What does responsible ownership mean?

What does responsible ownership mean?

Extract from the book “Governance in Family Enterprises – Maximizing Economic and Emotional Success”, 2014 , reproduced with autorisation, Palgrave Macmillan ©

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Wild Group Professor of Family Business and co-director of the Global Family Business Center at IMD, Switzerland

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People tend to think that it is easy to be an owner. But being a responsible family business owner can be difficult and challenging. Some decisions are tough: having to sell part of the business, stopping the heritage product line, forgoing dividends because the business needs liquidity, making employees redundant for the sake of survival – there are many examples of tough decisions.

Yet the amazing strengths of family businesses come from the very fact they are privately owned. Their resistance, resilience, long-term vision, the passion and efforts made to preserve and maintain the business over time are some of the underlying reasons that explain the higher economic performance of these businesses.

Responsible ownership is normally in the family’s DNA. Responsible ownership begins with “ownership,” which brings with it the ultimate power of decision-making in a business. The role and the importance of ownership have long been overlooked. Ownership is concentrated in the hands of a few people, which gives them considerable power but also makes them visible and identifiable, thus more accountable for their decisions. In addition, ownership evolves over time and goes from one owner-manager, to a partnership of siblings in the second stage, and later to a cousin consortium in a third stage, growing the numbers each time.

The second part of responsible ownership is “responsibility,” which means the capacity to act in the best interest of the business, the employees, and the community, as well as the family and the other owners. Responsible ownership has four fundamental roots:

  • Family values: integrity, respect, commitment
  • Stewardship: ensuring protection of the best interest of the business in the long term
  • Emotional ownership: a sense of ownership that is far more than material ownership or an investment
  • Patient capital: this refers to the willingness of family business owners to provide equity in the long-run

Responsible ownership can be found in many successful entrepreneurial families. They care deeply about their business and their family; they consult one another before making important decisions, to lower the risk of mistakes; they take responsibility for their decisions; their vision of and commitment to the business are strong. They take price in steering the enterprise and the family through the storms that will inevitably occur, and guiding them to harbor.

Read more about the precise tasks of responsible owners in: Governance in Family Enterprises – Maximizing Economic and Emotional Success, by Alexander Koeberle-Schmid, Denise Kenyon-Rouvinez and Ernesto J. Poza, Palgrave Macmillan, ISBN 978-1-137-29389- 3, http://www.palgrave.com/products/title.aspx?pid=649676,entitled to a 20 % discount with the promotional code WORLDPALGRAVE20 if ordered through http://www.palgrave.com.

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