{"id":1460,"date":"2024-11-06T08:05:16","date_gmt":"2024-11-06T07:05:16","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=1460"},"modified":"2025-01-21T11:34:47","modified_gmt":"2025-01-21T10:34:47","slug":"what-do-shareholders-of-family-firms-deserve","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2024\/what-do-shareholders-of-family-firms-deserve\/","title":{"rendered":"What do shareholders of family firms deserve?"},"content":{"rendered":"

As family businesses transition across generations, a distinct type of shareholder emerges: one who only own shares<\/strong> while playing no role on its executive board or leadership team.<\/p>\n

The concept of responsible and committed ownership<\/strong> has increasingly gained traction in recent years, guided by the principle of stewardship<\/strong>. This vision underscores the critical need for shareholders to offer the stability required to promote the firm\u2019s long-term sustainability.<\/p>\n

While the focus often centers on what family businesses expect from shareholders, this article will flip the narrative by examining what shareholders should expect from family firms<\/strong>.<\/p>\n

Drawing from my experience, I have outlined four essential needs<\/strong> that family businesses should aim to meet for their shareholders:<\/p>\n

1 – Leadership: competent, competitive governance and management<\/strong><\/span><\/h2>\n

Top-tier executives in family-owned firms should have the requisite leadership skills <\/strong>to achieve economic goals while also investing in their team\u2019s ongoing development.<\/p>\n

In this role, they should foster strong relationships not only with shareholders but also with key stakeholders<\/strong>, and promote an entrepreneurial mindset<\/strong> throughout the organization to secure long-term competitiveness.<\/p>\n

2 – Emotional dividends versus economic dividends<\/strong><\/span><\/h2>\n

While pride of belonging and emotional bonds are invaluable, they cannot replace the need for competitive returns<\/strong>. Profitability should reflect the shareholder\u2019s capital investment<\/strong> and the level of risk assumed<\/strong>.<\/p>\n

By establishing a dividends policy, companies provide transparency<\/strong> to shareholders regarding their expected returns. While dividends should ideally supplement the shareholder\u2019s income rather than serve as its primary source, they nonetheless can enhance their personal and familial well-being<\/strong>.<\/p>\n

3 – <\/span><\/strong>Information and accountability<\/span><\/strong><\/h2>\n

Providing shareholders with accurate, transparent information<\/strong> is increasingly standard, but companies need to go further. Leadership should regularly report on performance and disclose relevant events<\/strong>.<\/p>\n

This proactive stance doesn\u2019t mean providing continuous updates, but rather focusing on important issues or decisions that require input from shareholders.<\/strong><\/p>\n

To ensure informed decision-making, companies should also equip shareholders with the context and understanding <\/strong>necessary to interpret this information effectively.<\/p>\n

4 – Respect<\/strong><\/span><\/h2>\n

Family firms must respect the role of these shareholders, which are sometimes referred to as \u201cpassive\u201d in contrast to \u201cactive shareholders\u201d who work in the company. Because of family ties and frequent interactions, some family firms overlook the need of keeping passive shareholders up to speed<\/strong> on the business.<\/p>\n

This misconception of trust leads some to believe that regular updates and explanations are unnecessary. Yet this would be a mistake, as trust should always be grounded on a rigorous exercise of everyone\u2019s rights and obligations<\/strong> according to their specific role: shareholder, director or manager.<\/p>\n

Respect should also be a two-way street<\/strong>: shareholders need a clear understanding of the firm\u2019s decision-making structures, and should assess the roles and effectiveness of directors and managers through a reliable appraisal system.<\/p>\n

When these elements are in place, trust is built on both family bonds and rigorous professional standards<\/strong>.<\/p>\n

\n

Shareholders with overlapping roles should be mindful of their position in each decision-making context<\/strong>\u2013whether in a shareholder assembly, board meeting or management committee\u2013since failing to \u201cwear the right hat\u201d<\/strong> for each setting can lead to confusion.<\/p>\n

When family firms meet these expectations, their shareholders will likely consider their stake as their best long-term investment<\/strong>, one that leaves a meaningful legacy<\/strong> for future generations.<\/p>\n


\nHomepage image: SEO Galaxy<\/a> \u00b7 Unsplash<\/a><\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

As family businesses transition across generations, a distinct type of shareholder emerges: one who only own shares while playing no role on its executive board or leadership team. The concept of responsible and committed ownership has increasingly gained traction in recent years, guided by the principle of stewardship. This vision underscores the critical need for […]<\/p>\n","protected":false},"author":818,"featured_media":1461,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[352,12],"tags":[117539,119698,38871],"class_list":["post-1460","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-family","tag-ownership","tag-passive-shareholders","tag-shareholders","megacategoria-mc-family-business"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/1460","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/users\/818"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/comments?post=1460"}],"version-history":[{"count":3,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/1460\/revisions"}],"predecessor-version":[{"id":1464,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/1460\/revisions\/1464"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/media\/1461"}],"wp:attachment":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/media?parent=1460"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/categories?post=1460"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/tags?post=1460"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}