Luxottica: it's all about succession

Succession is the name of the game at Luxottica. The founder’s recent move back to the front line of the business is a sign that the next generation is being primed to take over the firm.

At the beginning of September Luxottica, the huge Italian eyewear group, announced that its non-family chief executive Andrea Guerra was stepping down after a very successful 10 years at the helm.

Leonardo del Vecchio, the company’s founder and owner, said that he would step in as executive chairman, and appoint two chief executives. The current chief financial officer Enrico Cavatorta will oversee Luxottica’s corporate business as chief executive, while a second chief executive will be found to focus on growing markets.

This means that the owner of the Ray-Bans and Oakley brands, which had revenues of more than €7bn last year, will effectively be controlled by a triumvirate.

Co-chief executives are not uncommon. The German software company SAP had two chief executives up until recently. And family-controlled Richemont still does. But triumvirate structures, even in the corporate world, have been virtually unheard of since the fall of the Roman Empire.

And the structure raises additional questions because of del Vecchio’s age – he is 79. Why assume the role of executive chairman at such a grand old age? In fact, his age is probably the key to understanding the structure he has created.

Del Vecchio told the Italian media after Guerra’s departure that part of the reason he decided to create a triumvirate structure was because he thought it would allow his children to enter more into the governance of the group. For governance, in this case, read management. He also said that his eldest son Claudio, who is currently running Brooks Brothers, the US clothing company bought by the family in 2001, is doing an excellent job.

But he added that Claudio, who also sits on the board of Luxottica, would not be the sole successor. Del Vecchio has

five other children from three marriages. The eldest children, Claudio, Marisa and Paola, are all in their 50s. The three others – Leonardo Maria, Luca, and Clemente – are much younger.

In an effort to forestall issues over who gets what in the family when he dies, a few years back del Vecchio created a structure where each of his children will receive a sixth of the shares he owns in Luxottica – totalling approximately 66% of the business – after his death. Afterwards a council made up of the next generation, or their representatives, will oversee these shares. (None of del Vecchio’s three wives would be beneficiaries – apparently they have received big sums of money.)

Such structures might be designed to keep all the next gens happy and as a means of preserving the culture created by the founder, but they mostly start to unravel after the death of the person who set them up.

And even if they don’t unravel, there is enough surplus cash around in the extended businesses and family bank accounts for at least one of the second generation to launch a bid for leadership after the death of their father.

But the new structure means that it might never come to that. The triumvirate structure is probably weak enough for a new leader to be appointed before del Vecchio dies, or at least soon afterwards. Indeed, he may have created it to be purposely weak so a family member can assume power soon.

That family member is likely to be Claudio, according to off-the-record comments from Italian corporate analysts. The new structure, rather than being eccentrically experimental, is a way of encouraging continuity.

Even in the 21st century, Italian family businesses are loath to hand over operational control to a non-family member – especially when the business has been as successful under family control as Luxottica.