tag:theconversation.com,2011:/fr/topics/family-businesses-43654/articlesFamily businesses – The Conversation2023-04-11T19:12:11Ztag:theconversation.com,2011:article/2030332023-04-11T19:12:11Z2023-04-11T19:12:11ZCorporate social responsibility: Why family businesses get more bang for their buck than non-family firms<figure><img src="https://images.theconversation.com/files/519906/original/file-20230406-18-itucl7.jpg?ixlib=rb-1.1.0&rect=50%2C40%2C6659%2C4426&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">While family owners can sometimes be bad for business, they can also be beneficial in many ways.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>When it comes to turning corporate social responsibility (CSR) into profit, research shows family businesses have the advantage. <a href="https://www.investopedia.com/terms/c/corp-social-responsibility.asp">CSR is a form of self-regulation</a> where businesses make concerted efforts to be socially and ethically accountable to themselves, their stakeholders and the public.</p>
<p>In <a href="https://doi.org/10.1177/01492063211066057">our recent study on S&P 500 firms’ CSR strategies</a>, we found that family businesses get more bang for their buck. While family owners can sometimes be bad for business — the desire for control can result in family-owned businesses under-investing in things <a href="https://doi.org/10.1177/0894486513477454">like innovation</a> <a href="https://doi.org/10.1111/j.1467-6486.2009.00889.x">and diversification</a> — they can also be beneficial.</p>
<p>Family owners tend to focus on the long term because, unlike CEOs in non-family firms, they want their firm to benefit their children and grandchildren.</p>
<p>Because family owners think in terms of generations, they invest more in <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/joms.12015">enhancing their company’s reputation</a> and building deeper connections with employees, suppliers and communities.</p>
<p>Family firms are also able to dedicate the time needed for high quality CSR strategies, unlike non-family firms that might neglect CSR because of short-tenured leadership and concerns about quarterly earnings.</p>
<h2>Symbolic CSR distracts from problems</h2>
<p>There are two types of CSR strategies: symbolic and substantive. Symbolic CSR strategies are low-cost actions designed to garner media attention without solving underlying problems. <a href="https://doi.org/10.1177/01492063211066057">They are reactive, self-serving and distract from current problems</a>. </p>
<p>An extreme and tragic — but powerful — example of symbolic CSR comes from a study on a Malaysian forestry firm’s operations in Guyana. The researchers found that <a href="https://doi.org/10.5465/amd.2014.0064">the company’s Forest Stewardship Council certification diverted attention away</a> from the systemic rape of local women by employees of the company. It took years for global environmental groups and agencies to see through the company’s CSR deception and believe the accusations.</p>
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<img alt="A middle-aged white man with short, curly brown hair speaks into a microphone." src="https://images.theconversation.com/files/519907/original/file-20230406-14-7ew098.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/519907/original/file-20230406-14-7ew098.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=876&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519907/original/file-20230406-14-7ew098.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=876&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519907/original/file-20230406-14-7ew098.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=876&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519907/original/file-20230406-14-7ew098.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1101&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519907/original/file-20230406-14-7ew098.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1101&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519907/original/file-20230406-14-7ew098.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1101&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Tony Hayward, who was BP’s CEO during the Deepwater Horizon oil spill, speaks during a news conference on Fourchon Beach in Port Fourchon, La. in May 2010.</span>
<span class="attribution"><span class="source">(AP Photo/Patrick Semansky)</span></span>
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<p>While the initial positive effect of symbolic CSR can distract from a company’s wrongdoings, the impact usually wears off once stakeholders see through its facade. This is what happened during <a href="https://theconversation.com/deepwater-horizon-scientists-are-still-trying-to-unravel-mysteries-of-the-spill-66878">BP’s massive Deepwater Horizon Oil Spill</a> in the Gulf of Mexico in 2010. </p>
<p>Initially, stakeholders were impressed with BP’s reaction to the crisis, but once they realized the company had cut back on environmental protections — including equipment meant to prevent oil spills — <a href="https://science.time.com/2010/07/25/oil-spill-goodbye-mr-hayward/">they quickly withdrew their support</a>. </p>
<h2>Substantive CSR solves problems</h2>
<p>Substantive CSR, in contrast to symbolic CSR, is long term and actually addresses pressing societal problems. It is backed by meaningful investment and implementation. Organizations <a href="https://doi.org/10.1177/01492063211066057">engaged in substantive CSR will change processes, suppliers and their entire value chains</a>.</p>
<p>Outdoor clothing company Patagonia is an example of an organization pursuing substantive CSR. <a href="https://www.patagonia.com/hidden-cost-of-clothes/">On its website</a>, Patagonia discusses climate change and the global rise of CO2 emissions. Such proclamations might seem symbolic, but <a href="https://theconversation.com/has-patagonia-defined-a-new-gold-standard-for-business-responsibility-191250">Patagonia addresses environmental issues substantively</a> and has committed to only using <a href="https://www.patagonia.com/stories/how-were-reducing-our-carbon-footprint/story-74099.html">renewable energy across all its facilities by 2025</a>. </p>
<p>Substantive CSR can detract from financial performance in the short term because it takes time and money to implement, but it can eventually lift the firm’s reputation and excite stakeholders about its products and services. A favourable reputation, in turn, <a href="https://doi.org/10.1111/joms.12015">improves customer loyalty, sales and profits</a>. </p>
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<img alt="People pass by a wooden sign that says 'We're in business to save our home planet.'" src="https://images.theconversation.com/files/519905/original/file-20230406-440-hxi0f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519905/original/file-20230406-440-hxi0f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519905/original/file-20230406-440-hxi0f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519905/original/file-20230406-440-hxi0f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519905/original/file-20230406-440-hxi0f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=510&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519905/original/file-20230406-440-hxi0f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=510&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519905/original/file-20230406-440-hxi0f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=510&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Buyers pass by a sign in the Patagonia exhibit at the Outdoor Retailer & Snow Show in the Colorado Convention Center in Denver in January 2019.</span>
<span class="attribution"><span class="source">(AP Photo/David Zalubowski)</span></span>
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<h2>CSR has long-term benefits</h2>
<p>Our research found that CSR strategies at family-owned businesses significantly improved firm performance. This benefit wasn’t felt immediately, but in the third year after the initial CSR investment. Positive benefits endured throughout the fourth and fifth years of the strategies being implemented.</p>
<p>Our analysis found that a 20 per cent increase in substantive CSR improved the annual return on assets (a financial ratio that measures a company’s profitability in relation to its assets) to 5.78 per cent from 4.30 per cent within three years. This change equalled a 34 per cent return on assets increase. </p>
<p>When it came to stock market performance (the annual change in the price of the company’s shares on the stock market), the increase was 15.5 per cent.</p>
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Read more:
<a href="https://theconversation.com/how-to-manage-traditions-for-the-continued-success-of-the-family-business-174275">How to manage traditions for the continued success of the family business</a>
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<p>Non-family firms, on average, did not benefit financially from substantive CSR. Their inability to sustain investments across CEOs and time might have reduced stakeholders’ enthusiasm in the company’s CSR efforts. </p>
<p>Non-family firms must work harder to convince stakeholders their intentions are real and sustainable before they are able to reap above-average financial benefits from substantive CSR.</p>
<h2>CSR has short-term benefits</h2>
<p>Family-owned businesses also benefited more than non-family firms when it came to using symbolic CSR strategies. We found that symbolic CSR improved firm performance immediately for family firms. </p>
<p>A 20 per cent increase in symbolic CSR increased their average return on assets within one year to 5.74 per cent from 4.30 per cent — an overall increase of 33 per cent. For stock market performance, the increase in the price of the company’s shares was 5.1 per cent. </p>
<p>Their favourable reputations and <a href="https://books.google.ca/books/about/Managing_for_the_Long_Run.html?id=5fqYqzlWU5IC&redir_esc=y">relationships with customers, suppliers and the local community</a> gave family-owned firms a buffer if things went wrong. </p>
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Read more:
<a href="https://theconversation.com/the-future-of-the-family-business-4-strategies-for-a-successful-transition-156191">The future of the family business: 4 strategies for a successful transition</a>
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<p>In the event of a scandal — or a symbolic CSR strategy being exposed as surface-level and insufficient — stakeholders were more likely to trust family owners to address underlying issues and convert their symbolic claims into substantive actions. </p>
<p>Similar investments in symbolic CSR among non-family firms helped them keep up with peers, but not get ahead. Stakeholders were simply more skeptical of non-family firms’ symbolic CSR activities. </p>
<p>Though the average non-family firm may not see significant gains from CSR investments, some do. By building credibility around long-term CSR commitments, more businesses could overcome stakeholders’ skepticism and gain more bang for their CSR buck.</p>
<h2>Profitable in more than one way</h2>
<p>Research shows that the older generations of family business owners often <a href="https://doi.org/10.1016/j.jfbs.2019.100335">under-invested in CSR</a>. This has the potential to lead to considerable conflict with younger generations because for many millennials and Gen Zs, <a href="https://doi.org/10.1002/cb.1882">the environment, community and society can matter as much — or more — than profit</a>. </p>
