Family Business today, striking a balance between financial gain and socio-economic wealth

Kirsty Ross wrote for The Times "The Business" online magazine.

Family Businesses are the cornerstone of the economy in Scotland, accounting for roughly 90% of private businesses. The Top 100 alone employ north of 115,000 people and generate over £1bn in annual profits.

There are many exceptionally strong balance sheets in the family business community. Family businesses are not just about financial gain, they also place equal importance on socio-emotional wealth.

These non-financial goals can be about several things, often related to ESG, philanthropy, long-term and stable employment, legacy and place in the local community, as well as innovation and investment for the long term rather than being under pressure to distribute profits to shareholders.

Well-run family businesses know and live their purpose and values and the very best ones have good governance in place in the form of shareholder agreements, a family constitution and often family councils. They often appoint NEDs and larger businesses sometimes appoint nonfamily as CEOs to bring a strong external perspective. They are sophisticated and well-run organisations, often with two or three generations involved in the business and a strong succession plan for the future.

Family businesses more often than not, have always had ESG on their agenda – of course, historically it hasn’t been called or recognised as ESG, but rather “the way we do things around here”. They perhaps need a bit of help to recognise and identify these things, so they can benefit from a number of the tax breaks, schemes and incentives that exist now to support marketing advantage.

I was privileged enough to facilitate family business leaders' circles every two weeks in lockdown. The types of conversations were largely around” how can we remain true to our values in this horrific time”. Their ability to be agile, innovative and open allowed for shared ideas around many points and pressures, along with how they were going to deal with them. One example that stands out is how the family business community used their networks to help employees find other work. Five of the family businesses on our calls were able to place all otherwise redundant employees with other businesses in their supply chain.

It has been well documented, that women prefer the environment and culture which a family business provides, and E&Y reported in 2019 that it was easier for a woman to rise to the top in a family business than in a non-family business. At that time, the impact of menopause on women in the workplace was not as evident, with very few, if any businesses having such a thing as a menopause policy. The ECHR has since issued new guidance following a case, providing further consideration for organisations to have such a policy as a support. Interestingly but perhaps not surprisingly, there is a growing trend of women rising to the top in family businesses where a menopause policy is in place alongside a culture and value system which actively promotes and supports women.

I’ve worked with many family businesses through good times and more challenging times, helping to plan for the future with good governance and assisting often difficult succession planning issues. I’m fortunate to work with several skilled colleagues with significant experience advising substantial family businesses across the UK on legal, tax and succession issues. Each individual family has its own story and balance of matters to work through.

I certainly see very exciting times ahead as family businesses continue to grapple and deal with the challenges of the relationships between the family, the business and the owners. Those who do this effectively and plan carefully for the future will be around for a very long time.