While large public corporations were taking severe financial hits since 2008, family firms were affected to a lesser degree and, indeed, we can even say that family-owned businesses are in a better position than their larger publicly traded counterparts to face the future right now.
At the outset of the financial crisis, most people thought that large public corporations would be prepared to withstand the blow. But they were wrong. Rather, it was the very special characteristics of firms run by one or various families that enabled these family firms to ride out the storm. Here are the reasons for their success:
- As opposed to large public corporations, owner families have non-economic goals in addition to financial objectives. It is precisely such social, family- and community-oriented goals that make these firms well-prepared to survive long periods of crisis. The priorities of keeping the firm in family hands, as well as the strong link with the company's local community, its social commitment to that local community, and the high reputation of the owner family in that community are factors responsible for keeping these firms alive. Regardless of the size of its business, a firm without non-economic goals will succumb when hit by its first strong crisis.
Observing the best examples, it would seem simple to deduce that corporate survival depends on the capacity to establish socially responsible objectives, and that such goals should guide shareholders when it comes to conducting their business. Being socially responsible implies not only setting up some non-economic goals over and above financial goals, but also reflects the manner in which such goals should be met and the ways that those responsible for the achievements of the firm should be rewarded.
Surviving or not surviving this crisis has depended to a large extent on the capacity of the board of directors of such companies to create value for the entire community instead of reaping benefits solely for shareholders and senior management. Therefore, we should ask ourselves why the big multinationals, many of them formerly successful family firms, have stopped paying attention to these four points followed by successful family-owned businesses, and have caused such destruction of economic and social value as a consequence of the global financial crisis.
Finally, European regulatory bodies that today adopt new, last minute control measures to avoid a second recession, have, in the family firms, a crucially important fountain of knowledge that they must use when the time comes to develop much more effective corporate governance regulations.
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