<p>Our research shows that investing in CSR can be about reaping financial gain while also making societal contributions. Aligning people, the planet and profits is not only worthwhile and laudable — it might also help the next generation identify more strongly with the family business and motivate them <a href="https://www.35questions.com/">to become responsible owners for another generation</a>.</p><img src="https://counter.theconversation.com/content/203033/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>By investing in corporate social responsibility initiatives, family-owned businesses can make financial gains while also making positive societal contributions.Peter Jaskiewicz, Professor and University Research Chair in Enduring Entrepreneurship, Academic Director Family Enterprise Legacy Institute, L’Université d’Ottawa/University of OttawaJames G Combs, Della Phillips Martha Schenck Chair of American Private Enterprise, University of Central FloridaKatrina Barclay, Executive Manager, Telfer Family Enterprise Legacy Institute (FELI), L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1978552023-03-24T12:05:51Z2023-03-24T12:05:51ZSuccession planning: not all family businesses feud – here’s how they help younger generations take over<p>When the world’s richest and most powerful families deal with the tricky task of succession planning, it can attract a lot of interest. Think of news reports from <a href="https://www.theguardian.com/media/2022/oct/21/murdochs-succession-who-wins-from-move-to-reunite-fox-and-news-corp#:%7E:text=When%20the%20Rupert%20era%20ends,and%20Chloe%2C%20are%20financial%20beneficiaries.">the Murdoch’s media empire</a> or, more recently, <a href="https://www.bloomberg.com/graphics/2023-bernard-arnault-louis-vuitton-moet-hennessy-succession/">luxury goods company LVMH</a>. Even fictional clans such as the Roys of TV show Succession attract massive global audiences with tales of dysfunction as members battle for control of the family firm.</p>
<p>As well as the <a href="https://archive.vanityfair.com/article/2021/5/the-fall-of-the-house-of-hammer">real-life examples</a> tracked by <a href="https://www.theguardian.com/media/2020/aug/02/how-departure-of-james-laid-bare-the-murdoch-family-rifts">the world’s media</a>, the many <a href="https://www.harpercollins.com.au/9781460756690/the-price-of-fortune/">books</a>, <a href="https://www.imdb.com/title/tt11214590/">movies</a> and <a href="https://en.wikipedia.org/wiki/Dynasty_(1981_TV_series)">TV shows</a> based on stories of attempts to pass family wealth and power <a href="https://www.imdb.com/title/tt7660850/">down through generations</a> show just how fascinating this transfer can be. </p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/l8K6Wd2vyHc?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">A trailer for the highly anticipated fourth season of Succession.</span></figcaption>
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<p>But while some family businesses must overcome in-fighting and entitled behaviour as younger family members take control, others manage to pass down the baton without issue. Indeed, although it can be an opportunity to see families at war with each other, succession planning decisions also determine the long-term survival of a business.</p>
<p>Family businesses have different practices and balance various goals. But there are some patterns that seem to contribute to keeping certain families in business for generations. Our research shows there are three key stages family members must work through to gain the <a href="https://journals.sagepub.com/doi/full/10.1177/10422587211046547">knowledge needed for a successful succession</a>: setting the rules, grooming the successors and passing the baton.</p>
<h2>Setting the rules</h2>
<p>In a family business, success at work often goes beyond a simple formula of talent and skill. Gathering a different type of knowledge based on “<a href="https://journals.sagepub.com/doi/full/10.1177/10422587211046547">doing things together</a>” can be just as important – especially if these activities relate to the family business. Sweet Mandarin – at one time the UK’s best local Chinese restaurant, <a href="http://sweetmandarin.com/blog/gordon-ramsays-f-word/">according to TV chef Golden Ramsay</a> – resulted from <a href="https://www.abebooks.co.uk/9780091913618/Sweet-Mandarin-Helen-Tse-0091913616/plp">three generations of family cooking together</a>, for example. </p>
<p>These family rituals set rules of behaviour based on a shared, <a href="https://iris.unibocconi.it/handle/11565/4000773">often rich and diverse, history</a> as different generations interact inside and outside of the business. Skills and stories (or knowledge) are passed between generations. But so are personality traits <a href="https://journals.aom.org/doi/abs/10.5465/annals.2014.0053">such as resilience</a> that can help prepare younger family members to work in the business.</p>
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<img alt="Baby girl, child and senior man comparing the hands size. Two different generations concept." src="https://images.theconversation.com/files/507571/original/file-20230201-26-e9iqv6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/507571/original/file-20230201-26-e9iqv6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=418&fit=crop&dpr=1 600w, https://images.theconversation.com/files/507571/original/file-20230201-26-e9iqv6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=418&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/507571/original/file-20230201-26-e9iqv6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=418&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/507571/original/file-20230201-26-e9iqv6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=525&fit=crop&dpr=1 754w, https://images.theconversation.com/files/507571/original/file-20230201-26-e9iqv6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=525&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/507571/original/file-20230201-26-e9iqv6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=525&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">When families live and spend time together, it can help strengthen the family firm.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/baby-girl-child-senior-man-comparing-1136723819">David Pereiras/Shutterstock</a></span>
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<h2>Grooming the successors</h2>
<p>So, once younger generations are ready for their first day at the family firm, where should they start? The recent <a href="https://www.theguardian.com/business/2023/jan/14/succession-struggle-rages-for-luxury-giant-lvmh-bernard-arnault">succession planning efforts of luxury goods company LVMH</a> – owned by the richest man in the world Bernard Arnault – has shone a light on the fascinating world of <a href="https://link.springer.com/book/10.1007/978-3-319-98542-8">families that own and control several businesses</a>. </p>
<p>This is a way to help younger generations take control, often more gradually. These families setup, acquire and manage family businesses in parallel over <a href="https://sk.sagepub.com/reference/hdbk_familybusiness/n18.xml">a long period of time</a>. This provides a training ground for younger generations.</p>
<p>Such complex family portfolios come in different shapes and sizes. As well as France’s LVMH, other examples include <a href="https://www.reuters.com/article/mexico-slim-succession-idINKCN0Y820F">Grupo Carso</a>, a Mexican conglomerate involved in retail, energy and construction, among other industries, and controlled by the Slim family. Or India’s <a href="https://www.theguardian.com/business/2021/oct/09/air-india-tata-conglomerate-in-24bn-takeover-deal">Tata Group</a>, which includes companies in the auto, steel and aviation industries. It is run by the Tata family via parent company Tata Sons.</p>
<p>And it’s not just international corporate giants that do this. There are many <a href="https://priefert.com/about-us/about-the-family">inspiring, and often dramatic, stories</a> of how diverse members of one or more families influence the creation, development, acquisition and even divestment of various parts of smaller firms to <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/joms.12717">shape a family business portfolio</a>. </p>
<p>Our research suggests that building these firms is not just about creating financial advantages, competing and the desire to expand or innovate. It can also relate to <a href="https://www.tandfonline.com/doi/full/10.1080/08985626.2022.2067902">family dreams, dynamics, conflicts and crises</a>.</p>
<p>As a portfolio of businesses develops, growing managerial complexity might push the leaders to look for the <a href="https://journals.sagepub.com/doi/full/10.1111/j.1540-6520.2012.00534.x">ideal family member</a> to lead a particular business unit, division or the entire conglomerate. <a href="https://link.springer.com/book/10.1007/978-3-031-13206-3">Our research</a> shows the decisions behind who should be entrusted to lead are influenced not only by business objectives, but also by finding ways to more efficiently balance family ambitions, skills and responsibilities.</p>
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<img alt="Carpenter family business with generations in the workshop having a break" src="https://images.theconversation.com/files/507564/original/file-20230201-21-an94m7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/507564/original/file-20230201-21-an94m7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/507564/original/file-20230201-21-an94m7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/507564/original/file-20230201-21-an94m7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/507564/original/file-20230201-21-an94m7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/507564/original/file-20230201-21-an94m7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/507564/original/file-20230201-21-an94m7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Successful family businesses often provide space for younger generations to learn the business and experiment with new ventures.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/carpenter-family-business-generations-workshop-having-1628760379">Kzenon/Shutterstock</a></span>
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<h2>Passing the baton</h2>
<p>A family business portfolio could also offer younger generations a “sandbox”. This is an environment in which they can explore and experiment with new ideas or best practices, fail and try again. They can use this time to prove they are apt stewards of existing family assets, as well as <a href="https://journals.sagepub.com/doi/full/10.1177/02662426221084918">entrepreneurially savvy</a> enough to continue building them. </p>
<p>The process of pursuing new opportunities, often creating or acquiring new ventures, may then continue across generations. And such an approach can help to prepare several potential successors, or even facilitate the passing of the baton to a larger pool of eager candidates.</p>
<p>Our research suggests that such “training” can start very early for family members who want to be involved in the firm. This is particularly true for those with diverse skills and ambitions, and where incumbent generations are still not considering retirement. </p>
<p>In the case of LVMH, for example, we may only now be seeing the end result of a long and deliberate approach to grooming family members to lead diverse business units <a href="https://www.reuters.com/business/retail-consumer/lvmhs-arnault-brushes-off-succession-question-2023-01-26/">while the previous generation remains involved</a>.</p>
<p>Families that create such sandboxes could be devising solutions to unforeseen, future succession dilemmas. And this way they can protect and grow the family business for many more generations to come.</p><img src="https://counter.theconversation.com/content/197855/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bingbing Ge received funding from Research and Development Management Association during her PhD. </span></em></p><p class="fine-print"><em><span>Allan Discua-Cruz does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Many family businesses pass through generations without issue, some even grow stronger.Allan Discua-Cruz, Director, Centre for Family Business, Department of Entrepreneurship and Strategy, Lancaster UniversityBingbing Ge, Lecturer in the Department of Entrepreneurship and Strategy, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1701392021-10-25T13:28:41Z2021-10-25T13:28:41ZSuccession: how true to life is the TV series?<p><em><strong>This article contains spoilers for season three of Succession.</strong></em></p>
