Over the years The Economist has warmed to family businesses, or at least become less hostile to the business model then it was back in the 1980s and 1990s. This may be because the UK weekly magazine, which calls itself a newspaper, has woken up to the fact that far from declining, family capitalism is actually increasing its share of global economic activity. But it might also have something to do with the influential family businesses dynasties that own a hefty chunk of the newspaper – and they are poised to take an even bigger stake.
Earlier this year, the Economist ran a special report on family businesses. Although critical of the inherent problem of nepotism family businesses often face, the newspaper said they are flourishing and are likely to continue to do so. That’s a far cry from the approach the Economist took back in the eighties and nineties, when it favoured the classical economics view that family businesses would wane as rationalism took hold and capital markets would go on to conquer the world.
Of course, capital markets haven’t gone on to be all powerful. But also the Economist has over the years become increasingly controlled by some pretty powerful family business dynasties. They are the Schroders (owners of one of the UK’s biggest asset management groups), the Agnellis (owners of Fiat and family investment company Exor); the Rothschilds (the wing of the banking dynasty represented by Lynn Forester de Rothschild and Evelyn de Rothschild); and the Cadbury family. Another prominent member of the board is Eric Schmidt, the chairman of Google, whose family office Hillspire likes investing in businesses focused on the long term
These family groups own the more powerful ‘A’ shares at the Economist group, which gives them a greater number of board seats, whereas Pearson, the former owners of the Financial Times, owns ‘B’ shares in the media group. After the recent successful sale of the FT, there is growing speculation that Pearson wants to sell its 50% ownership of the Economist group.
Reports suggest these families are interested in taking a bigger stake in the Economist and even buying Pearson’s stake in the business. Exor confirmed last week that it was looking to increase its 4.7% stake in the group. And it’s understood that John Elkann, heir to the Italian Agnelli industrial fortune, might be leading a consortium of the existing family shareholders to take a controlling stake in the Economist.
Could this mean that the Economist could be about to triumph the importance of stakeholder values in global capitalism, which is increasingly the mantra of two of its main shareholders, Elkann and Forester de Rothschild? Of course, journalistic independence is a guiding principle of the magazine and preserved by powerful trustee structure. Nevertheless, it will be interesting to see if the newspaper’s traditional advocacy of free market economics of the shareholder value variety continues to wane in the years ahead.