Definition of family business
According to the Family Business Expert Group, an enterprise of any size is a family business, if:
“1) The majority of decision-making rights is in the possession of the natural person(s) who established the firm, or in the possession of the natural person(s) who has/have acquired the share capital of the firm, or in the possession of their spouses, parents, child or children’s direct heirs;
2) The majority of decision-making rights are indirect or direct;
3) At least one representative of the family or kin is formally involved in the governance of the firm;
4) Listed companies meet the definition of family enterprise if the person who established or acquired the firm (share capital) or their families or descendants possess 25 per cent of the decision-making rights mandated by their share capital.”
A family business is a hybrid organisational form, whose identity encompasses the overlap of a family system and a business system. Due to the integration of these two systems, one based on economic principles and the other based on emotions, family businesses are characterised as emotional arenas, with strong intergenerational issues such as managing successful transitions. As very few family businesses survive beyond the second generation, and this form of enterprise is spreading out across the world, they prevent intergenerational conflicts through writing formal agreements or “constitutions” which are both a shareholders' agreement and a code of conduct.
family businesses in the news
Because of their heritage, their long-term view and their commitment to the community, family enterprises are increasingly emphasised as symbols pf stability and accountability. Additionally, local family enterprises are more and more perceived as manufacturers of quality products and services. Nowadays, in countries such as France and the UK, UK-based and France-based production appears to the customers as a guarantee of reliability and excellence. In Saudi Arabia, family businesses dominate the country’s economy and some of them have become regional giants. Around the world, countries such as Poland are, however, confronted with both positive and negative consequences of family businesses’ wealth and status.