<p><a href="https://www.hbo.com/succession">Succession</a> is back for another series of excruciating family interactions and vicious backstabbing. Going behind the scenes at <a href="https://theconversation.com/succession-logan-roys-hand-picked-directors-cover-up-wrongdoing-just-like-in-real-life-170140">Waystar Royco</a> – the fictional version of the world’s biggest media and entertainment company – has never made for comfortable viewing.</p>
<p>The business has long turned <a href="https://succession.fandom.com/wiki/Category:Main_Characters">the family</a> against each another – yet they must work out who will be crowned successor to <a href="https://succession.fandom.com/wiki/Logan_Roy">Logan Roy</a>, the founder and CEO of the media conglomerate and the patriarch of the Roy family. Over the past two series, viewers have watched on as three of the four Roy children – <a href="https://succession.fandom.com/wiki/Kendall_Roy">Kendall</a>, <a href="https://succession.fandom.com/wiki/Roman_Roy">Roman</a> and <a href="https://succession.fandom.com/wiki/Shiv_Roy">Shiv</a> – each attempt to prove their worth as the right person to take over the firm.</p>
<p>For many family businesses, when the person at the top takes ill, dies or wants to retire this can often mean the end of the business. <a href="https://doi.org/10.1111/j.1540-6520.2004.00047.x">Research shows that</a> succession planning must be anticipated long in advance, but often isn’t. And without plans in place, everything else can quickly topple. </p>
<p><a href="https://doi.org/10.1108/JKM-09-2020-0701">My research</a> looks at successions in family businesses – specifically, how knowledge should be passed on during this process. It’s clear to me that the Roy family are missing many important elements that add up to create a successful succession – namely, a trusting atmosphere, a loving family and most of all, a CEO that is willing to retire. </p>
<h2>How a succession should look</h2>
<p>In many ways, the TV series Succession demonstrates the exact opposite of what family businesses should do. Rather than things being planned, considered and clearly articulated, the process is highly dysfunctional, unpredictable and often downright abusive. </p>
<p><a href="https://doi.org/10.1108/JKM-09-2020-0701">I have found</a> that there are certain factors companies must consider should they want to avoid the Roy-style situation. In an ideal world, a succession would go through three stages, the first of which involves ground rules being established so everyone knows what to expect. </p>
<p>A <a href="https://doi.org/10.1177/0894486513480386">loving and trusting</a> family relationship is important during this foundational stage and family meetings often play an important role. The Roy family obviously do not relate to each other in a loving and trusting way. So while there are many family dinners and family meeting scenes, these seem to resemble something closer to the <a href="https://www.history.com/news/why-judas-betrayed-jesus">Last Supper</a> – and end with similar levels of betrayals. </p>
<p><a href="https://doi.org/10.1016/j.jfbs.2015.10.002">Research shows</a> that the leadership style of the current CEO of a business also plays a vital role in the success of this initial phase. Ideally, this is someone who will openly participate in the process and who is supportive. In the case of Succession, Logan often holds back knowledge from his children and plays them off against each other in his typical power-hungry fashion. </p>
<p>Adding to all these difficulties, as with many businesses, Waystar Royco also features a host of non-family employees and other stakeholders. All these individuals have their own experiences and knowledge that need to be captured and passed on to the new CEO, but <a href="https://doi.org/10.1080/14778238.2019.1621224">research shows</a> this is often hard to do. </p>
<p>Indeed, in the first episode of season three, Logan declares that if one of the kids was to take over, the first thing they would do would be to sack some of his longstanding advisers – which is what often happens in real life. Instead, Logan has decided to temporarily elevate the company’s general counsel (or chief legal officer), <a href="https://succession.fandom.com/wiki/Gerri_Kellman">Gerri Kellman</a>, to the top spot – while still steering the ship from the shadows, of course. </p>
<h2>The grooming stage</h2>
<p>Once the ground rules have been established, “the grooming stage” can then commence – this is where the successor is nurtured to be the next leader of the business. The Roy family dynamic will again likely play out negatively in this phase as nurturing is not a word many of them are familiar with. </p>
<p>Logan’s determination to decrease any successor’s autonomy, combined with his controversial moral and ethical standards, will also mean that things will be very difficult for interim successor Gerri – and for any eventual successor of the firm. Indeed, it will be hard for anyone to really make any difference – particularly in light of the allegations of <a href="https://www.thetimes.co.uk/article/succession-season-three-cast-interview-snclt08cp">covered up</a> rapes and murders on cruise liners that the company owns.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/Q2vuZQJNVl8?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p><a href="https://doi.org/10.1080/14778238.2018.1457005">Research has found</a> that, at the grooming stage, good mentoring and coaching is important to ensure knowledge is passed on between generations. Though <a href="https://doi.org/10.1016/j.jbusres.2006.12.014">jealousy and rivalry</a> can stop things going smoothly here: as Logan has made clear, the Roy family members are “at war” with each other as they battle to find a new successor, so it’s unlikely this stage will go to plan for the Roys either. </p>
<h2>Passing the baton</h2>
<p>The final phase of a succession involves the current CEO “passing the baton” to the successor – and this phase needs to be managed well for the effective running of the company. <a href="https://doi.org/10.1111/etap.12114">This stage</a> offers opportunities to reshape the strategic direction of a business. Many family businesses, for example, use the next generation’s knowledge in digital technology to broaden their presence on social media. </p>
<p>This is also a time when other potential successors (if managed appropriately) can be brought onto the board or the top management team. This helps to maintain family control and ensure things are operating in a way that is in keeping with the family’s wishes.</p>
<p>It’s clear the Roys still have some way to go before they decide upon their successor. And judging by the current climate at the company, the process will continue to be highly dysfunctional and challenging for all involved. What more could fans want?</p><img src="https://counter.theconversation.com/content/170139/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bingbing Ge receives funding from Research And Development Management Association (RADMA) for her PhD.
This research paper is co-authored by Bingbing Ge and Giovanna Campopiano.</span></em></p>Here’s what should happen during a family business succession.Bingbing Ge, Teaching Fellow in the Department of Entrepreneurship and Strategy, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1522852021-05-10T13:51:39Z2021-05-10T13:51:39ZFive things that family businesses must do to survive hard times<figure><img src="https://images.theconversation.com/files/397615/original/file-20210428-17-1yha080.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">h</span> </figcaption></figure><p>The British royal family, like many family businesses, has had its share of difficulties lately. Prince Harry, previously viewed as one of the great modernising influences, has <a href="https://theconversation.com/meghan-and-harrys-oprah-interview-why-british-media-coverage-could-backfire-156424">become more distant</a> from the traditional business after marrying Meghan Markle. </p>
<p>Meanwhile, his father Prince Charles has been <a href="https://www.forbes.com/sites/ceciliarodriguez/2019/11/15/prince-charles-at-71-breaking-records-as-king-in-waiting-in-photos/">waiting many years</a> to take over; his uncle, Prince Andrew, has been caught up in an <a href="https://foreignpolicy.com/2020/09/04/jeffrey-epstein-prince-andrew-royal-family-abuse-britain/">international scandal</a>; and to cap it all, the Queen recently lost her husband, Prince Philip, after 74 years of marriage. </p>
<p>The royal family may not be among the family businesses most obviously affected by the pandemic, but there are similarities when it comes to navigating difficult times. All family businesses, including the royal family, have to contend with the advantages and disadvantages of close family ties within the firm. Families can close ranks when times are hard, but it can be a struggle to oust executives with blood ties who are causing problems – or virtually impossible in the case of the Windsors. </p>
<p>On the other hand, family businesses are in theory better equipped to survive than most. They tend to <a href="https://onlinelibrary.wiley.com/doi/10.1111/jsbm.12102">be able to</a>
prioritise long-term goals because the owners usually intend to transfer the business to the next generation. This can be a problem if the heir is not as strong as whoever is on the “throne”, but at least short-termist investors are either non-existent or can usually be overruled.</p>
<p>In my co-authored <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/joms.12632">research</a>, we reflect on the the challenges to family firms triggered by the pandemic and its social and economic reverberations, drawing on our own knowledge of this field and inspired by informal conversations with some family businesses of a range of sizes during the pandemic. They trade in everything from olive oil to microwave-imaging devices to financial services to fine wines, and most are headquartered in Italy. </p>
<p>This has enabled us to argue for five challenges unique to family businesses across the world. These have been made worse by the pandemic, but can all be turned into opportunities. It is worth emphasising that the survival of these businesses is vital to us all – <a href="https://www.tharawat-magazine.com/economic-impact-family-businesses/">they contribute</a> between half and 90% of the GDP of most countries, and employ the majority of people. </p>
<h2>1. Succession</h2>
<p>Family businesses tend to think of succession as a long process that needs to be methodically planned and executed, but it has been taking place rapidly and unexpectedly during the pandemic. <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/joms.12632">At least 25%</a> of those in charge have suddenly got sick or will leave their business earlier than expected due to the crisis. </p>
<p>As the family owner of a structural steel design business told me: </p>
<blockquote>
<p>An increased sense of mortality after seeing the many victims of this pandemic is leading me to see succession as closer than ever and to suddenly think of it as something that is happening really quickly and in an unforeseen way.</p>
</blockquote>
<p>Clearly, owners and managers need to be ready to manage such successions. In some cases, the current environment may force them to consider alternatives to a succession within the family, such as an external candidate, or selling or even closing the business. Even long-expected successions of the kind that will inevitably come to the British monarchy need to be handled carefully when the moment arrives. </p>
<h2>2. Preserving the family feeling</h2>
<p>We know <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/joms.12632">from research</a> that having family members working in the business engenders long-lasting personal relationships with employees, customers and suppliers. But these relationships have been disrupted by social distancing and <a href="https://theconversation.com/how-the-pandemic-will-shape-the-workplace-trends-of-2021-152277">people working from home</a> during the pandemic. </p>
<p>These businesses must therefore redesign their working processes, reflecting deeply on how to preserve their distinctive social edge in a more digital environment that <a href="https://theconversation.com/five-charts-that-reveal-how-remote-working-could-change-the-uk-154418">may be</a> here to stay. </p>
