* This article originally appeared in the newspaper “Expansión” on May 4, 2024 under the title “Llegan tiempos de mudanza y oportunidad para la empresa familiar.”
Family firms require solid corporate governance in order to maintain their relevance as engines of growth and employment.
Spain’s corporate world has garnered global media attention in recent weeks with two very different news stories: first, the €3 billion IPO launched by fashion and fragrance company Puig–the largest in years–and second, Grifols’ appointment of a new CEO amid unproven allegations of its financial reporting.
As different as the developments are for the two Barcelona-based groups, they both underscore the evolution of Spain’s family-owned businesses with the integration of new governance, management and ownership practices that may forever shape their identities.
Essential for sustained competitive advantage, these changes also present companies with the opportunity–and challenges–of forging a new identity that remains tied to the family while still maintaining its independence.
For Puig, the seismic shift is becoming a publicly listed company. “We believe the balance of being a family-owned company that is also subject to market accountability will allow us to better compete in the international beauty market during our next phase of development,” announced Chairman and Chief Executive Marc Puig in a statement on the share sale.
Founded in 1914 as a cosmetics and fragrance company–famous for producing Spain’s first homegrown lipstick, for instance–the Puig group has expanded to acquire a broad portfolio of global brands from Carolina Herrera to Charlotte Tilbury.
For Grifols, meanwhile, the newly appointed CEO marks a move to separate management from ownership. As announced by the firm, “Grifols, which has pioneered so many innovations over the decades, now also sets a new corporate governance standard for family businesses listed on the Spanish Stock Exchange.”
Founded in 1909, Grifols has evolved into a global healthcare leader with operations in more than 110 countries. In separating management and ownership, members of the Grifols family have stepped aside. The new CEO is a non-family member with 25 years of international management experience in publicly traded companies.
Spain is a country of family-owned businesses, and not only the many numerous mom-and-pop shops that we all know. Family businesses come in all types and sizes. Think of any sector. Fashion? Inditex. Supermarkets? Mercadona. Construction? Ferrovial. Family-owned all, they are some of Spain’s best-known companies.
According to Spain’s Instituto de la Empresa Familiar (Family Business Institute), 89% of Spanish firms are family-owned, accounting for the country’s main source of job creation. Their importance is difficult to overstate.
But Spain today is a very different place than when many of these companies were founded. Among other changes, they face competition from all sides, from big chains and franchises to online businesses. Large, global companies need to show transparency. Managers must be up to the task.
Doing right by stakeholders
Given their importance in Spain’s economy, family businesses wield an outsize impact on their stakeholders, including their customers, employees and suppliers. In the case of family-owned businesses, there is an additional stakeholder–the family–whose fortunes and name are often intertwined with those of the company.
Many people assume that family-owned businesses are automatically better than other types of companies in their treatment of employees, suppliers and community. Without a doubt, examples abound of family-owned companies that treat their employees like family, regardless, regardless of actual blood lines.
That said, the same can’t be said of other family-controlled companies. While it might come as a surprise, the research is mixed on whether family-owned business is actually better for stakeholders.
Far from being a problem, this is an opportunity going forward. Family businesses can make a difference, especially at a time when the wisdom of stakeholder capitalism and responsible, sustainability-minded companies is gaining traction, especially among younger generations. Guided by a long-term vision, family-owned businesses can think big even when they’re small.
In collaboration with Caser, we recently produced a white paper on how companies can make sure they do right by stakeholders.
It all starts with employees. Family-owned businesses have the chance to build strong employee relationships even in times of growth. Communication is key: employees must be aware of the benefits of a family-owned business and the connection between family values and business goals.
The commitment to maintaining employment in good and bad times is also a plus. This is particularly relevant in attracting new talent, which may not be as familiar with the company’s history as previous generations. At the same time, communicating fairness in career opportunities for non-family members will also enhance the firm’s attractiveness to top professionals.
Communication is also critical in maintaining existing clients and attracting new ones. The unique family history may serve as an initial selling point, but having and communicating environmental, social and governance (ESG) strategies will help retain them. ESG strategies should include training employees in climate-related innovation, even in the case of small companies, and diversifying the board of directors in the case of large firms.
It may require forming alliances, including companies that are sometimes competitors. When speed is crucial, organic growth may be too slow; strategic alliances can offer companies faster access to new markets, cutting-edge technology and specialized knowledge.
When trust is an issue, some companies prefer to forge alliances with other family-owned firms, reinforcing their shared long-term vision. Strengthening bonds and relationships among family business can bolster competitive opportunities.
Sometimes, growth requires major changes in a company’s management or ownership, as evidenced by Grifols’ decision to bring in outside management or Puig’s recent IPO. But equally important are new ways of thinking to ensure family-owned businesses continue to serve as engines of Spain’s growth and employment.
Homepage image: Max Prokop on Unsplash