Ownership matters

http://www.ifb.org.uk/ It was good to see the report of the Ownership Commission chaired by Will Hutton, which was published yesterday, argue for plurality of ownership models in order to strengthen the economy.

But the Commission does not see any panaceas - no one model is perfect. The economy benefits from diverse ownership types co-existing together, each with its strengths and weaknesses. Within the mix, that includes Plcs, family business, private equity, co-operatives and employee-owned firms, the report highlights the important role that family firms play in promoting corporate plurality, seeing many of the positive attributes of responsible capitalism in family businesses.

The Commission also calls for better stewardship where owners exercise a duty of care in relation to the assets they control. This is a characteristic that the IFB has already highlighted as an important performance lever in the IFB Family Business Stewardship report (2011).

Allied to this the Ownership Commission calls for greater corporate engagement by shareholders as a cornerstone for building responsible ownership, and cites the behaviours of good owners as noted in the Perspectives on Responsible Ownership guide (2007). Active and engaged family business owners challenge the status quo helping to fight the risk of a culture that kills off innovation.

The report emphasises the preponderance of family firms among the UK’s Mid-Sized Businesses (MSB) and calls for the expansion of the MSB sector. The Government has already identified MSBs as an engine for growth to potentially rival the German Mittelstand.

Boosting the performance of the UK’s MSBs however calls for better tools, including a more diverse range of sources of finance and enhanced skills at all levels in the organisation. The Ownership Commission recommends that the Government develops policies that tackle these two issues, supporting the arguments that IFB Representation has long been making on the sector’s behalf.

Business leaders and good stewardship

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www.ifb.org.uk Ken Costa, Gresham College Professor and Chairman of Lazard International, addressed an IFB Forum this week on the need for business leaders to act in a morally, spiritually and financially responsible fashion. Leaders who act as good stewards develop the people they are chosen to lead—the opposite of old-fashioned coercive leadership.

Speaking at a meeting hosted by Saunderson House in London, Costa, who is also author of God at Work, emphasised the importance of values and how leading up to the financial crisis society had arguably been sidetracked by self serving principles. Adam Smith’s system flourishes best where it focuses on delivering profitable enterprises, long-term sustainability and retains a strong regard for impact on communities. To remain healthy capitalism has to remain a servant and not become the master.

Capitalism however requires checks and balances to help to regulate the behaviour of the human actors involved.  The rebuilding of trust is an important factor in emerging from the crisis – indeed you can’t operate the capitalist system without a strong degree of trust.

Family firms have a strong role to play and the best of them have avoided the traps of the crisis by not chasing short term gains. A minority were lead astray by leaders who borrowed heavily following the fashion of the times. On the other hand many of the best family businesses are largely detached from both the debt and equity markets and take the long term view.

Costa sees a strong confluence of emotional and patient capital at work in business families, citing Harrods as an example. Successful family businesses are able to leverage their emotional and financial capital and deliver a robust performance.

Family Business Stewardship - a model for business success

http://www.ifb.org.uk/ The debate on the principles of good ownership very much came to life at the height of the recent financial crisis. Corporate failures, such as Lehman Brothers, raised questions about the health of capitalism and whether it was always working for the benefit of society as a whole. Politicians and the media called on owners to be more accountable and to ensure that their companies treated stakeholders fairly and acted as responsible corporate citizens.

Tomorrow’s Company, a think-tank that aims to reduce the gap between business and society, stepped in to the debate with the publication of a report “Tomorrow’s Owners - Defining, Differentiating and Rewarding Stewardship”. The report, to which the IFB contributed, defined stewardship as the active and responsible management of entrusted resources now and in the longer term, so as to hand them on in better condition. The report set out four principles for corporate stewardship, and related behaviours:

• Principle 1. Setting the course: attention to clarity of purpose

• Principle 2. Driving performance: attention to performance and improvement

• Principle 3. Part of the landscape: attention to the wider world

• Principle 4. Planting for the future: coherence over time

Throughout this recession the family business sector has been held up by observers, such as the CBI, as a source of stability. Although the trading environment has been very difficult family firms have generally held a steady course. Arguably one of the reasons for the success of family firms during tough times is their adherence to the four stewardship principles.

A leading example of family business stewardship in action is Wates Group who place respect for communities and people at the heart of their business. This approach has earned them the prize of Major Contractor of the Year for a second consecutive year at Building Magazine’s awards.

The IFB Research Foundation has partnered with Tomorrow’s Company to examine empirically how family businesses function in terms of the stewardship and to find out if this is a model for business success. If you would like to participate in the debate about family business stewardship please leave a comment here or email your views to info@ifb.org.uk .You can also request a copy of the IFB Family Business Stewardship Report that will be published in June 2011.