The Economist - USA (2021-01-30)

TheEconomistJanuary 30th 2021 49

1

G

erman firmshave, like their country

itself, a reputation for being staid. Look

closer, though, and many brim with in-

trigue. Albert Darboven, a coffee tycoon,

pushed his own son Arthur out of JJ Darbo-

ven and tried to adopt a friend as his heir

and successor. The five children from the

first marriage of Rudolf-August Oetker,

grandson of the eponymous founder of a

pudding dynasty, and the three offspring

from his third have been at each other’s

throats for years. The feud among the bil-

lionaire scions of the Tengelmann retail

empire led to speculation that Karl-Erivan

Haub, the group’s fifth-generation ceo,

faked his own death in a skiing accident.

This month his brother, Georg Haub, re-

portedly withdrew the application to have

him declared dead.

Apart from ripping families apart and

tearing down reputations, such feuds des-

troy shareholder value—including that ac-

cruing to the warring clans. Hermann Si-

mon, a management consultant to many

powerhouses in Germany’s Mittelstand of

medium-sized firms, says succession is

their biggest problem. Families that quar-

rel risk a split, a sale to a rival or bankrupt-

cy. With early planning and discussions

many rows could be avoided. Yet most

founders prefer to keep their options open.

And few wish to contemplate retirement.

Dynastic dissonance

More than 90% of German firms are family

companies. Unusually, that includes many

multinationals across a range of indus-

tries: appliances (Miele), carmaking (bmw,

Continental and Volkswagen), chemicals

(Henkel), engineering (Bosch, Heraeus,

Knorr-Bremse), food (Oetker), media (Ber-

telsmann), medicines (Merck) and retail

(Aldi and Schwarz, which owns Lidl groc-

ers). Fully 30% of companies with more

than 500 employees are in the hands of

their founding clans.

The profusion of family companies is

partly a function of inheritance tax. This

has historically been high in America and

France but modest in Germany—and, cru-

cially, waived for heirs who keep their fam-

ily business running for at least seven

years, and protect jobs and wages. Another

explanation is culture. Whereas Americans

admire self-made men, Germans respect

old money. Neureiche(newly rich) are dis-

missed as arriviste vulgarians.

Whatever the reasons, the upshot is

ubiquitous strife. For conflict is built into

family businesses, says Arist von Schlippe

of the Wittener Institute for Family Com-

panies, a think-tank. Each is a paradox, he

says, combining the inclusive logic of a

family with the selective logic of business.

As an example, he recalls advising a foun-

der who wanted each of his four sons to in-

herit one-quarter of the family concern,

while also encouraging all of them to strive

for the qualifications to become its next

boss. That is a recipe for discord.

Succession is easier when there is only

one descendant, or when others show little

interest in business. It gets complicated in

dynasties with plenty of children from

multiple marriages. Ferdinand Piëch, a for-

mer boss of Volkswagen Group and grand-

son of the carmaker’s founder, Ferdinand

Porsche, had six daughters and seven sons

from three marriages and a couple of liai-

sons. Ever since Piëch died in 2019 his 13

children have been fighting in court with

his last wife. An estimated €1.5bn ($1.8bn)

in family wealth is at stake.

The trickiest succession is from the first

generation to the second. If a family can

Family firms

Mittelstand-off

BERLIN

All families argue. Some of the most explosive rows happen inside Germany’s

powerhouse companies

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