{"id":353,"date":"2021-12-09T08:33:39","date_gmt":"2021-12-09T07:33:39","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=353"},"modified":"2023-01-09T10:19:03","modified_gmt":"2023-01-09T09:19:03","slug":"the-voice-of-minority-stakeholders-in-family-owned-firms","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2021\/the-voice-of-minority-stakeholders-in-family-owned-firms\/","title":{"rendered":"The voice of minority shareholders in family-owned firms"},"content":{"rendered":"

Family-owned firms dominate the global economy: according to PwC\u2019s latest Global Family Business Survey<\/a>, they contribute more than half of the world\u2019s annual GDP<\/strong> and generate around two-thirds of employment. Their strength is also seen in new business ventures: 85% of start-ups are launched with family money.<\/p>\n

As outlined in a previous post<\/a>, an important facet of socioemotional wealth (SEW) in family-owned firms is conserving familial control, influence and binding family ties. For this reason, many turn to IPOs when they need new sources of capital<\/strong> to continue growing or bolster their equity. By securing capital from a diverse pool of minority shareholders, they avoid diluting the family\u2019s long-term influence.<\/p>\n

Since publicly traded family firms prioritize these SEW dimensions over short-term profits, many assume frequent tensions and conflicts<\/strong> emerging between family members and minority shareholders. But is this really the case? Do minority shareholders voice their discontent through contentious proposals calling owners’ policies into question?<\/p>\n

My colleagues and I decided to test this hypothesis by analyzing thousands of shareholder proposals<\/a> put before 543 publicly traded U.S. family firms over a ten-year period.<\/p>\n

Areas of conflict<\/span><\/h2>\n

Based on our findings, family firms\u2019 primary areas of conflict <\/strong>fall along three main lines: contract issues<\/strong> like hiring, firing and compensation decisions, major strategic directions<\/strong> such as M&As, diversification and divestitures, and finally CSR initiatives,<\/strong> including projects that enhanced the family image without an economic objective.<\/p>\n

We also examined other dimensions like the firm\u2019s financial performance<\/strong> and the presence of family members in the firm\u2019s top leadership team<\/strong>. In these cases, tensions were most likely to emerge when a family member serves as the CEO, when the founder is no longer on the scene, or when financial returns fall below shareholder expectations.<\/p>\n

Research conclusions
\n<\/span><\/h2>\n

Despite popular belief, conflicts between family businesses and their minority shareholders are few and far between. By and large, minority shareholders generally do not feel expropriated<\/strong> by family owners in our analysis.<\/p>\n

The solid financial performance of family-controlled firms is the main reason for this harmonious relationship: despite their \u201cfamily first\u201d orientation, they consistently outperform non-family companies, showing what\u2019s good for the family is good for the firm<\/strong>.<\/p>\n

Prof. Pascual Berrone\u2019s research on socioemotional wealth has led to his distinction as <\/em>one of the world\u2019s most highly cited scholars<\/em><\/a> for the third consecutive year.<\/em><\/p>\n

 <\/p>\n

Carrousel image: Mikael Kristenson<\/a> on Unsplash<\/a><\/span><\/p>\n

 <\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

Family-owned firms dominate the global economy: according to PwC\u2019s latest Global Family Business Survey, they contribute more than half of the world\u2019s annual GDP and generate around two-thirds of employment. Their strength is also seen in new business ventures: 85% of start-ups are launched with family money. As outlined in a previous post, an important […]<\/p>\n","protected":false},"author":333,"featured_media":357,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[352],"tags":[117538,117539,117526],"class_list":["post-353","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-minority-shareholders","tag-ownership","tag-socioemotional-wealth"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t