Home Uncategorized Family businesses generate US$ 7.28 trillion in the world, shows index

Family businesses generate US$ 7.28 trillion in the world, shows index

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Family businesses generate US$ 7.28 trillion in the world, shows index

The world’s 500 largest family businesses collectively generated $7.28 trillion in revenue and employed 24.1 million people in 2021, according to the Global Family Business Index.

Despite this success, a global study by PwC highlights that only 36% of companies of this type go to the second generation. In the following, this number is reduced even further: 19% survive the third and 7%, the fourth.

Conflicts

In family businesses, it is difficult to maintain harmony among members so that succession and business management occur peacefully. A PwC study, released in 2021, reveals that, of 282 Brazilian family companies, only 16% of them say they never had a disagreement between members. Already 13% declared that the clashes are regular.

For Helena Rocha, partner at PwC Brasil consultancy, “the family business grows in number of members much faster than the business itself. So you usually have to share the slice with a lot more people than the numbers grow.”

These conflicts, says Rocha, call into question the succession of corporate command for the next generation. In addition, the issue of attachment to the business created can make the management transition more difficult.

“Sometimes it is very difficult, especially for the founder, to let go of the role and the business he created. So, it is important that this person who is passing the baton finds a purpose, which can be a social cause or be part of the board of directors”, says the consultant.

Succession plan

Thinking about these difficulties, a transition plan can help in the continuity of the family business. According to PwC, only 24% of members of the current generation in charge of Brazilian family businesses have a robust succession plan.

“We realized that the more governance a company has, the greater the chances of the business perpetuating itself. […] When there are established controls, processes and effective communication, the chance of success for the transition between one generation and another is much greater”, indicates Helena Rocha.

financial market solution

According to the Global Family Business Index, 10 Brazilian family companies are listed on the stock exchange. However, only 3 – CSN, Magazine Luiza and Energisa – have family CEOs.

In the other seven, the leaders of the businesses are outside the family. But that doesn’t mean that the families that own these empires aren’t connected in this succession story.

To escape conflicts, family members can, instead of disputing the succession of command, act as investors.

The lawyer specialized in corporate governance and professor at USP Carlos Portugal Gouvêa explains: “In the United States, for example, it is normal for the founders, even of these large modern companies, to own around 5% of the total shares of family businesses”.

This means that by selling a part of the companies’ assets, these families are diversifying their assets. Thus, the heirs will no longer own that company and will act as investors in that company. “And then, generally, a structure is created that I would call family officein which the family starts to operate the equity as if it were an investment fund”, explains Gouvêa.

In addition to doing an X-ray on family businesses and the challenges of succession in this type of company, the CNN Soft Business this Sunday (4) also brings a review of the prototypes of humanoid robots, which appeared in 2022. The North American Tesla, the Chinese Xiaomi and the British Engineered Arts demonstrated their creations this year.

O CNN Soft Business airs every Sunday at 11:15 pm, with a presentation by Phelipe Siani and Fernando Nakagawa. You can check it out on TV and also on YouTube.

*Published by Letícia Naome supervised by Ana Carolina Nunes

Source: CNN Brasil

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