Blood is thicker than competence. And that, precisely, is the problem.

The mafia, too, is a family business. It is an observation the Financial Times deployed earlier this month, deliberately, to break the romance surrounding businesses held in family hands. The Trumps now run one as well, the United States, Professor Marco Becht of the Université Libre de Bruxelles added at a recent conference convened by IESE Business School in Barcelona and the European Corporate Governance Institute. Family-owned firms have purpose, patient capital and a long horizon. It depends only on which family, and for whom.

The myth is tenacious. A company with a surname above the door is presumed, almost by reflex, to be warmer, wiser and more agile than its corporate counterpart. Fentener van Vlissingen, Bonnier, Wallenberg, Brenninkmeijer, Zegna, the storied houses obligingly furnish the evidence for a pleasing narrative. Between such exemplars and the Sacklers of Purdue Pharma, or the Trumps, sits a broad grey zone in which the bulk of Dutch family businesses operate. And in that grey zone a phenomenon plays out about which remarkably little is said: the surname ceiling.

The FT drew on a working paper by the economists Bennedsen, Tsoutsoura and Wolfenzon. Nearly two decades of Danish data, matched against school results and career trajectories. The provisional finding is, to put it mildly, arresting: employees of family firms score on average lower on intelligence measures than comparable peers elsewhere, and the gap is widest at the upper rungs of management. The brightest people steer clear of the family business because promotion is rarer there and rewards are thinner. We are familiar with the glass ceiling. This is a new variant. Invisible, but palpable, and then, all at once, everyone in the building knows precisely where it sits.

Gildo Zegna, grandson of the founder, will deny it. He has just elevated his two sons to co-leadership of the principal brand and, in the same breath, insists that family businesses are in fact free of politics, no one can hide in them, the truth is spoken. It is a touching self-image. And what arrant nonsense it is. From the Odyssey to Succession, world literature runs on family politics, or, better, family intrigue. And anyone who has ever sat at a boardroom table where the founder’s son made his debut knows the awkwardness: nobody speaks. Nobody dares.

In my own practice, I have encountered this theme in family businesses all too often, alas. And I encounter it still. The question, however carefully wrapped, is always the same: does the family member get priority, or not? The answer is, statistically, beyond argument. A household holds two or three children. A family that has owned a business for generations holds perhaps a few dozen. The labour market, by contrast, holds millions. The probability that the objectively best candidate for a leadership role happens to reside within the family is vanishingly small. The law of large numbers is unambiguous on the point and is no friend of sentiment.

The only serious remedy is governance. A robust, tripartite structure with cleanly separated roles: a STAK (the Dutch share-administration foundation) embodying shareholdership, a Supervisory Board exercising oversight, and a statutory Management Board doing the leading. Substantial outsiders in every position where that is feasible. Not from distrust of the family, but out of love for the company, and, ultimately, out of love for the family itself. Family interests and corporate interests do not always run in parallel. The tripartite structure forces clarity, at any given moment, about which interest is decisive.

And should that disciplined process happen to surface the best candidate from within the family? Splendid. He or she then stands on their own merits. That is a considerably firmer footing than any surname could ever provide. Such examples do exist, by the way, and some are extraordinarily successful. But they are the exceptions.

In summary: the family business is not morally superior, nor does it possess automatic excellence. It is a form of ownership. The added value, patient capital, long horizons, identity, is real, but accrues only to those with the discipline not to favour their own. Those who lack it pay the price in mediocrity at critical posts, a steady talent drain to competitors and, sooner or later, the kind of succession war for which world literature has long since drawn up the blueprints. An independent STAK, an independent Supervisory Board and a Management Board selected on merit are not a luxury. They are the minimum conditions, the first principles, for a family business that still wishes, one and two generations hence, to call itself one. 

You are warmly welcome to exchange views on the finding and selection of the best, most fitting candidates for leadership roles in your organisation.

Warm regards,

Aegeus