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Guido Corbetta Chair AIdAF -EY of Strategic Management in Family Business

Long- lasting Family Business. Guido Corbetta Chair AIdAF -EY of Strategic Management in Family Business In memory of Alberto Falck Helsinki, 19 th September 2014. Family Business is the most diffused form of capitalism in many countries.

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Guido Corbetta Chair AIdAF -EY of Strategic Management in Family Business

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  1. Long-lasting Family Business Guido Corbetta Chair AIdAF-EY of Strategic Management in Family Business In memory of Alberto Falck Helsinki, 19th September 2014

  2. Family Business is the mostdiffusedformof capitalism in manycountries * Non listed companies. * * North America businesses. - 2 -

  3. Family Business mayoutperform non family businesses Share price (Index: June-2003=100) +133% +65% - 3 -

  4. Family Business mayoutperform non family businesses Cumulatedrevenuesgrowth (Index: 2001=100) Italianfamily companies Italian non family companies Source: AIDA database - 4 -

  5. Family Business mayoutperform non family businesses Return on Investment Italianfamily companies Italian non family companies* Source: AIDA database (*) Average of the relevantindustriesbased on all the limited companies in the AIDA database - 5 -

  6. Family businesses may last for more than … 100 years (1/2) - 6 -

  7. Family businesses may last for more than … 100 years (2/2) - 7 -

  8. Family businesses may last for more than … 200 years - 8 -

  9. But Italian data confirm that the first generation builds, the second maintains and the third... Data processing is related to the period 2000-2008 Source: Aidadatabase - 9 -

  10. And Italian data confirm that some experience is good, too much is bad Data processing is related to the period 2000-2008 Source: Aidadatabase - 10 -

  11. We can conclude that there are some weaknesses and traps of family ownership For all FBs: • Strong resistance to change of the senior entrepreneur and managers • Nepotism • Conflicts between family members • Sub-optimal strategies (control versusgrowth) • Mainly for SME FBs: • Poor strategic management processes • Ambiguous organizational structure and systems - 11 -

  12. How to overcome weaknesses and traps ? John Elkann’s ideas Groups like ours typically go through three stages in their development: a time of strength, a time of privilege and a time of vanity. For me the first is the only one that counts. Giovanni Agnelli - 12 -

  13. How to overcome weaknesses and traps ? John Elkann’sideas • Conservative capital structure (little/no debt) • Frugality • Diversification - 13 -

  14. How to overcome weaknesses and traps ? ErmenegildoZegna’sideas An ownership capable of supporting the enterprise with “patient” capital: • an owner family is a positive factor for an enterprise when it’s capable of balancing its own short-term interests and the enterprise’s long-term development • a conception of ownership that sees the enterprise as a precious asset which, whilst being the property of a few, must be managed with a deep sense of responsibility towards all stakeholders and not just the majority shareholders - 14 -

  15. How to overcome weaknesses and traps ? ErmenegildoZegna’sideas • A corporate leadership capable of effective entrepreneurial change: • a selection process that strictly avoids the risk of nepotism • Professional governance enabling talented non-family (and family) directors and managers to be attracted and retained: • having a clear distinction of roles and responsibilities between owners, directors and managers. In this context, the make up of the board of directors with independents deserves special attention - 15 -

  16. How to overcome weaknesses and traps ? ErmenegildoZegna’sideas • … Vision • … A bit of luck • … A lot of energy - 16 -

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