Sibling rivalries can take the shine off solidarity and solid earnings.
Since 2023, when Rupert Murdoch launched an attempt to change his family’s trust and give control of his media empire to his eldest son, the annual net incomes of Fox Corp and News Corp have grown by $2 billion and $79 million, respectively. This week, Murdoch’s wishes were rebuffed by a court in Nevada.
So what? Family-owned businesses might be good for business. But good for families? The jury’s out. The list of dynasties recently embroiled in costly legal disputes over succession and commercial control is lengthy and includes the household names of Murdoch, Agnelli (Fiat), Ambani (Reliance) and Redstone (Viacom).
The scripts write themselves. As Jesse Armstong, creator of HBO’s Succession has said, you don’t need to have talked with James Murdoch or Shari Redstone to taste the acrimony. Just “look at what their PRs are saying everyday about each other. It’s all there, it’s no secret”.
The business case. Having “skin in the game” does, however, seem to reap rewards.
By the numbers:
- 4.5 – factor by which returns from investing €100 in a mega-cap family business exceed those from investing in a non-family business over an 18-year period, according to the Carmignac Family 500 database.
- 70 – per cent of global GDP accounted for by family businesses, according to the 4,000-member Family Business Network.
- 14 – per cent outperformance in shareholder returns vs non-family businesses, according to McKinsey.
Investors generally view family businesses as capable long-term stewards. But every dynasty has its twilight. Data shows that shares in companies run by the first generation gain almost twice as much as those run by the fifth generation.
Preserving power. All family businesses face choices about org charts and ownership structure. Shares are typically dual-class, allowing family members to hold outsize voting control – a perk they will often go to great lengths to retain (the Agnellis, for example, moved Exor’s headquarters from Milan to Amsterdam, where vote structures are more flexible).
Bridget Kustin, an economic anthropologist at Oxford’s Saïd Business School, has identified three main approaches to family ownership: autocratic, bureaucratic and democratic (the examples are Tortoise’s).
- Autocratic. Murdoch’s bid to cement the right-wing slant of Fox News and Lachlan’s position as executive was described by the case’s commissioner as a “carefully crafted charade” made in “bad faith”. But there’s an alternative view: investors buying Fox are also buying Lachlan, who has been chair and CEO since 2019. A battle between the siblings over Fox’s ideological soul might hit the share price. For Claire Atkinson, the author of a forthcoming biography of Murdoch, Rupert’s controlling approach speaks to his own experience of succession: “I’m sure Rupert has it in his mind that when his father passed away, there was a frenzy of claims about who was getting what, and it ended up with Rupert losing some of his inheritance. He doesn’t want a repeat of that.” Murdoch’s lawyer has said he will appeal the ruling.
- Bureaucratic. Over the last few years Bernard Arnault, the 74-year-old CEO of LVMH, has been carefully appointing his five children to management positions across his €400 billion stable of luxury brands. In 2022, the French fashion king announced a change to the structure of LVMH’s controlling company to split power equally between his children and ban them from selling shares for three decades. But questions remain over whether Delphine, Arnault’s eldest, will replace him as CEO.
- Democratic. Kustin says she’s interviewed representatives of families with “thousands” of shareholding members. She describes one in particular as “a mini city state” with sophisticated mechanisms to deal with planning, organization and equity.
What’s more… In his annual letter to shareholders the revered investor Warren Buffett offered family businesses a simple piece of advice: “When your children are mature, have them read your will before you sign it,” he wrote. “You don’t want your children asking ‘Why?’… when you are no longer able to respond.”
As another episode in the Murdoch saga begins, it’s not just his children asking that question.
