Family business

As a family, or even family describes an organization, if it is significantly influenced by a family or a limited number of owners in the circle with family relationships.

Definition of family

The terms family and small and medium enterprises (SMEs) are manifestations of the preamble middle class. In practice, many small and medium enterprises are organized as a family, however the two terms are defined differently.

• Small and medium enterprises are defined by certain quantitative size limits. The classification of a company in a specific size category takes place here for practical reasons based on the number of employees or the amount of sales.
• Family, however, are characterized by their ownership and governance structures. So you are no size restrictions. In practice, however, the distinction proves to be difficult, especially as a definition of family is missing. An EU expert group proposes to adopt a definition developed in Finland.

"A firm, of any size, is a family business, if: (1) The Majority of decision -making rights is in the possession of the natural person ( s ) who established the firm, or in the possession of the natural person ( s ) who has / have -acquired the share capital of the firm ... ( 3) at least one representative of the family or kin is formally Involved in the governance of the firm. ( 4) Listed companies meet the definition of family enterprise if the person who established or -acquired the firm ( share capital) or Their families or descendants possess 25 per cent of the decision -making rights ... "

According to a definition by the Institute for SME Research ( IfM) Bonn are characterized by the unity of family ownership and management. Capital or default control law relevant owners run their business itself or together with third-party managers.

In addition to the narrow definition of the IfM Bonn, there are other definitions with less stringent criteria. In the definition of the family foundation, certain companies are included, where indeed a separation between ownership and management exists as long as the company but is controlled by a limited number of natural persons or families.

History

The oldest family business in the world and also the oldest companies was generally up to its liquidation in 2006, the Japanese temple builders Kongō Gumi, founded 578 Superseded it was from the also Japanese inn ( ryokan ) Hōshi, founded 718 Traditional family are in the Association les Hénokiens together.

After the importance of large family businesses in Europe and the U.S. rapidly declined in the first third of the 20th century that was connected especially with the limited funding opportunities were leading economic historians such as Alfred Chandler assumes that the days were numbered and the family owners control would be replaced by managerial control. However, to show that examples like the Franz Haniel & Cie.. GmbH that it is not a one-way street in the transformation of family in public companies. In fact, Haniel is now a private equity company owned by about 500 family members, without hardly interfere in the operational work of about 800 holdings.

Characteristics of family

The influence of the family can be perceived through various information channels or organization. On the one hand, the family can by voting rights that determine participation in the management or the supervisory bodies, the fortunes of the company significantly. On the other hand arises influence on generations of experience that has accumulated in the owner's family. Furthermore, family distinguished by an embossed by the owner family company culture.

The influence of a family on a company is, according to prevailing opinion, not, as was previously thought by some authors, dichotomous ( present or absent ), but continuously graded. A validated scale for measuring family influence is the so-called F -PEC.

Family exist in all market-oriented countries. In most of these countries, they represent the large ( numerical ) majority of the company is an EU-wide about 60%. They often wear on more than half of GDP and employment. More and more family develop international (multi- ) location strategies today.

Small family businesses are considered to be rather weak return, but particularly resilient in times of crisis. This applies not only to the U.S., where the Vermont Business School has studied this phenomenon after the financial crisis 2008-10.

The largest German family were able to increase their capital base despite the financial and economic crisis even from 30.1% to 33.5 % in the years 2007-2009, as the study The largest family in Germany showed the Institute for SME Research ( IfM) Bonn. In order for the family in Germany have compared to the non- family-run company on a significantly higher equity ratio.

A problem in family-run businesses often succeed regulation of the management. In the period 2005 to 2009 was, for example, in almost every sixth family of a scheme of succession. Every year there are 71,000 family so that must regulate their succession. Also, internal family disputes may adversely affect the management, especially when the degree of relationship is wider in the later generation and thereby the strategic consistency is lost. Since for many family-owned public disclosure of financial data and company developments is not required by law, the resulting lack of transparency possible investors complicates a detailed (risk) assessment of the company.

The DAXplus Family 30 index tracks the performance of listed family businesses in which the founder's family owns at least a 25 percent voting interest or sitting in management or supervisory board and holds a voting interest of at least 5 percent. It includes German and international companies in the Prime Standard of the Frankfurt Stock Exchange.

Economic Importance

Germany

As a study by the Institute for SME Research Bonn confirmed family are widely used in Germany.

• Approximately 95 percent ( = 3 million ) of the Germany-based companies and companies are run as family businesses.
• 41.5 per cent of the turnover of the undertaking comes from a family business.
• 57 percent of jobs are provided by family.

