• Peer Clinten und Prof. Dr. Heiko Kleve, Wittener Institut für Familienunternehmen (WIFU)

Empowering the children of shareholders.

(Reading time: 3 - 6 minutes)

Witten ILLU UnternehmerkinderFamilies, it is said, lose their business in the first generation for lack of insight, in the second for lack of harmony, and in the third for lack of interest. Therefore, a scientific study of the socialization of shareholder children is of great importance. For they will shape the family business and the entrepreneurial family in the future.

Finding unity in diversity is one of the greatest challenges for family businesses. If they are successful for a long time, the number of shareholders almost inevitably increases. The company can then only remain capable of acting if it succeeds in keeping the interest of the children alive in all shareholder families.

Basically, an entrepreneurial family can be divided into operationally active and non-active family members. The - in the truest sense of the word - "entrepreneurial children" are the descendants of the operationally active core family. Children of shareholders in the family business who neither work in the business nor play an active role in the organisation of the entrepreneurial family may be referred to as 'shareholder children'. Unlike the entrepreneurial children, they receive only indirect impressions of the business - for example, through stories told in the family or in the form of random news about the situation of the business.

On the surface, this differentiation may seem trivial. But it is important.For the number of shareholder children in growing multigenerational entrepreneurial families is usually greater than the number of entrepreneurial children. Therefore, a more differentiated upbringing within the family is necessary. However, this is not yet taken into account in many families.

Our thesis is that the competencies of the shareholder children are just as decisive for the long-term survival of a family business as the competencies of the potential operational successors from among the entrepreneurial children.

It is therefore a matter of promoting a socialisation and educational climate in the entire family that is characterised by responsibility for the employees, the future of the company and the appropriate handling of assets. This is because the willingness to make investments from the assets, if necessary, must be developed, especially among the non-operating shareholders.

In order to better understand this problem, it is necessary to examine the dynamics of shareholder families more closely with regard to the socialization of children and young people. This is because they usually make and live their educational and career decisions as well as their choice of partner largely uninfluenced by the company. It is only after adolescence, training and the first years of work that an independent view of the company may form, which also includes a possible operational activity, provided that the internal regulations and agreements offer opportunities for this.

The first fundamental question for the children of shareholders is whether or not they bear the name of the company. If they do not bear the company name, they are not identified in their circle of friends and in the wider social environment as members of an entrepreneurial family. Many see this as an advantage because it allows a greater degree of freedom in the way they lead their own lives. Shareholder children therefore often consciously conceal their affiliation with a family business or articulate this affiliation in a highly reflective and very selective manner.

Shareholder children who are bearers of names - especially of better-known family businesses - are, on the other hand, fundamentally associated with the subject of assets and business ownership - in a similar way to entrepreneurial children. This distinguishes them from their peers.

It should also be taken into account how close or how far away from the family business the socialisation of the entrepreneur and shareholder children takes place. Entrepreneurial children are already entrepreneurial children in the sandbox. They are also more likely than their peers to be educated in boarding schools during their school years. Shareholder children at the location of family businesses often meet the same fate. They also have to deal with a special position of belonging to a family business. Possible bragging or bullying by their peers is not uncommon and puts a strain on their socialization.

Shareholder children living several hundred kilometres away from the company's headquarters, on the other hand, usually experience a completely company-free socialisation - at least in the first decade of their lives. The company appears only very sporadically at large family gatherings or in snatches of words in adult conversation.

Finally, after puberty and during education, depending on the state of communication in the family of origin, a certain unspecific relationship to corporate ownership develops initially. Closer or wider family ties then influence the shareholder child's attitude towards the company. Particularly at celebrations and special occasions, there is an opportunity to get to know the entrepreneurial family more closely in the narrower sense. Sometimes this getting to know happens only with the transfer of shares by attending the shareholders' meetings. Again and again, the whole range between a high degree of identification and a rather contradictory attitude towards company ownership or the company as a whole can be observed.

This is exactly the challenge for entrepreneurial families.The socialization of the shareholders' children with regard to the company usually varies greatly depending on the name and place of residence. It is therefore important to establish structures that prepare these children in particular for the demands and challenges in and with the family business.

In this context, it is particularly important that the affiliation of the shareholder family and their children to the larger entrepreneurial family and thus to the family business is taken into account in the respective nuclear family. It is essential to develop and establish age-appropriate forms of addressing this special family situation. This also includes ensuring that questions of wealth are not excluded from the discourse. Children and adolescents develop a great sensitivity for family-relevant topics that their parents or other family members make taboo. These aspects then operate in secret and can also evoke destructive dynamics and conflicts.

Therefore, especially for the socialisation and upbringing of social children, the question arises as to how this special family situation can be lived as "normally" as possible. For it is only such normality that strengthens the qualities that family businesses and entrepreneurial families want to promote in their shareholders: the special responsibility and fiduciary attitude with regard to the company property and the assets that were founded and created in past generations. ®

Authors: Peer Clinten and Prof. Dr. Heiko Kleve, Witten Institute for Family Business (WIFU)

Publishing address

  • Private Wealth GmbH & Co. KG
    Montenstrasse 9 - 80639 München
  • +49 (0) 89 2554 3917
  • +49 (0) 89 2554 2971
  • This email address is being protected from spambots. You need JavaScript enabled to view it.


Social media