<h2>3. Traditions and history</h2>
<p>It is <a href="https://journals.sagepub.com/doi/abs/10.1177/1042258720913028">often assumed</a> that family businesses are forward-looking, focused on growing over generations. But the negative outlook and increasing uncertainty brought by the pandemic has led many to instead feel nostalgic for the “golden age of the past”. </p>
<p>Many are trying to leverage their family history and tradition, for example by emphasising longstanding values and past accomplishments to customers. They are also focusing on staying alive rather than pursuing growth. </p>
<figure class="align-center ">
<img alt="Financial problems in family small business during covid-19 pandemic. Sad young african american couple in aprons and protective masks gesturing and talking about bills and work with laptop in cafe" src="https://images.theconversation.com/files/380455/original/file-20210125-15-o2250r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380455/original/file-20210125-15-o2250r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380455/original/file-20210125-15-o2250r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380455/original/file-20210125-15-o2250r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380455/original/file-20210125-15-o2250r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380455/original/file-20210125-15-o2250r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380455/original/file-20210125-15-o2250r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">‘The footsoldiers are going to have to go.’</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/financial-problems-family-small-business-during-1856504788">Prostock-studio/Shutterstock</a></span>
</figcaption>
</figure>
<p>Family businesses need to use their traditional values <a href="https://journals.aom.org/doi/10.5465/amp.2015.0017">to orient themselves</a> during times of uncertainty, while <a href="https://journals.sagepub.com/doi/full/10.1177/0894486520945053">looking back</a> on their history to learn how family members coped with past crises. Owners must focus on how best to do this for future competitive advantage. </p>
<h2>4. Difficult trade-offs</h2>
<p>Family businesses are typically motivated by more than financial wealth – in particular, the effects on family members often come into consideration. If the business is in trouble, the management is often <a href="https://onlinelibrary.wiley.com/doi/10.1111/jsbm.12100">reluctant to</a> sack family members – a Harry and Meghan type situation might fester far longer than a falling-out between unrelated executives. Equally, the management can struggle to bring in outsiders to run the business for fear of undermining the succession plan. </p>
<p>Such decisions can be a huge challenge, often forcing a choice between family harmony and the future of the business. This involves trade-offs, and there will be more of these in the aftermath of the pandemic. </p>
<h2>5. Preserving wealth</h2>
<p>The owners of family businesses <a href="https://journals.sagepub.com/doi/10.1111/1540-8520.t01-1-00013">are often</a> viewed as <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/jpim.12373">likely to</a> make investments with little or no expectation of a quick return. Hence external advisers usually focus on management or governance and not financial viability.</p>
<p>Yet the pandemic is changing this. Families in business are focusing more on preserving their estate and wealth to survive the crisis, as I found recently when I spoke to a family business leader in financial services, for example. As a result, <a href="https://www.investopedia.com/terms/f/family-offices.asp">family offices</a>, which are organisations usually set up by the owners of the firm to manage its assets, are becoming more important and will continue <a href="https://www.campdenfb.com/article/accelerating-transformation-family-offices-italy">this transformation</a>.</p>
<p>Rather than focusing on short-term concerns, family businesses need to address these five challenges to survive and thrive for the long term. In many cases, this will involve letting go of archaic views about running the business, and rethinking how it operates. How exactly that applies to Prince Charles – if and when it is finally his time to take over – is a discussion for another day.</p><img src="https://counter.theconversation.com/content/152285/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alfredo De Massis collaborates with and/or serves on the boards of public and private organisations internationally, including in Italy, Switzerland, UK and Asia. He also serves as advisor to family enterprises, business families and policymakers.</span></em></p>The British royal family has got more in common with the average family business than you might first imagine.Alfredo De Massis, Professor in Entrepreneurship and Family Business, Free University of Bozen-Bolzano, IMD and, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1561912021-04-15T14:06:17Z2021-04-15T14:06:17ZThe future of the family business: 4 strategies for a successful transition<figure><img src="https://images.theconversation.com/files/395025/original/file-20210414-21-opnk9m.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5921%2C3888&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The family business is among the most common organizations in the world. But figuring out succession plans is rife with complications. </span> <span class="attribution"><span class="source">(Unsplash)</span></span></figcaption></figure><p>Born between 1981 and 1996, <a href="https://doi.org/10.1080/01944363.2015.1057196">millennials differ more from their parents</a> than the last two generations, exhibiting a greater sense of purpose, willingness to move abroad and eagerness to explore new opportunities. </p>
<p>This leaves aging parents who own family businesses wondering about the future of their companies. Family businesses, <a href="https://doi.org/10.1177/1042258720913028">among the most common forms of organizations around the world</a>, are firms owned or managed by one or more founding family members. Passing the business onto the millennial generation, however, appears to be more difficult than it was previously.</p>
<p>Despite being more educated, technologically adept and global in vision, <a href="https://www.researchgate.net/publication/275639172_Coming_Home_or_Breaking_Free_Career_Choice_Intentions_of_the_Next_Generation_in_Family_Businesses">only 4.9 per cent of millennials intend to take over their respective family businesses, according to 2017 research</a>.</p>
<p>Does the older generation need to urgently adapt, or should they leave the family business to outsiders? It depends. Millennial participation may actively rejuvenate some businesses, improving the agility of the company in the face of economic, digital and sociopolitical change.</p>
<p>However, millennials with different ideas about how to run the business may also create unhelpful turbulence in the family and its company, suggesting they might be better off using their talents elsewhere. We therefore asked: Which types of transitions exist, and which one should families choose? </p>
<p>Our <a href="https://doi.org/10.1080/00472778.2021.1883038">decade-long research program</a> analyzed more than 400 interviews and conversations with members of family businesses around the globe. </p>
<h2>Millennial succession</h2>
<p>We discovered two dimensions that mattered for millennial succession:</p>
<ol>
<li><p>Families that are more close-knit <a href="https://onlinelibrary.wiley.com/doi/pdf/10.1111/1467-6427.00144">lean towards intergenerational collaboration</a>, whereas <a href="https://doi.org/10.1086/231213">more distant ones push generations apart</a>.</p></li>
<li><p>The flexibility of incumbent leaders in family firms influences the freedom that millennials have in the family business. Less flexible leaders insist on maintaining traditional family practices. Others are more open to changing the course set by previous generations. </p></li>
</ol>
<p>Based on these dimensions, our study identified four transition strategies, illustrated below and <a href="https://doi.org/10.1111/etap.12146">based on previous published research</a> — rejuvenation, rebirth, exit <a href="https://www.merriam-webster.com/dictionary/exaptation">and exaptation</a>:</p>
<figure class="align-center ">
<img alt="A graph shows four family business transition strategies." src="https://images.theconversation.com/files/389844/original/file-20210316-17-1yv0moy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/389844/original/file-20210316-17-1yv0moy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=481&fit=crop&dpr=1 600w, https://images.theconversation.com/files/389844/original/file-20210316-17-1yv0moy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=481&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/389844/original/file-20210316-17-1yv0moy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=481&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/389844/original/file-20210316-17-1yv0moy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=604&fit=crop&dpr=1 754w, https://images.theconversation.com/files/389844/original/file-20210316-17-1yv0moy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=604&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/389844/original/file-20210316-17-1yv0moy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=604&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Four Family Business Transition Strategies.</span>
<span class="attribution"><span class="source">Authors' calculations</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Rejuvenation: Embracing the family legacy</h2>
<p>Families that succeed with a rejuvenation strategy tend to be close-knit across generations and inclined to follow the family tradition. Trust between generations encourages co-operation, and younger family members go along with the family’s way of doing things, knowing that they are responsible for the future of the family firm.</p>
<p>This transition is often the smoothest, supported by effective family governance, leveraging the strengths of multiple generations. Millennials are encouraged to stay close to the incumbent generation — even if this means giving up on personal aspirations. </p>
<p>Incumbent family members may also support millennials in their pursuit of entrepreneurial projects when acceptable to the retiring generation. This <a href="https://www.forbes.com/sites/nusbusinessschool/2018/02/15/future-proofing-a-family-business-the-art-of-drafting-family-constitutions/?sh=6083628e5f17">transition strategy</a> <a href="https://doi.org/10.1016/j.jbusvent.2014.07.001">serves as a benchmark</a> for <a href="https://doi.org/10.5465/amp.2015.0017">most incumbent business owners</a>.</p>
<h2>Rebirth: Turning over a new leaf</h2>
<p>Some close-knit families feature both incumbent and younger family members openly collaborating on major business decisions, displaying high levels of flexibility. </p>
<p>Millennials in these families are generally inclined towards joining their parents in the family business. Incumbent family members are more open to their offspring’s ideas both inside and outside the business, emphasizing that they do not want to burden their children with running the family business.</p>
<p>Despite their openness to contemporary ideas, the closeness of the family may still cause it to favour tradition. However, support from incumbent family members empowers millennials to enact more radical change — which can include the transformation of the family business in terms of business model. </p>
<p>The choice to move away from older business models towards new goals may in fact be for the best, <a href="https://ffipractitioner.org/how-to-keep-a-business-family-alive-families-that-fuel-next-generation-family-business-leaders/">even if these new goals may only be marginally linked to the original business</a>. </p>
<h2>Exit: The world is an oyster</h2>
<p>This strategy is often seen in families with low intergenerational cohesion and lacking flexible leaders. Incumbent leaders have often endured self-sacrifice for the family and business, and typically prioritize business over family. Millennials are detached from the business and may not identify closely with it or other family members. </p>