The list of the 500 top-selling family in Germany is led by Volkswagen ( 2012 revenues: € 192.7 billion ), BMW (sales 2012: € 76.8 billion), Metro ( turnover 2012: € 66.7 billion ), Schwarz Group ( turnover 2012: € 63.4 billion ) and Aldi ( 2011 sales: € 62.2 billion ).

According to the Institute of the German Economy (IW ) generate family-run business - to just belong in Germany and very large - on average a higher return, but have an average equity ratio of 16 percent a smaller capital base than any other company with 22 percent.

A study by the Centre for European Economic Research and the Institute for SME Research Mannheim from 2009 proves that the " Top 500 " family business in busy and thus in the period between 2006 and 2008 the number of 2008 2.21 million people in Germany employees in Germany increased by 4%.

Contrary to popular belief, family businesses also an important phenomenon in the German stock markets, as in half of all listed companies that are listed in the CDAX - excluding financials, is it really about family.

In addition to major business organizations, the association, the family business take - and the ASU Foundation for Family political advocacy especially for family.

Despite this high importance for the economy, the scientific study of family-run or - controlled companies is comparatively low. Only a small part of business-related research and publications addressed family. An exception are in Germany the non-profit " Foundation for Family ", based in Stuttgart, the IFF Institute for Family Business, based in Stuttgart, the " intes Institute for Family " at the WHU Otto Beisheim School of Management in Vallendar, the " Witten Institute for Family " at the University of Witten / Herdecke and the Institute for SME Research Bonn ( IfM).

Austria

About 80 % of all enterprises in Austria ( = 240,000) in 2008 were family-owned. Austria is 10 percentage points above the EU average. Family deal here more than 70 % of all employees and can thus be referred to as the backbone of the Austrian economy. The largest part of them is now in its second generation. In recent years, reinforced the trend for conversion to corporations. In the period 2006-2012 more than 44 percent of companies surveyed by transfer or succession issues are concerned.

Switzerland

In Switzerland, 88 % of all companies family, with the majority again are small and medium enterprises. Located on the Swiss stock exchange thirty percent of the companies are family- dominated. The " family " phenomenon in the stock market is on the so-called " registered shares " back. Because these shares with a share relatively more voting shares are connected as normal shares, the family influence is ensured despite lower capital shares. The largest unlisted family business in 2008, DKSH Group, Tetra Pak (Suisse ) SA and the Hilti Group. A central theme of family is the corporate successor. One can assume that 18.5 % of all enterprises are each within 5 years prior to this task.

Europe

A study commissioned by the European Commission has fully considered the definition of family businesses and their economic importance in the European context. Covered by the study are all members of the European Union, the countries of the European Economic Area ( EEA) and the candidate countries to the European Union (Turkey, Croatia, Macedonia ). Across all countries studied include 70 % to 80 % of all companies to family businesses. Their share in total employment is 40 % to 50 %.

USA

In 2003, 89 percent of companies were family businesses in the United States. They generated about 59 percent of gross domestic product. In family about 58 percent of all employees worked.

Multi-generational family

The successful management of large companies is the entrepreneur requires appropriate training and skills that are essential in the founder generation. In the following generations, sooner or later arises a tension between the talents of the heirs, their interests and the needs of a successful management and the market. Also, and in particular the distribution of shares to several shareholders can lead to problems in business, as conflicting interests and ideas within the shareholder group may be present. Advantageously, an early control of the descendants according to their skills and introduction to the company.

Family Business Governance

Family differ in their corporate governance to the typical, Stock Exchange listed public company. The governance of family businesses is called Family Business Governance. It is defined as an organization of control and management as well as safeguard the cohesion of the family with the objectives of increasing the market success of the family business for generations and avoidance of conflicts in the family. The Family Business Governance is characterized by issues such as

• Identity management and ownership,
• Independence from the capital market,
• Succession of family members in management,
• Departure of family owners,
• Advisory Board and the Supervisory Board and Shareholders' Committee and as a family council
• Distribution of profits.

The individual, situation- appropriate " Family Business Governance " of a family business is creating a family constitution, a family of conduct or of a family strategy. Recommendations for optimal control of these governance issues are the " Governance Code" developed specifically for family. In addition to this institutionalized family governance, there is also an informal exerted through communication, role expectations and models.

Research

Research on family business, inter alia, the International Council of Small Business and Entrepreneurship ( ICSB ) and its European branch, the European Council of Small Business and Entrepreneurship ( ECSB ) stimulated. In Germany, the Witten Institute for Family Business apply ( WIFU ) and intes - together with the Welt am Sonntag initiator of the Governance Code for Family - pioneers in research and teaching in the field of family business.