It All Stays In The Family

In the world of multinational corporations, family business still gets a significant share of the market. When we think about family business, the first thing that comes to mind are bakeries, restaurants, or small coastal inns. But did you know that some of the Fortune 500 companies are family businesses? Ford, Benetton, BMW, Barilla, and LG are just some of them. This group seems to contradict the advice provided by Family Business Magazine. They analysed American oldest family companies and found that the most successful ones stay small, do not go public, avoid big cities and keep it in the family. The magazine also suggested choosing a business that does not go out of style, such as food-related industries. Finally, they recommended adaptability, because every generation has its challenges.

The 100 world largest family businesses — a few years ago had a combined revenue in 2019 of $3.75 trillion, with the smallest company on the list making $10.1 billion. But what constitutes a family company is not always clear. For example, the Toyota family that founded Toyota Motor Co. owns just 2% of the company. In 2009, Akio Toyoda, grandson of founder Kiichiro Toyoda took the helm as the president, so most people consider it to be a family-run enterprise. In addition, many companies operate behind complex ownership structures that make ownership, and even management difficult to determine.

However, Toyota seems to be an exception. Most of the time a family business has one shareholder who has more voting rights compared to other shareholders. This shareholder is a person rather than a company, state, management trust or investment fund. Although family members do not have to own or participate in managing the company, often they do. Having family members manage the business is beneficial because family is loyal and committed to the enterprise. Nonetheless, business and family dynamics are not always compatible, which can present a challenge. In addition, the family member is not necessarily the most qualified person for the job. Another potential problem is if family members get into a fight at work, and other family members are pressured to take sides. Last but not least, if the company goes under, the whole family is out of job.

There is a lot of family vocabulary in regular business as well. For example, if company A has two subsidiaries, company B and C, then B and C are called sister companies. Likewise, company A is their parent company. In relation to company A, companies B and C are said to be its affiliate companies or subsidiaries.