GenerationSurvival percentage 2nd30 3rd10-15 4th3-5 5th1-2 6th <0,5 Survival rates of family companies (world wide)
The stakeholders shareholders debt providers employees pressure groups
The shareholder – the most important stakeholder FamilyPrivateInstitutionActivist Hedge Fund Raider
The family shareholder - The Superstakeholder “ In a listed, or a privately held company, there is always a possibility to exit, one way or the other, whereas the fundamental idea about family ownership - in its purest form - is to keep the company, own it as a going concern, and pass it on to the next generation”.
How does this effect governance? If you can’t (or are not supposed to) vote with your feet – you probably want to exercise influence over the company, and ideally, in a much more rigourous way than the average shareholder in the average company Owner – management interest alignment?
Governance models Family assembly - Family council Annual General Meeting Single family Multiple families 1-2 generations Several generations Complexity³ Holding company – Supervisory board
Generation Persons Year of birth 4. 50 1930 - 1960 5.147 1951 - 2002 6.137 1980 - 2014 7. 6 2008 - 2014 340 Generation Persons Year of birth 4. 50 1930 - 1960 5.147 1951 - 2002 6.137 1980 - 2014 7. 6 2008 - 2014 340 Big Family - Big Challenges
The Ahlström family - direct involvement Some 340 family members including children and in-laws Widely spread share ownership, 230+ family shareholders The fifth generation has taken over at board level 13 family members serve on 6 different boards, some on 2 boards 6 family members are nomination board – or committee members 14 family members serve on the holding company supervisory board 3 family members are employed in two different companies About 30 persons
How do you secure a generation shift Trust or foundation Family governance Traditions, mindset, education, agreed principles Controlled shift of power
At what point do you engage the next generation? Early!
Education 1830 Age General EducationSpecific Education ”Equal opportunities” ”Based on track record and potential” Courses Finance for family business Ahlström Business Academy I Summer Camp Strategic thinking - Insead Leadership today - MIT 12 External – private economy Ahlström Business Academy II External evaluation Mentoring Ahlström Business Academy III Investor Day Factory visits Other external Family business - IMD
How to get the Family Governance Working - our case 1991 First session, Professor John Davies, Harvard 1994 Second session 1995 First Family Document 1996 Third session, Professors A. Lank & F. Neubauer, IMD, Switzerland 1998 Family Document 2nd edition ”Family Values and Policies” 2002 Family Document 3rd edition
Governance & the Family Council Family General Meeting Family Council Family Assembly Board Mgm t Mandate?
Why do Family Councils fail? The Family Council is a ”fair weather” institution The power structure of the Family Council is assymetric in relation to the Companies Act, and Articles of Association It does generally not take into account share based voting rights It is distant from the real corporate world
Back to the drawing board.... 2010 Dr. Annelie Karlsson 2011 Fine tuning of the governance mode 2012-14 Changing the corporate structure
Diffuion Ahlström Capital Private equity, industrial investments, real estate, forestry, listed shares, cleantech Ahlstrom plc Fiber Technology Ownership Structure 2014 Munksjö plc Specialty Paper Munksjö plc Specialty Paper Ahlström Family 230 shareholders OWNERSHIP ISSUES OPERATIONAL ISSUES
Simplyfing a complex world Social Capital Intellectual Capital Trust and Respect Vision, Mission, Owner Strategy Holding Company Operating Company