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Research and Insights

8 Facts Differentiate Family Business Leaders From Public Company Leaders

Family businesses have been core institutions that protected ethics and values in doing business for centuries. Typically, they have operated in traditional industries such as retail, manufacturing and commodities.

At the end of nineteenth century, corporatization wave influenced all the processes of the governance of businesses. This change was reasoned by increasing shared ownership and advance regulations of the firms in West with industrial growth which was requiring heavy capital injections into projects. 

Later, involvement of governments in business operations in nationwide strategic industries fostered corporate development and governance of public companies through rules introduced by Companies law and security exchanges.

However, some family businesses have kept their ownership or control across generations and our studies show that family business leadership has differences with non-family public companies even in the modern world. We studied the leaders/CEOs of the largest companies of the world by revenues. The study consists of demographic profiles, educational achievements and career progress of business leaders while taking into account years of experience with the same company across industries and markets.


Following facts are findings of the research report:


-   Though family business leaders are almost at the same age with non-family company leaders of 58 and 59, each region/market differs significantly from others: the oldest family leaders are in developed Asia with 66 and youngest leaders are in South Asia with 56. 

 The largest age gap exists in Middle East and Africa: public company leaders are 8 years older than family business leaders. In Europe and North America family business leaders are older than public company leaders;


- Family businesses have significantly smaller number of woman leaders - 2.8% of the pool and public companies with 4.4%


-  Foreign-born people had more chance to stay as head of the company in many industries of family businesses, examples include leisure with 70%, chemicals - 62%, energy - 57%, construction and real estate – 57%, which is not a case in publicly controlled companies, the biggest number of foreign-born leaders are in food and drinks industry with 48%;


- Family business leaders tend to have non-technical degrees compared to public companies 32% vs. 38%. 25% of family business leaders hold MBA while non family business leaders hold 30%;   


- Highly ranked university graduation does not play much important role in family business leadership, only 18% of them hold degrees from higly ranked universities, 24% of public company CEOs come from top schools. University ranking has impact on appointment age, top school graduates take the leadership positions two years earlier than the rest on average;

 

- China family businesses appoint leaders at 40 age on average and Middle East and Africa region is about 54. Generally, family business leaders are appointed at younger age compared to public companies – 47 vs. 52;


- Family business leaders stay longer in their roles than public company leaders – leaders appointed before 2000s is about one out of five in family companies while in public companies one in twenty;  


- Less years required to become a leader in family companies – 11 years, public companies still want loyalty – 14 years.


DOWNLOAD FULL REPORT


Authors: Fakhri Ahmadov is Managing Director at the firm, Fakhri@ahmadoff.com; Sona Salamzadeh is Research Team Leader for Leadership Practice, SonaS@ahmadoff.com 

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