Ex-Hermes CEO Thomas talks Piketty, politics – and succession


Patrick Thomas spent his entire career at family-owned firms, including Pernod Ricard, where he became CFO at 33, German cosmetics firm Lancaster and William Grant & Son, a British whisky maker where he was also the first non-family CEO.

He worked for France’s great luxury brand Hermes from 1989 to 1997, returning as CEO in 2003 and staying until 2014, when after a period of mentoring the sixth generation Axel Dumas, he handed over the running of the company.

Although he retired at the beginning of the year he isn’t sitting in front of the fire with his pipe and slippers just yet, and is now a non-executive director of a number of companies including auto-maker Renault, private equity firm Ardian and Shang Xia, a Chinese luxury brand which is 90% owned by Hermes. Family Capital talked politics and business with him.

FC: How are family businesses changing?

PT: Family companies, when they grow big, they realise that is all very well to be family controlled, but the management has to be good and if they don’t have a candidate in the family more and more they will appoint an outsider. That was not the case years ago.

When I became the first non-family member to manage Hermes it was because no family member was ready, they were too young. But my successor is a member of the family [Alex Dumas] who I recommended to the board because I thought he was the most competent person.

These days families differentiate much better between the roles of family and management, they are willing to accept managers who are not a member of the family. They differentiate more and more between ownership and management and I think this is a big plus, and that they will perform even better.

FC: What is your advice for non-family CEOs?

PT: Whether it is a family or a non-family company the CEO reports to the board, so whether you are in a family company or not, get aligned with the board. If there is a disconnection between the board and the CEO it can work for a while because you can have some little wars, but in the long term you have to align yourself with the board.

You have to meet them halfway. It is particularly important in family businesses because if the CEO is in conflict with the boss the CEO will lose 100% of the time. So you have to spend as much time as you need to persuade the board of your strategy and vision, or bend yours, because then your life is much easier.

FC: Do governments understand the importance of family businesses to the economy?

PT: Most politicians today understand the way to share wealth, but very few understand how wealth is created. That is true in France whether you have a politician from the right or from the left. And in the years to come one of the key differentiating points between states will be their ability to create wealth, because of competition and the slowdown of the economy.

Everyone says we are in a crisis, but we will be in a crisis for a century. We are in a sort of permanent crisis, and this will become more difficult because of slow growth. Piketty, in his book Capital in The Twenty-First Century, says that the growth rate of the world, including India and China, is going to slow down. If he is right, we will be more and more challenged by creating wealth, and less by sharing it.

Today, I agree that the way we share wealth is not very good in any society – in England or France you have poor people, which is unacceptable in a country where there is so much wealth –  but the big mistake that most governments are making is that they spend their time sharing the wealth, when they should also spend a lot of time helping people create wealth, because once you stop creating wealth you don’t have anything to share.

So the short answer to the question is: no.

FC: Should family businesses get better at lobbying politicians?

PT: Yes. I think that the problem at most businesses, whether they are family owned or not, is that they are focused on their job. As a CEO of a company that is a mistake I made, I was not involved enough in lobbying the politicians to let them know how the economy works. In France they don’t have any basic understanding of how macroeconomics works.

Take every big name in the world, it was basically launched and created by a family: Renault, Ford, financial institutions, industrial companies, even service companies. But in France there is  jealousy of the wealthy families, people tend to fight against them, and they kill them. Piketty’s analysis is interesting, but his conclusion [that there should be a wealth tax] is totally wrong. If you take a wealth tax of 5% there will be no wealth after 10 years. And if the rich are poorer, the poor are dying.