Thanks to this week’s blogger Mary Daugherty of the Opus College of Business at the University of St. Thomas for another contribution to our myths and realities series. This one is about the lack of knowledge on the part of colleagues from other professions about the importance (even existence!) of family enterprises to the world’s economies.
Myth & Reality: Why all the fuss over family business? Ask the Wall Street Journal!
I recently participated in a panel hosted by a local chapter of the National Association of Corporate Directors (NACD). The panelists were chosen from the public, non-profit and private family business worlds to get a broad perspective on the topic of board composition. As the panelist representing the private family business director, I led the discussion on family business boards, addressing some of the challenges family businesses face with membership diversity in the boardroom. At the end of the meeting, I had an audience member tell me how surprised he was that we included a focus on family businesses. He wanted to know why family business merited so much interest.
I was taken aback for a moment. Indeed, my first thought was to fire back a response that I thought it was amazing that we bothered to include a public company board member since most of the businesses in the world are private! But instead I chose to point out that we were within five miles of one of the most successful and largest family businesses in the world — Cargill. And even though most family businesses are significantly smaller than Cargill, by some estimates family firms account for roughly half of gross domestic product, 85% of private sector employment and more than two-thirds of all jobs created in the past decade in the US. Family businesses are the backbone of the US economy — and, in fact, the world’s economies.
The next morning as I read the Wall Street Journal (an interesting family business story itself as in 2007 the family owners of the WSJ sold to News Corp, which has significant ownership by the Murdoch family) a front-page headline caught my eye, “A Daughter Reshapes Father’s Legacy At Bank.” This article discussed the transition in leadership at family-owned Banco Santander SA. As I thought back to the conversation about the “fuss” regarding family businesses the day before, I decided to go through the rest of Section A of that day’s WSJ to see if I could find any other family business “mentions.”
In order to fit my definition of family business I required the company website to specifically mention family ownership. Even I was surprised about what I found: nine family owned businesses were mentioned or advertised in the first section of the WSJ that day.
In addition, there was a full-page advertisement from Save the Children thanking donors for their contributions. Of the forty-nine donors listed, twelve met my criteria of family businesses (although many of the other donors likely were also funded originally from a family business but nothing was mentioned directly on the donor’s website).
So what is all the fuss? We would assume the WSJ is dominated by stories of large, publicly traded companies owned by the scores of public market investors reading the Journal. It stands to reason that family business mentions in the WSJ are just the tip of the iceberg of all of the business activity generated by family businesses of much smaller scale. The fuss is well deserved! Just ask the WSJ!
About the Contributor:
Mary Daugherty is senior fellow in applied finance at the University of St. Thomas’ Opus College of Business. She is the founding faculty member of the Aristotle Fund, a $5 million student managed investment fund at the University, which she has led since 1999. Mary can be reached at firstname.lastname@example.org.