Family feuds Thicker Than Water

The tale of two butchers is occupying German courts, with judges deciding on the corporate legacy of the country’s largest meat business. Succession struggles at family-owned businesses are common in Germany where numerous firms are run by dynasties.
I'll see you in court: Family-owned businesses struggle over corporate legacies.

Who will lead Germany’s biggest meat-processing business in the future?

A court is to decide this question, mediating between an uncle and a nephew following the death of founder Bernd Tönnies.

Clemens is his brother, Robert his son. They each half own the business which has annual revenues of €5.6 billion ($6.9 billion). Robert Tönnies wants to run the business; Clemens Tönnies won’t let go.

As the case is heard in court, stories fly back and forth, of the hard-working penny-pinching years Clemens spent building up the business. Of intrigue and ingratitude when the son gave 10 percent of his holding to his uncle. Of the father’s deathbed wishes and false promises. The tales go on, of the uncle setting up a secret holding company established in a different country, of the father’s plans to leave his wife. The court will have to separate out the lies and slander to determine the founder’s intentions and who will succeed him. The case may take years to resolve.

This kind of courtroom drama is commonplace in Germany as a high proportion of businesses are owned by families – mostly in retail. Such firms employ 55 percent of Germany’s workers. Every 20 years, succession feuds break out among families. Sometimes all the siblings want to run the firm; sometimes, they just want a trust fund without bothering about the business.

 

Family owned businesses in Germany share employment sales-Big Business-01

 

Such corporate in-fighting can be a risk to the firm but also to Germany’s economy, the euro zone’s largest. About 91 percent of all German firms are family-controlled businesses. Sometimes, family-owned companies, including car parts maker Bosch and supermarket retailer Aldi, have bigger annual sales than listed blue-chips firms such as software maker SAP and sporting clothes maker Adidas.

The problems at Tönnies are not a one off case. There is a similar situation at the Oetker group, the baking goods business. The offspring are fighting over the strategy of the firm. In another bitter battle at cleaning and facility management business Piepenbrock, the founder’s wife and sons drove the daughter out of the firm.

These conflicts show how close family ties, which are usually a source of strength and continuity for such firms, can also be one of their biggest weaknesses.

In families, it's about relationships; in businesses, it’s all about decisions. In family-owned firms, these two things get mixed up. Arist von Schlippe, A conflict researcher and professor

“In families, it's about relationships; in businesses, it’s all about decisions. In family-owned firms, these two things get mixed up,” said Arist von Schlippe, a conflict researcher and professor of management at Witten Institute for Family Businesses.

In each case, the bitter conflicts are about power, money and recognition. “The bigger the family firm, the more power, money and recognition are at stake,” Mr. von Schlippe said.

For family firms, running the day-to-day business is also difficult. At the Oetker group, Rudolf-August Oetker had eight children from three marriages. When he died, he left behind a company with revenues of €11 billion and 27,000 employees. His children are unable to agree on how the business should work in the future and who should succeed the Mr. Oetker's brother when he retires.

“Firms where several offspring are involved in the decision-making are most likely to have conflicts,” said consultant Peter May.

At Piepenbrock, the facility management firm with €440 million revenues, once the founder stepped back from active business, he left it in the hands of a board consisting of his wife, sons and daughter. But the mother and sons voted to exclude the daughter, leaving her without influence on the operations of the business although she remains a partner.

Quelle: dpa
Fathers and sons, or here brother and uncle Tönnies, at odds over the future of the family firm.
(Source: dpa)

 

Rivalries between the Piëch and Porsche families had a powerful impact on the sports car business. In the early 1970s, three family members were in management, including Ferdinand Piëch in charge of development. But a power struggle meant all the family members left their posts in 1972. Mr. Piëch went to Audi, later led Volkswagen and now heads the VW supervisory board.

The old rivalry continued between Piëch and his cousin Wolfgang Porsche. When Porsche wanted to take over VW, Mr. Piëch was in favor. However, when Mr. Porsche installed Wendelin Wiedeking as head of Porsche, Mr. Piëch did not want to let him make all the decisions. The financing of the deal wobbled and the VW boss made sure to take over Porsche. The fighting families no longer have a direct influence on Porsche but they own the majority of VW.

Most family-owned firms fail to resolve succession issues smoothly. “If it’s unclear who’s making the decisions, it often leads to a power struggle and it can take decades to set up a structure for shared decision-making,” said Mr. von Schlippe. In the past, successions were clearer due to patriarchal structures. Nowadays, “family-owned businesses have to spend a lot of time finding new answers,” he said.

Such family-run businesses need to be managed professionally, according to Mr. von Schlippe. “Decisions need to be made based not on the individual involved, but on process.” Where a family cannot agree on a process, it can sometimes be better to break up the business, he said.

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Christoph Kapalschinski is an editor at Handelsblatt's Companies and Markets section, writing about companies which produce consumer goods, textile products or food. Anja Müller writes about German small- and medium-sized and family-owned businesses for Handelsblatt. To contact the authors: [email protected] and [email protected]