<p>They have many opportunities to leave and few reasons to return — in fact, many seek to study or work far from home.</p>
<p>Placing business needs above all else may place a psychological burden on the next generation, fuelling their desire to leave family and business behind. This, in turn, leaves older generation members scrambling to figure out a succession plan and pushes them to cling on to familiar traditions. </p>
<figure class="align-left ">
<img alt="A man in suit and tie smiles." src="https://images.theconversation.com/files/395033/original/file-20210414-19-1porhga.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/395033/original/file-20210414-19-1porhga.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=714&fit=crop&dpr=1 600w, https://images.theconversation.com/files/395033/original/file-20210414-19-1porhga.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=714&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/395033/original/file-20210414-19-1porhga.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=714&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/395033/original/file-20210414-19-1porhga.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=897&fit=crop&dpr=1 754w, https://images.theconversation.com/files/395033/original/file-20210414-19-1porhga.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=897&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/395033/original/file-20210414-19-1porhga.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=897&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The late Vittorio Merloni, head of Indesit.</span>
<span class="attribution"><span class="source">(Carla Martella)</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>This behaviour pattern can lead to even greater rifts in an already distant family, sometimes exacerbated by poor company performance. However, these businesses may be able to survive with very little family involvement by finding capable outsiders to take on business roles. </p>
<p>One example of exit is Italy’s Merloni family, which sold its controlling stake in the family business — Indesit, the largest producer of household appliances in the country — <a href="https://www.campdenfb.com/article/indesit-sale-could-be-wake-call-italy-support-family-businesses">to Whirlpool for 758 million euros</a> amid <a href="https://www.reuters.com/article/uk-indesit-whirlpool-idUKKBN0FG03K20140711">rumours of disagreements in the family over strategy</a>.</p>
<h2>Exaptation: Out with old, in with new</h2>
<p>Families with low unity but flexible leaders often see their children follow their own dreams. Greater parental flexibility reduces the pressure on millennials to inherit the family firm. </p>
<p>Motivated by a need to step back and retire, family incumbent leaders see the business as a tool to support both themselves and the next generation. This support may result in the younger generation pursuing new entrepreneurial activities only loosely linked to, or even separate from, the original business. The older generation <a href="https://www.ft.com/content/08b2e4f8-efff-11e9-a55a-30afa498db1b">is perfectly fine with this behaviour and adopts a “hands-off” approach</a>. </p>
<figure class="align-center ">
<img alt="A young woman sits on the phone in front of an open laptop laughing." src="https://images.theconversation.com/files/395269/original/file-20210415-22-rmuevn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/395269/original/file-20210415-22-rmuevn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/395269/original/file-20210415-22-rmuevn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/395269/original/file-20210415-22-rmuevn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/395269/original/file-20210415-22-rmuevn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/395269/original/file-20210415-22-rmuevn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/395269/original/file-20210415-22-rmuevn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Younger family members can build a new, innovative legacy for the family business.</span>
<span class="attribution"><span class="source">(Anna Shvets/Pexels)</span></span>
</figcaption>
</figure>
<p>This is often portrayed in the media as the end of longstanding family business dynasties. However, <a href="https://www.sciencedirect.com/science/article/abs/pii/S0883902614000627">the younger generation may build a different yet equally powerful legacy</a>. The distance between generations allows millennials to pursue projects on their own terms, yet often with parents’ support, <a href="https://doi.org/10.1080/00472778.2021.1883038">transforming the family legacy into something new</a>. </p>
<h2>All families differ</h2>
<p>Every family is different — some are close, others are distant, still others are dysfunctional. Additionally, family business leaders also differ — some are flexible, others are more rigid.</p>
<p>Passing on the traditional family firm to a millennial, which we call the rejuvenation strategy, is not necessarily the best one. We argue that imposing a transition that is misaligned with family and leader characteristics is more likely to fuel conflict and, ultimately, fail. </p>
<p>Alternative options such as rebirth or exit may not always keep the old business in the family, but may be a wiser choice and could contribute more positively to the family’s legacy and society at large.</p><img src="https://counter.theconversation.com/content/156191/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Jaskiewicz receives funding from Social Sciences and Humanities Research Council (SSHRC). He is affiliated with the Telfer School of Management at the University of Ottawa. He is also pursuing research and executive education projects with the non-for-profit organization "Family Enterprise Xchange" (FEX) in Canada. Finally, he consults to business families. </span></em></p><p class="fine-print"><em><span>Alfredo De Massis is a Professor of Entrepreneurship & Family Business who does research on family business, collaborates with different universities and serves on the boards of public and private organizations internationally, including in Italy, Switzerland, UK and Asia. He serves as advisor to family enterprises, business families and policy makers. Alfredo De Massis received financial support from the Chamber of Commerce of Bozen-Bolzano.</span></em></p><p class="fine-print"><em><span>Marleen Dieleman works at NUS Business School in Singapore. She has been a consultant for various business families in Asia.</span></em></p>As aging parents wonder about the future of the family businesses they founded, four succession strategies could help.Peter Jaskiewicz, Professor and University Research Chair in Enduring Entrepreneurship, L’Université d’Ottawa/University of OttawaAlfredo De Massis, Professor in Entrepreneurship and Family Business, Free University of Bozen-BolzanoMarleen Dieleman, Associate Professor, Strategy and Governance, National University of SingaporeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1168392019-06-06T12:34:50Z2019-06-06T12:34:50ZHow to build a business that lasts more than 200 years – lessons from Japan’s shinise companies<figure><img src="https://images.theconversation.com/files/278321/original/file-20190606-97994-q3n8qa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Gaid Kornsilapa / Shutterstock.com</span></span></figcaption></figure><p>Japan is home to a number of the world’s oldest companies. There is even a specific Japanese term for companies that have survived for more than a century, retained ownership within the same family and continued plying the same trade for the duration. They are called “shinise” firms. </p>
<p>Kyoto, Japan’s ancient capital, holds the highest proportion of these century-old firms. They operate in traditional sectors such as sake brewing, sweet making and arts and crafts. The Gekkeikan sake company, for example, is nearly 400 years old and has been run by 14 consecutive generations of the Okura family. Sasaya Iori, meanwhile, is now in its 303rd year of making and selling sweets.</p>
<p>Colleagues and I interviewed the people who run these shinise firms and many others <a href="http://www.research.lancs.ac.uk/portal/en/publications/-(b76db112-0e82-48f2-9f35-68e23a9b700c).html">to understand their relationship with the local community</a>. We found that a key part of their success was maintaining high social standing in the city amid a changing business environment characterised by loss of traditional values and practices, changing consumer tastes due to Japan’s Westernisation, and increasing competition from larger and internationally operating firms. </p>
<p>Their high social standing partly comes through the traditional emphasis of these firms. As well as producing and selling traditional Japanese crafts, they embody and reproduce local community values. In doing so, the shinise firms are like custodians that protect local traditions. And, culturally, there is a love of tradition in Japan that gives these firms a cachet with consumers and the local community.</p>
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<img alt="" src="https://images.theconversation.com/files/278323/original/file-20190606-98041-19118qp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/278323/original/file-20190606-98041-19118qp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/278323/original/file-20190606-98041-19118qp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/278323/original/file-20190606-98041-19118qp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/278323/original/file-20190606-98041-19118qp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/278323/original/file-20190606-98041-19118qp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/278323/original/file-20190606-98041-19118qp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Gekkeikan has been brewing sake in Kyoto since 1637.</span>
<span class="attribution"><span class="source">Pack-Shot / Shutterstock.com</span></span>
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</figure>
<p>Shinise firms are also very much embedded in the communities where they are based. As well as maintaining family ownership and the quality of products, many of our interviewees emphasised their commitment to the welfare of the community. For example, according to a representative from Kyoto’s local government we spoke to, most of the owner-managers of shinise firms do something to help the local community, such as supporting the city’s famous Gion festival. </p>
<h2>Long-term focus</h2>
<p>One of the reasons that shinise firms last so long is that they put a strong emphasis on longevity and tradition. This is reflected in the way the firms are organised, as the president of Unsoudou, a 128-year-old company producing wood block prints and art books, told us:</p>
<blockquote>
<p>Usually, in a firm, the CEO holds the position for two to four years, and he has the mission to satisfy the expectation of shareholders in that short period. We do not publicly list our stocks. Our way of doing is the opposite of this. We do not want to make profit in the short term.</p>
</blockquote>
<p>Shinise firms are also cautious about swerving from their original focus and constantly balance opportunities to innovate with maintaining tradition. As the Unsoudou president said:</p>
<blockquote>
<p>I am grateful to my ancestors, because we are doing business with what they left us. I feel very strongly about this … If there is a business opportunity, I do not reject it. However, I do not think exploiting this opportunity is always the best option, because it is just a small part of a long history. What is important is to create a business that can live for a long time.</p>
</blockquote>
<p>While the sizes of the shinise firms vary, many of them prioritise sticking to their existing commitments over seeking short-term profit or rapid growth. If they grew, they did so while maintaining these commitments.</p>
