How to succeed with a family business succession

Tyson Foods’ chief financial officer admitted to investors this week. After checking his earnings, John Randall Tyson added a personal note: “I’m sure you’ve seen the news about the incident involving me. I’m embarrassed and want to let you know that I take full responsibility for my actions. “.

The news was that Tyson’s 32-year-old son and grandson of its founder was charged with drunkenness and trespassing after a stranger found him sleeping in his bed in Arkansas. Instead of firing him – the likely fate of any non-family member – the American company asked its directors to review his conduct.

“Don’t forget that he’s basically been in this business his whole life,” said Donnie King, Tyson’s chief executive, when analysts asked why the younger Tyson was in a job typically reserved for seasoned executives in their fifties. True, but that’s usually a qualification for becoming a king or queen, not a CFO of a US 500 public company.

Red Bull managed its succession more wisely, appointing three executives to replace founder Dietrich Mateschitz after his death in October, rather than his son. “I do not believe that one should be both an employee and a shareholder in the same company,” wrote Mark Mateschitz, who inherited his father’s 49 percent stake in the Austrian energy drink maker.

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This does not mean that the victim leaves others alone to carry out operations, including the Red Bull Formula 1 team. “I will.” . . express yourself in a way that makes sense to me and I see fit,” he said of becoming a co-owner alongside Thailand’s Yoovidhya family. Hiring and firing are just as powerful as doing them yourself.

Succession is an emotionally charged question that entrepreneurs face. When they grow up, will they sell their business to outsiders or appoint one of their sons or daughters as both their successor and chairman? The problem lies ahead for many founders of the 20th century: more than 1.5 million owners of small and medium-sized companies in Germany have retired.

The struggle is evident at public companies that remain under family control, such as Fox Corporation and News Corp, both of which are dominated by Rupert Murdoch, 91. He installed his son Lachlan as his presumptive successor after decades of family maneuvering, as faithfully caricatured in the HBO drama. Succession.

It seems that Bernard Arnault also likes the family corpse. Five of his children now work for his luxury group LVMH, and he has extended his mandatory retirement age to 80. This allows time for face-offs and invites the kind of speculation about who will replace him, as Lachlan Murdoch once described to me. pain pain”.

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I can see why this kind of competition appeals to patriarchs: like King Lear, they encourage their grown children to pledge loyalty and love and use them to solidify their control. If you’ve owned a company for many years, the idea of ​​it being run after your death by a hireling with an MBA must be terrifying.

The benefits are less obvious for the younger generation. If several people are fighting to get ahead, it’s a surefire way to ruin family gatherings. Even if there is only one child, the vexing question remains: could this person have had a chance not to have their name? The answer is usually no.

This does not mean that family supervision has some advantages. Family businesses are more profitable and have a long-term focus for many investors than companies run by professional managers. Having someone in charge who instinctively loves the business and has been nurtured to appreciate its purpose can be a strength.

It is also not unreasonable for family members who want to inherit shares of companies to get to know them from the inside. Whatever happens, John Tyson has been taught a hard lesson in how public company executives should behave and the discipline of scrutinizing investors. It is healthier to be shamed in public than to remain a golden youth and wait for an inheritance.

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But this should not include the successors of the manager as well as the owners. A study of Danish companies found that family succession produces worse results than Red Bull’s approach of installing professionals to take over the role of founder. As controlling investors, families retain considerable power to influence companies.

Some heirs have figured it out: John Elkann, the scion of the Agnelli family that controls Ferrari and Juventus, doesn’t run them himself, but controls them through their boards and his family holding company. Marta Ortega Pérez, daughter of Inditex’s founder, became chairman of Zara’s parent group last year, but day-to-day responsibility rests with a chief executive.

It’s only natural. After years of watching entrepreneurs, many of the younger generation must have realized that public liability for everything has its drawbacks. Succession does not require the whole show.

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