50 Business The EconomistJanuary 30th 2021
2 pull that off without bad blood, subsequent
handovers are likelier to succeed, says Kir-
sten Baus of the Institute for Family Strat-
egy, a think-tank in Stuttgart. In America
70% of family firms fold or get sold before
the second generation gets a look-in. Just
10% remain privately held going concerns
into the third generation, according to a
study in theHarvard Business Review. In
Germany 16% of small or medium-sized
companies say that they will probably
close down when the boss retires (though
this does not count firms that go bust).
Most would like to stay in the family but are
unable to persuade a relative to take over.
Conflict is often not chiefly over money.
Relatives spar because they have different
aspirations for the business, or feel they
are being mistreated. Arthur Darboven was
pushed out by his father, and stripped of a
part of his stake. Among other things, Mr
Darboven reportedly disapproved of his
son’s launch of a racy new brand called Cof-
fee-Erotic. At the age of 83 Albert Darboven
remains at the helm of his firm. (After a
court denied his adoption strategy, he is re-
portedly pondering creating a foundation
to control the firm.)
To avert such to-dos, some clans organ-
ise an annual family day, holiday camps for
their youngsters and even dedicate a house
to family reunions, often the home of the
founder. Most also draw up codes of con-
duct, says Herbert Wettig, an adviser of
family companies. The 680 members of the
Haniel clan (who until recently owned
Metro supermarkets) have an 80-page
code, which stipulates that no family
member can work for the company, not
even as an intern. The Reimanns, billion-
aire owners ofjab,a coffee-to-cosmetics
group, have a similar rule. The Trumpfs
have a code that covers succession and the
sale of shares in the firm, but also includes
guidelines for religious tolerance, modesty
and respect for others.
No charter is foolproof; the Oetker co-
dex did not stop them clashing. Some fam-
ilies unable to find agreement decide to sell
out or, if they are large enough, go public.
In 2017 Wirtgen, a construction firm with
annual sales of €3bn, was sold to John
Deere for $5.2bn. The founder’s sons wor-
ried they would be too old to run a com-
pany by the time their children could take
over. After falling out bitterly with his only
son, Heinz Herrmann Thiele listed one-
third of Knorr-Bremse, the company he
built into a leading purveyor of train and
lorry brakes, on the Frankfurt stock ex-
change in 2018. He and his daughter raked
in €3.9bn with the flotation.
Or quarrelsome clans can go their sepa-
rate ways. Some of corporate Germany’s
biggest names are the result of break-ups. A
fight between the shoemaking Dassler
brothers led in 1948 to the creation of Adi-
das and Puma, each of which now makespriceytrainers.A feudin 1960 betweenthe
Albrechtbrothersoverwhethertosellciga-
rettesalsoresultedina bifurcation:Aldi
NordoperatesinnorthernGermanyanda
numberofother,mostlywesternandcen-
tralEuropeancountries; AldiSüdcovers
southernGermany,remainingpartsofEu-
rope,plusAustraliaandChina.
A splitmaymakesenseforgroupswith
diverseinterests,saysKlaus-HeinerRöhl
oftheGermanEconomicInstitute,another
think-tank.Butitweakensspecialistfirms
ofthesortthatpopulatetheMittelstand.
ThelatestgenerationofAldiNordheirshas
foughtovermoneyandpowerfora decade.
Therowispreventinga sensiblere-merger
oftheAldis.Nevermindthatit wouldhelp
bothbusinesses.^7C
ommercial tiesbetween Ericsson and
China date back to the 1890s, when the
Swedish company sold 2,000 telephones
to Shanghai. It has been welcome in the
Chinese market ever since, most recently
selling speedy 5gtelecoms gear. Now, fears
Borje Ekholm, Ericsson’s boss, those bonds
are in jeopardy, as a result of the Swedish
government’s anti-Chinese turn.
After centuries of cordial relations—
from the Swedish East India Company’s
ships sailing between Gothenburg and
Guangzhou in the 18th century to Sweden’s
early recognition of the People’s Republic
in 1950 and its blessing in 2010 of the Chi-
nese takeover of Volvo, a much-loved car-maker—the mood has changed. Last Octo-
ber the Swedish telecoms regulator barred
Huawei, Ericsson’s Chinese rival, from the
country’s speedy 5gmobile networks, cit-
ing “theft of technology” by China. This
month, after an auction of Sweden’s 5gra-
dio spectrum that forbade the winners
from using kit from Huawei and zte, an-
other Chinese supplier, China’s commerce
ministry hinted that the ban could com-
promise bilateral economic ties.
That would be bad news for Ericsson,
which derives 13% of its revenues from Chi-
na. It is the only foreign company that pro-
vides China with certain types of 5gkit—
which China is well ahead of most other
countries in installing, thanks to gargan-
tuan sums channelled into telecoms infra-
structure. But Mr Ekholm’s fellow bosses
are equally worried, if not quite as outspo-
ken. Plenty of Swedish blue chips have a
large exposure to the Asian giant, from abb
and Atlas Copco, two engineering groups,
to Essity, a maker of nappies, and AstraZe-
neca, a Swedish-British pharmaceutical
giant (see chart).
Joakim Abeleen, the Beijing representa-
tive of Business Sweden, a lobby group, ob-
serves that diplomatic ties soured after- That year Chinese agents arrested Gui
Minhai, a Swedish national who sold books
in Hong Kong that were critical of the Com-
munist Party. This, along with Chinese
buyers’ aggressive pursuit of Swedish as-
sets, including a port, infuriated Sweden’s
government, which has since become one
of Europe’s staunchest critics of China.
Even so, Mr Abeleen says, relations be-
tween the two countries’ corporate worlds
remained cordial. Swedish exports to Chi-
na (mainly medicines, vehicles and ma-
chinery) rose by 15% in the first ten months
of 2020, year on year. It is Sweden’s fifth-
biggest source of imports and sixth-largest
export market. Around 600 subsidiaries of
Swedish companies operate there; the 30
biggest reported an 18% increase in their
Chinese sales in 2019, compared with a year
earlier. A year ago a survey of Swedish busi-
nesses in China found that 34% planned to
increase their investments in the country.
The 5g ruckus risks undermining this
mutually beneficial state of affairs. China
appears ready to use Sweden as a caution-
ary tale for other eu countries, showing
what happens if they bar Huawei from
their 5gnetworks, says a prominent Swed-
ish industrialist. That would be tricky for
Ericsson—which, as Mr Ekholm points out,
needs China for global scale.
It could also harm Sverige ab more
broadly; a well-functioning trade system is
“pivotal” for a small, open country like
Sweden, the industrialist warns. No won-
der many bosses are quietly hoping that the
country’s highest administrative court will
reverse the telecoms regulator’s decision,
which Huawei has appealed against. 7
BERLIN
Corporate Sweden resists its
government’s Sino-scepticismSverige AB and ChinaStockholm
syndrome
There be dragons
OMX Stockholm 30 index, selected members
Revenues from China, 2019, %Sources: Bloomberg; company reportsH&MASSA ABLOYSCASandvikEssityEricssonAlfa LavalABBAutolivAtlas CopcoAstraZeneca20151050$bn1.30.50.10.71.73.00.74.21.52.15.1