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<img alt="" src="https://images.theconversation.com/files/278328/original/file-20190606-98045-hlx5dn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/278328/original/file-20190606-98045-hlx5dn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/278328/original/file-20190606-98045-hlx5dn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/278328/original/file-20190606-98045-hlx5dn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/278328/original/file-20190606-98045-hlx5dn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/278328/original/file-20190606-98045-hlx5dn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/278328/original/file-20190606-98045-hlx5dn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Traditional Japanese sweets.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/beautiful-japanese-sweets-japan-1026496237?src=B_kBEuMrgDfnPqbufad2Zg-1-23&studio=1">Shutterstock</a></span>
</figcaption>
</figure>
<p>Through these commitments, shinise firms performed a cultural function in preventing cultural erosion at the local community level. In exchange, they are endorsed with high social standing by the local community which brings them a lot of custom in the face of market pressures.</p>
<h2>The dark side of success</h2>
<p>We also found there to be a dark side to the success of these age-old shinise firms. At least half of the 17 companies we interviewed spoke of hardships in maintaining their high social status. They experienced peer pressure not to innovate (and solely focus on maintaining tradition) and had to make personal sacrifices to maintain their family and business continuity. </p>
<p>As the vice president of Shioyoshiken, a sweets company established in 1884, told us:</p>
<blockquote>
<p>In a shinise, the firm is the same as the family. We need to sacrifice our own will and our own feelings and what we want to do … Inheriting and continuing the household is very important … We do not continue the business because we particularly like that industry. The fact that our family makes sweets is a coincidence. What is important is to continue the household as it is.</p>
</blockquote>
<p>Innovations were sometimes discouraged by either the earlier family generation who were keen on maintaining the tradition, or peer shinise firms who cared about maintaining the tradition of the industry as a whole. Ultimately, we found that these businesses achieve such a long life through long-term sacrifice at both the personal and organisational level.</p><img src="https://counter.theconversation.com/content/116839/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The research article mentioned in this article was published in Organization Studies and co-authored with Professor Davide Ravasi at the UCL School of Management, University College London and Dr Evelyn Micelotta at the Anderson School of Management, University of New Mexico, USA.</span></em></p>Centuries-old shinise businesses have withstood Westernisation, changing tastes and increasing competition.Innan Sasaki, Lecturer in Strategic Management, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1015152018-08-15T10:23:53Z2018-08-15T10:23:53ZSmall business owners are getting a new incentive to sell to their employees<figure><img src="https://images.theconversation.com/files/232006/original/file-20180815-2906-ma5oyy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A bartender pours drafts at Harpoon's beer hall in Boston. Harpoon became partially employee-owned in 2014. </span> <span class="attribution"><span class="source">AP Photo/Charles Krupa</span></span></figcaption></figure><p>The federal government <a href="https://nonprofitquarterly.org/2018/08/14/employee-owned-businesses-sba-loans/">just made it a lot easier</a> to form an employee-owned business. </p>
<p>In an increasingly rare example of bipartisan cooperation, President Donald Trump on Aug. 13 <a href="https://www.cnbc.com/2018/08/13/trump-signs-717-billion-defense-bill.html">signed a defense bill</a> into law that included a popular provision that allows the Small Business Administration to straightforwardly loan money to employee-owned businesses that wish to buy out retiring small business owners.</p>
<p>This and other changes in the provisions are significant. Not only could they double or even triple the growth rate of employee-owned companies over the next decade, we expect they will help stabilize jobs in local communities as well as reduce inequality by giving more middle-class families a means of accumulating wealth. </p>
<p>Furthermore, this <a href="https://smlr.rutgers.edu/sites/default/files/documents/ResearchDocs/3-21-18_main_street_employee_ownership_act_summary_5_copy.pdf">measure</a> – which <a href="https://scholar.google.com/citations?user=DWGTo1cAAAAJ&hl=en&oi=ao">we</a> supported with research and analysis – will be a boon to the hundreds of thousands of small businesses owned by retiring baby boomers that are at risk of closing up, putting millions of jobs on the line as well. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/231989/original/file-20180815-2909-vp95cb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/231989/original/file-20180815-2909-vp95cb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/231989/original/file-20180815-2909-vp95cb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/231989/original/file-20180815-2909-vp95cb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/231989/original/file-20180815-2909-vp95cb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/231989/original/file-20180815-2909-vp95cb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/231989/original/file-20180815-2909-vp95cb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A wave of baby boomers choosing to retire and perhaps spend more time fishing means millions of small businesses in the U.S. will soon change hands.</span>
<span class="attribution"><span class="source">sirtravelalot/Shutterstock.com</span></span>
</figcaption>
</figure>
<h2>‘Silver tsunami’</h2>
<p>The impetus behind the latest piece of legislation is a result of what some have dubbed the “<a href="https://bigthink.com/philip-perry/can-the-world-sustain-9-billion-people-by-2050">silver tsunami</a>.” </p>
<p>As baby boomers retire, more than <a href="https://www.project-equity.org/wp-content/uploads/2018/07/Project-Equity-National-Small-Business-Closure-Crisis.pdf">2.3 million closely held businesses</a> that they own are at risk of closing down because of an inability to find someone to take over. These companies employ about 25 million people, spend about US$1 trillion on payroll a year and make about $5 trillion in sales. </p>
<p>While some of these businesses will be passed down to members of the family or others, about <a href="https://www.project-equity.org/wp-content/uploads/2018/07/Project-Equity-National-Small-Business-Closure-Crisis.pdf">6 out of 10 are expected</a> to wind up on the auction block in the next decade because the owners need to sell out in order to retire. </p>
<p>We believe this will represent one of the largest transfers of wealth in American history. </p>
<h2>Workers to the rescue</h2>
<p><a href="https://www.project-equity.org/communities/small-business-closure-crisis/">Surveys show</a> that only a small fraction of retiring owners have a daughter or son who wants to take over the company and is competent to do so, and only a fifth of businesses listed for sale ever sell. </p>
<p>That makes selling their businesses to the workers who helped create all the value in the first place one of the best options available. It not only helps secure the owner’s retirement but also leaves behind a legacy in the local community. It has also slowly become more popular in recent decades. </p>
<p>Small businesses are sold to their managers or workers using one of three methods: an employee stock ownership plan or ESOP, a worker cooperative or an employee trust.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/WqIJMxNz5C0?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Experts explain how employees can take some ownership of a business.</span></figcaption>
</figure>
<p>The ESOP, <a href="http://kelsoinstitute.org/louiskelso/kelso-paradigm/important-dates/">created in 1956</a> by the late political economist <a href="http://kelsoinstitute.org/louiskelso/">Louis O. Kelso</a>, is currently the most common way to do this because it gives regular workers a way to buy companies and has meaningful federal tax incentives. This allows the new owners to set up a trust, which secures a loan that the company itself will pay back over several years.</p>
<p>A key feature is that the company, not the workers, steps forward to provide the collateral for the loan, and as the loan is paid down, new shares are distributed to employees and managers. The workers do not purchase the shares with their savings.</p>
<p>Worker cooperatives, on the other hand, have traditionally been employee-owned from the beginning, with investments from staff and equal voting rights in many company decisions. Increasingly, the worker coop model <a href="https://institute.coop/workers-owners-conversions">is being used</a> to purchase companies from retiring business owners. </p>
<p>Employee trusts are a new form of ownership, similar to ESOPs in some ways. <a href="https://www.fieldfisher.com/publications/2016/04/watg-employee-owned-through-a-perpetual-trust">Their goal</a> is to ensure a company remains employee-owned in perpetuity by keeping the shares within the trust itself. The employees are beneficiaries of the trust, receiving payouts based on profits. </p>
<p>A few employee-owned companies include grocery chain Publix Super Markets and staffing firm Penmac – the <a href="https://www.nceo.org/articles/employee-ownership-100">two biggest</a> – as well as food companies King Arthur Flour and Bob’s Red Mill and breweries Harpoon and New Belgium Brewery, maker of Fat Tire beer.</p>
<p>We have spent the last 35 years researching this phenomenon and pulling together all the empirical studies that have been done to assess the impact, which we explore in our books, “<a href="https://yalebooks.yale.edu/book/9780300209334/citizens-share">The Citizen’s Share</a>” and “<a href="https://press.uchicago.edu/ucp/books/book/chicago/S/bo8056093.html">Shared Capitalism at Work</a>.” The <a href="http://papers.nber.org/books/krus08-1">evidence</a> shows that employee ownership tends to make companies more productive and stable. </p>
<p>As for their prevalence, based on our recent calculations of all of the 2014 U.S. Department of Labor data on ESOPs, <a href="https://smlr.rutgers.edu/sites/default/files/documents/ResearchDocs/8-14-18_analysis_of_esop_data_from_2001-2014.docx">we found</a> that about 2 million workers and managers were invested in about 5,800 closely held companies with the total employee ownership valued at $255 billion. While the average ESOP worker in these companies has an ownership stake of $134,000, our calculations are this is close to a quarter of a million dollars for workers who stay with the company for 20 years. </p>
<p>Unfortunately, many business owners aren’t aware this is even an option. </p>
<h2>Raising awareness and guaranteeing loans</h2>
<p>And that’s where the new law comes in. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/231991/original/file-20180815-2921-1dapbuc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/231991/original/file-20180815-2921-1dapbuc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=766&fit=crop&dpr=1 600w, https://images.theconversation.com/files/231991/original/file-20180815-2921-1dapbuc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=766&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/231991/original/file-20180815-2921-1dapbuc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=766&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/231991/original/file-20180815-2921-1dapbuc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=962&fit=crop&dpr=1 754w, https://images.theconversation.com/files/231991/original/file-20180815-2921-1dapbuc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=962&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/231991/original/file-20180815-2921-1dapbuc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=962&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sen. Kirsten Gillibrand wrote the original legislation on employee-owned companies that became law.</span>
<span class="attribution"><span class="source">AP Photo/Seth Wenig</span></span>
</figcaption>
