The Five Big Challenges of Family Businesses

Their challenges are succession plans and the separation of powers, together with greater independence and diversity of gender and nationality.

Expansion | February 17, 2020

The Expansión article, "The Five Big Challenges of Family Businesses,” featured the firm’s study, "Corporate Governance in Listed Spanish Family Businesses: Generation of Value and Sustainability." The article is excerpted below.

Family businesses are essential to the economy (they represent two-thirds of businesses worldwide and 60% of companies and half of employment in Europe) but they must move forward to solve a problem with three variables: legacy, profitability and their relationship with the environment and its stakeholders. Russell Reynolds Associates, in collaboration with the Businessmen's Association (Círculo de Empresarios), presented the report Corporate Governance in Listed Spanish Family Businesses: Generation of Value and Sustainability, in which they analyze their governance and define the challenges they face. In Spain, family businesses (where one or more families have more than 30% of control) account for 90% of private groups, 67% of employment and 57% of the GDP. 40 listed companies (20 family-owned and 20 non-family owned), from the Ibex and the Mercado Continuo have been analyzed.

Analyzing the Board
According to the report, the selection of top executives and directors is often influenced, sometimes for emotional reasons, which causes family businesses, especially in the Mercado Continuo, to have fewer independent directors.

One of the recommendations of good governance speaks of the separation of powers between the president and the first executive. Most companies separate these roles, although the number in which the same person assumes both powers doubles in family businesses compared to non-family businesses.

There are also differences in the diversity of the board, both in terms of gender and nationality.

Family businesses have fewer women on their boards (21%) than non-family (26%), despite having more female chairmen in the Mercado Continuo (29%), including Esther Alcocer Koplowitz (FCC) Sol Daurella (Coca Cola European Partners), Isabel Reig (Laboratorios Reíg Jofre) or Helena Revoredo (Prosegur).

The most represented nationalities on the boards are British (21.5%), American (13.3%), Mexican (10.2%), French (10.2%) and German (7.1%).

The study also carries out a profitability analysis that concludes that family businesses with the best results are those that have a smaller board and therefore encourages debate, Board members with more experience and seniority, with greater knowledge of the sector and gender diversity. These companies also have a succession plan which they regularly monitor, although only 15% of companies have one.

To read the full article, click here.

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The Five Big Challenges of Family Businesses