The existential threat to German family businesses – greed


Germany’s huge and thriving family business sector faces many challenges, including greater tax burdens and intense global competition, but perhaps the biggest threat to their future is greed.

This is the view of one of the country’s top family business academics, Dr Tom Rüsen, who sees many of the next generation owners of Germany’s Mittelstand being motivated by different priorities than their parents, namely short-termism and even greed.

Rüsen’s argument is expressed in a Viewpoint he has written for Family Capital. In it, he talks about a transition happening in the ownership structures of Germany’s family businesses, which is bringing about significant cultural changes related to ownership in the sector.

“It is well documented that the global transition of wealth is happening rapidly and the consequences of that transfer will be immense, not least in Germany,” he says. “Here we are seeing many of the next generation of owners content to take on ownership of these businesses, but less happy to work on the operational side of them.”

The head of the Witten Institute for Family Business argues that the tradition of stewardship in Germany’s family sector, which says to family owners that they have inherited the business, but doesn’t entitle them to sell the business, is becoming less adhered to.

“With the growth of non-operational family shareholders, the practice of stewardship is threatened with erosion in Germany,” he says. “It’s a potential scenario that many of these next generation owners think more like Anglo-Saxon owners of businesses. They have become more short-term in their outlook.”

Rüsen adds that if many of them are losing the culture of stewardship then next generation owners will be more likely to sell their businesses. In order to avoid this happening, or at least mitigate the growth of a more short-term approach to managing these businesses, Rüsen says there needs to be a concerted effort to educate non-operational family shareholders.

For this to happen, says Rüsen, it will require more than these shareholders being able to read a balance sheet of their businesses, but for them to be part of a much more concerted educational process.  “They need to understand how the business family works and how that is interconnected with the operational business – and this should be a detailed and ongoing process.”