</figure>
<p>The provision, previously known as the <a href="https://www.gillibrand.senate.gov/news/press/release/after-meeting-with-businesses-throughout-new-york-that-support-workers-through-employee-ownership-and-pushing-for-legislation-to-help-companies-transition-to-esops-or-co-ops-gillibrand-announces-her-bipartisan-employee-ownership-bill-included-in-national-defense-bill">Main Street Employee Ownership Act</a>, was written by Democratic Sen. Kirsten Gillibrand and had co-sponsors on both sides of the political aisle. It is the most far-reaching employee share ownership legislation to pass Congress in over 20 years.</p>
<p>Its most important element involves permitting the SBA to clear away many previous barriers so it can make <a href="https://www.occ.gov/topics/community-affairs/publications/insights/insights-bankers-guide-sba7a-loan-program.pdf">guaranteed loans</a> of up to $5 million to employee-owned businesses, especially ESOPS and worker cooperatives. This will make employee buyouts easier to do by significantly expanding the amount of credit available and will create more flexibility for sellers so that they can transition out of their businesses over a few years. </p>
<p>The law also tasks the SBA with providing more awareness, technical assistance and training both to the small business owners who might be interested in selling to their employees and to the workers themselves. </p>
<p>We’ve observed that past efforts to encourage employee ownership by the federal government led to large growth spurts, such as laws passed <a href="https://www.law.cornell.edu/uscode/text/26/1042">30</a> and <a href="https://www.nceo.org/articles/esops-s-corporations">20</a> years ago that offered tax incentives. That’s why we would estimate the latest measure to double or even triple the growth of employee-owned companies. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/232007/original/file-20180815-2909-172djh1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/232007/original/file-20180815-2909-172djh1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/232007/original/file-20180815-2909-172djh1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/232007/original/file-20180815-2909-172djh1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/232007/original/file-20180815-2909-172djh1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/232007/original/file-20180815-2909-172djh1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/232007/original/file-20180815-2909-172djh1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An employee at employee-owned King Arthur Flour Co. in Norwich, Vermont, takes bread from the oven.</span>
<span class="attribution"><span class="source">AP Photo/Toby Talbot</span></span>
</figcaption>
</figure>
<h2>Measuring the wider impact</h2>
<p>The legislation’s impact could be far-reaching. </p>
<p>If it’s successful in leading more small business owners to sell to employees, it could help reduce economic inequality. That’s because the <a href="https://community-wealth.org/content/cleveland-model-how-evergreen-cooperatives-are-building-community-wealth">primary beneficiaries</a> would be working- and middle-class employees who would suddenly have a new way to build a substantial amount of capital. </p>
<p>Furthermore, it’ll help <a href="https://institute.coop/workers-owners-conversions">preserve local jobs</a> and the tax base because as we noted these small businesses often end up closing down because there’s no one to take over. In addition, employee-owned companies <a href="https://www.upjohn.org/research-highlights/how-did-employee-ownership-firms-weather-last-two-recessions">have shown greater resiliency</a> in times of economic stress, leading to fewer layoffs. And <a href="https://www.youtube.com/watch?v=znjEO4TciQI">research shows</a> that these types of companies <a href="https://www.ownershipeconomy.org/wp-content/uploads/2017/05/employee_ownership_and_economic_wellbeing_2017.pdf">offer better pay and benefits than other types of businesses</a>. </p>
<p>With real wages for most Americans flat or declining and most wealth in the hands of the richest Americans, broadening capital ownership to the middle and working classes may be the best – and perhaps the only – bipartisan road left to addressing economic inequality in the U.S.</p><img src="https://counter.theconversation.com/content/101515/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joseph Blasi is the Director of the Institute for the Study of Employee Ownership and Profit Sharing, which receives funding a range of foundations, including Citi Community Development, the Employee Ownership Foundation, the W.K. Kellogg Foundation, the Open Society Foundation, the Rockefeller Foundation and the Russell Sage Foundation. Other donors are disclosed on its website and in specific conference programs. Professor Blasi's professorship is supported by an endowment set up by the Beyster Foundation for Enterprise Development. Professor Blasi is also a Senior Fellow at the Aspen Institute and assists them in developing dialogues and programs on capital shares for national leaders.</span></em></p><p class="fine-print"><em><span>Douglas L. Kruse is the Associate Director of the Institute for the Study of Employee Ownership and Profit Sharing.</span></em></p>New legislation may boost growth rate of employee-owned companies in the US, easing the impact of one of the largest transfers of wealth in American history.Joseph Blasi, Director of the Institute for the Study of Employee Ownership and Profit Sharing, Rutgers UniversityDouglas L. Kruse, Distinguished Professor and Associate Dean for Academic Affairs, Rutgers UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1008532018-08-06T13:49:22Z2018-08-06T13:49:22ZWhy Sergio Marchionne’s successor has such big boots to fill at Fiat Chrysler<p>Sergio Marchionne, Fiat Chrysler’s former CEO, was renowned in the car industry for succeeding in adverse circumstances. After his <a href="https://www.cnbc.com/video/2018/07/25/fiat-chrysler-says-sergio-marchionne-has-died.html">sudden death</a>, he leaves large shoes to fill at one of Italy’s biggest businesses. Marchionne was instrumental in building the company, as well as leading it with huge amounts of energy and vision.</p>
<p>In <a href="https://www.reuters.com/article/us-fiat-chrysler-events-timeline/timeline-chrysler-bankruptcy-and-beyond-idUSTRE5A35V420091105">June 2009</a>, Marchionne, then Fiat CEO, entered Chrysler’s headquarters in Auburn Hills, Michigan. America’s third largest car manufacturer had just declared itself bankrupt and was in dire straits. Marchionne engineered a takeover and oversaw Chrysler’s turnaround. January 2011 saw it launch 16 new products at the Detroit Auto Show, presenting a new and revived Chrysler to the marketplace. </p>
<p>Marchionne then oversaw Chrysler’s merger with Fiat in 2014 to create FCA Automobiles. This, along with a number of spinoffs, brought an ailing conglomerate back to profitability. By 2017 the new company’s net profit amounted to €3.5 billion, from €111 billion in <a href="https://www.automotiveworld.com/news-releases/fca-2017-full-year-fourth-quarter-results/">revenues</a>. </p>
<p>The roots of Marchionne’s success were his leadership style and the bond he had with FCA chairman, John Elkann, who is also chairman and CEO of FCA’s holding company, Exor.</p>
<h2>Leadership style</h2>
<p>A pressure cooker best explains the essence of Marchionne’s leadership style. And, while many focus on his charisma, he was also skilled in unlocking his top management team’s potential, enabling the company to overcome particularly complex situations and achieve its ambitious targets. </p>
<p>Managers were given a great deal of freedom when it came to achieving results – so long as they delivered them. And if any issue arose, Marchionne would be available 24/7 for help and decision making. This was especially demanding for the leader of such a big global company. </p>
<p>As Marchionne once said in a private conversation to one of us: </p>
<blockquote>
<p>I live in planes; I don’t have a home. In one year, I spend the equivalent of 169 days flying. I wear a black sweater because it is simpler … I need as much simplicity I can in the complex life I live.</p>
</blockquote>
<p>As a result, the business management system was always switched on and connected, it never stopped. Managers in the system could not stop to wait for some inputs, decisions were always there to be made. There were no progress reviews for managers, they simply had to achieve the results. </p>
<p>Marchionne instituted a committee system of regular manager meetings to discuss how the business was doing. These meetings would last one or two days and were typically held on the weekend once or twice a month, with Marchionne always present. The intervals between them would be dedicated to operations, but the meetings themselves were deadlines that served as an opportunity for Marchionne to hone the organisation’s rhythm and establish the tempo that motivated people to achieve the company’s goals. </p>
<h2>Working with the family</h2>
<p>Marchionne joined Fiat at the behest of its owners, the Agnelli family. For generations, it had been a family-run business and it was crucial that Marchionne was successful at working with the family, particularly its new head, Elkann.</p>
<p>As <a href="https://scholar.google.it/citations?user=2AFgZ38AAAAJ&hl=en">research clearly shows</a>, when it comes to family businesses, the family’s goals and the business’ goals do not always go hand-in-hand. But Marchionne worked hard to ensure that these goals converged. As he once put it: “Don’t do anything specifically for the family and don’t do anything without them.”</p>
<p>Marchionne also had a lot of support from the Agnelli family. The family backed having a professional CEO and both the family goals and the business’ goals were clearly communicated and discussed. This laid the foundations for the stability and openness of the company’s shareholder structure, which lent, for instance, much credibility with the US government over the course of the Fiat-Chrysler merger. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230597/original/file-20180803-41357-tginsz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230597/original/file-20180803-41357-tginsz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230597/original/file-20180803-41357-tginsz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230597/original/file-20180803-41357-tginsz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230597/original/file-20180803-41357-tginsz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230597/original/file-20180803-41357-tginsz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230597/original/file-20180803-41357-tginsz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sergio Marchionne and John Elkann at the Geneva Motorshow in 2010.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/fiat/4403153079">Fiat</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Elkann also worked hard to oversee the family business’ succession planning process. This included reassuring the company’s stakeholders (including customers, employees, shareholders and suppliers) about its future. Elkann proceeded to act quickly to ensure a continuity of leadership after Marchionne’s death.</p>
<p>Mike Manley was the natural choice as successor. His <a href="https://www.ft.com/content/a0120d34-918b-11e8-bb8f-a6a2f7bca546">track record at Jeep</a> (part of the FCA group), where he oversaw a successful turnaround of fortunes, made him an obvious candidate. He will likely adopt a similar leadership style and organisational structure to Marchionne, and is already experienced at managing FCA business across continents, spending a lot of time on a plane like his predecessor.</p>
<p>The most important challenge for Manley will be to develop the organisation, while protecting its traditions. To do this, he will have to work hard, in cooperation with the family. And he will have to have political foresight to navigate various governments and regulators – not least the challenge that an escalating trade war between the US, China and potentially others could bring. He will also need to build partnerships with the tech giants like Google and Amazon if we wants to successfully lead a global company in an industry in technological transition.</p>
