: Bringing family businesses and investors together”. By and large this set of individuals comes from highly controlled family businesses, where ownership and management are firmly in family hands. The governance structure is less formal and, unsurprisingly, strongly influenced by family.

Team brainstorming

Preoccupation with family control

Throughout their growth and development, family businesses view family control and leadership as an integral part of their business strategy. The vast majority of WCD Survey respondents (90 percent) reported that the family holds a majority stake in their respective companies, wherein 74 percent represent families owning 100 percent of the business, which gives family members ultimate control over company direction.

Furthermore, family plays a dominant role in decision-making and business management: in 89 percent of the cases, the CEO is a family member, thereby leaving control over business in the hands of the family. This figure is even higher and reaches 100 percent in companies not fully owned by family members.

Informal governance structure

An additional detail to the profile of the family businesses surveyed is their predominantly informal governance structure: only one-third of companies (37 percent) have a formal structure with a board of directors and 11 percent mention a less formal structure with the advisory board. Moreover, almost two-thirds (68 percent) report that more than half or their board is made up of family members.

Family business respondents in the KPMG Global Family Business Survey proved less ‘close’ to the founding family. We uncovered the following illuminating trends from this report:

  • Three-fourths (76 percent) are companies where the family holds the majority stake of the business, though in only 42 percent, the ownership is 100 percent.
  • The CEO is a family member in 71 percent of the surveyed companies and in 52 percent of cases less than half or none of the board is made up of family members.
  • Half of the respondents have a formal governance structure with the board of directors and an additional 20 percent have a less formal structure with the advisory board.

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