<p>Manley will long be compared to his predecessor, as Marchionne clearly set a new leadership standard for the car industry and future family business CEOs, restoring the reputation of family businesses in financial markets and instilling a high degree of confidence that goes beyond the day-by-day “car guy” merits that Manley clearly already has.</p>
<p>As <a href="https://journals.aom.org/doi/10.5465/amp.2015.0017">our research</a> into the strategies of long-lasting family businesses illustrates, continuity and change should not be seen as conflicting. Innovation through tradition will be the most important challenge for the next CEO of FCA, as it is for the future of all global family businesses.</p><img src="https://counter.theconversation.com/content/100853/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alfredo De Massis is Associate Editor of the journal Family Business Review, serves on the Honorary Advisory Board of the Universal Scientific Education and Research Network (USERN), on the Academic Advisory Board of the Institute for Family Business (IFB) Research Foundation based in London, and on the Board of Supervisors of the Grenke Centre for Entrepreneurial Studies in Berlin. </span></em></p><p class="fine-print"><em><span>Bernardo Bertoldi is member of some audit committees in FCA Group.</span></em></p>Marchionne set new leadership standards as CEO of the Fiat family business. His successor, Mike Manley, must build on his legacy.Alfredo De Massis, Chair Professor in Entrepreneurship and Family Business, Free University of Bozen-Bolzano and Professor in Entrepreneurship and Family Business, Lancaster UniversityBernardo Bertoldi, Researcher in Management and Family Capitalism, Università di TorinoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/845052017-09-21T22:47:44Z2017-09-21T22:47:44ZDown on the farm: tax reforms will hurt family businesses<figure><img src="https://images.theconversation.com/files/187135/original/file-20170921-30334-1rcssu4.jpg?ixlib=rb-1.1.0&rect=35%2C27%2C843%2C589&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Dairy cows at a family farm in Chilliwack, B.C. Sylvain Charlebois, a noted academic on food policy issues, says the federal government's proposed tax reforms will hurt family farms.</span> <span class="attribution"><a class="source" href="http://www.cpimages.com/fotoweb/cpimages_details.pop.fwx?position=1&archiveType=ImageFolder&sorting=ModifiedTimeAsc&search=11767271&fileId=7ED4E565C8CEED27AEA6EAB315B987A8EB1B023AB80A6779EEECB0F082709652BF4B180AE6F446F48ACB7DB1B8CDE7E37BF497D18515FAB7C57815DF9C7E71E1737892DD5BA3F69052E833AF84B460A366C5C783F97C728CB910651727E2C0824659CEF5EB788C83C532767AD380F645D77BAD04B306FF8CCC68F7125A9EC36CA762C230427A2B3A2574B0EB54ACE3B3">CANADIAN PRESS/Jonathan Hayward</a></span></figcaption></figure><p>Until recently, two things were certain in life: death and taxes. We can now add a third one: botching the promotion of a <a href="https://www.fin.gc.ca/n17/17-066-eng.asp">tax reform</a> for political gains. Finance Minister Bill Morneau’s tax reform has been a <a href="https://www.thestar.com/opinion/editorials/2017/09/15/tone-deaf-rollout-of-liberal-tax-reforms-a-lesson-in-how-good-ideas-go-sour-editorial.html">communications disaster</a>. </p>
<p>Claims about Ottawa’s intentions to revamp our tax system for small corporations have been ridiculous. Some predict a recession due to the changes proposed, while others declare the end of entrepreneurship as we know it. We should all take a collective deep breath and figure out how changes will affect our economy. </p>
<p>What needs to be underscored, though, is how Morneau’s vision for taxing small corporations will impact our agrifood sector.</p>
<p>Generally, the tax system is not really about pensions, legacy and social programs. Yet for a family-owned business, it is — and there are thousands of them in agrifood. In farming, Canada now has more than 43,000 incorporated farms, compared to around 23,000 incorporated farms in 2001.</p>
<h2>Proposed tax changes penalize families</h2>
<p>Despite the fact that we have <a href="http://www.statcan.gc.ca/daily-quotidien/170510/cg-a001-png-eng.htm">fewer farms overall today than in 2001</a>, more of them have opted to convert their operations into a corporation to provide an incentive to the next generation to take over the farm. </p>
<p>Proposed changes on capital gains would make it more expensive for a current family member to acquire the farm than for a third party. This is a critical piece of a highly complicated puzzle: <a href="https://beta.theglobeandmail.com/report-on-business/2016-agriculture-census-on-canadian-farms-older-hands-till-larger-fields/article34949582/">keeping families and jobs in rural Canada is not an easy task</a> and many agricultural producers are using our tax system wisely to secure the future of their businesses.</p>
<p>In food processing, retailing and in the food service sector, countless family businesses are wondering how family values immeasurably embedded in anything the corporation does can survive the next generation.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/187134/original/file-20170921-9750-1bc8nsy.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/187134/original/file-20170921-9750-1bc8nsy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/187134/original/file-20170921-9750-1bc8nsy.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=331&fit=crop&dpr=1 600w, https://images.theconversation.com/files/187134/original/file-20170921-9750-1bc8nsy.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=331&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/187134/original/file-20170921-9750-1bc8nsy.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=331&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/187134/original/file-20170921-9750-1bc8nsy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=416&fit=crop&dpr=1 754w, https://images.theconversation.com/files/187134/original/file-20170921-9750-1bc8nsy.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=416&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/187134/original/file-20170921-9750-1bc8nsy.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=416&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Agriculture in Canada continues to decline.</span>
<span class="attribution"><a class="source" href="http://www.statcan.gc.ca/daily-quotidien/170510/cg-a001-png-eng.htm">Handout/Statistics Canada</a></span>
</figcaption>
</figure>
<p>Income sprinkling is another issue Morneau is attempting to address. Presently, corporations can hire family members who work for the enterprise, which reduces the tax rate for everyone. Current rules about who can be compensated and at what level are ambiguous, at best. Morneau wants to change that, and for a good reason. </p>
<p>Several small corporations pay family members, who do not necessarily work for the company, to pay less taxes. This practice should stop but family businesses are really a different breed. </p>
<p>Defining tasks in a family-owned business can be difficult. Many of the contributions made by family members are ad hoc and not easily categorized. Recipes, tricks of the trade, family traditions all matter a great deal to whatever a small food outlet is doing. It is nothing like being an accountant, a doctor or a dentist. </p>
<p>A family business is like — well, a family. The enterprise survives daily by relying on favours and duties as assigned. On a family-owned farm, a restaurant or in a small food processor, job profiles are vague, at best.</p>
<h2>Condescending, awful rhetoric</h2>
<p>This political nightmare began in July when Ottawa launched a consultative process on how best to address tax planning practices that it believes are being used to gain unfair tax advantages. Individuals set up corporations to pay less in taxes in a variety of ways. Ottawa’s intentions are noble, but it is the bombastic tone used as a backdrop to promote the plan to Canadians that has been less than effective. Consultations end Oct. 2.</p>
<p>What has really caused many of the problems is the awful, condescending rhetoric coming out of Ottawa, labelling small business owners as a group of cheats and greedy tax evaders trying to dodge the system by using loopholes. That was simply insulting.</p>
<p>The government anticipates that the new regulations will bring in barely $250 million a year. For those thinking that the Liberals are looking for ways to increase revenues to pay for a ballooning deficit, they are wrong. This is really about politics, purely and simply.</p>
<p>Prime Minister Justin Trudeau’s egalitarian agenda to serve the so-called middle class is motivating the government to implement these changes. The tax regime needs change as some small corporations are using current tax rules to save money unjustifiably. </p>
<p>Most opponents have been quite vocal in recent weeks, but their corporations will survive the changes. However, <a href="http://www.cbc.ca/news/canada/toronto/family-farm-aging-farmers-canada-1.4207609">the stakes are much higher in agrifood and farming</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/187133/original/file-20170921-7480-xaux3g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/187133/original/file-20170921-7480-xaux3g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/187133/original/file-20170921-7480-xaux3g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=776&fit=crop&dpr=1 600w, https://images.theconversation.com/files/187133/original/file-20170921-7480-xaux3g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=776&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/187133/original/file-20170921-7480-xaux3g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=776&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/187133/original/file-20170921-7480-xaux3g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=976&fit=crop&dpr=1 754w, https://images.theconversation.com/files/187133/original/file-20170921-7480-xaux3g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=976&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/187133/original/file-20170921-7480-xaux3g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=976&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Highlights of Statistics Canada’s 2016 Census of Agriculture.</span>
<span class="attribution"><a class="source" href="http://www.statcan.gc.ca/pub/11-627-m/11-627-m2017010-eng.htm">Handout/Statistics Canada</a></span>
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</figure>
<h2>Agriculture, food sector at risk</h2>
<p>This is not about being unwilling to pay more taxes. Rather, it is about the viability of an entire economic sector. Our tax regime should differentiate and give our rural economy and family corporations some level of immunity. </p>
<p>Ottawa should think of fiscal incentives the agrifood sector can use to grow. Right now, it is not clear how this can be achieved. As Ottawa is attempting to bring more fairness to our fiscal landscape and fix what is largely an urban issue, it shouldn’t penalize our agrifood sector.</p>
<p>Despite Morneau’s disgraceful performance as a tax reform salesman, changes will most likely happen, to the despair of many. Changes to our tax system are obscure concepts for most Canadians who have never had a company. Even Canadians with corporations would have a hard time understanding what is being proposed. </p>
<p>The confusion that has led to the hysteria we are seeing today is really the government’s fault and no one else’s. When it comes to taxes, painting everyone with same brush is unacceptable.</p>
<p>Ottawa will get its way in the end, but it should at the very least accommodate the unique intricacies of our agrifood sector.</p><img src="https://counter.theconversation.com/content/84505/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sylvain Charlebois does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Family farms, restaurants, other food businesses and the rural economy will suffer under federal tax proposals for small businesses,Sylvain Charlebois, Professor in Food Distribution and Policy, Dalhousie UniversityLicensed as Creative Commons – attribution, no derivatives.