Over the years, I’ve spoken to many family businesses, and one thing on which they pretty much all agree is that governments do little to help them.
Yes, family businesses, like the rest of the business community, appreciate lower business taxes, less red tape, and policies that promote flexible labor markets. But these polices are designed to help the business community as a whole, not family businesses in particular. Governments don’t give special tax breaks to family businesses to encourage things like succession and stewardship.
Is that fair or unfair? Family businesses are highly important job creators and reliable long-term taxpayers, and they are socially engaged in their home countries.
Why might policy-makers be ignoring these facts? It may be that politicians seeking re-election calculate that it is better not to give special tax treatment to individuals who are considered to be rich and privileged. But is that calculation really in everyone’s best interest in the long run? Or is this lack of support the result of a political conviction: that giving family businesses tax breaks to manage succession or to finance new investments would lead to even greater accumulation of wealth and social imbalance?
Whatever the reason might be, ignoring the long-term contribution of family business to society, innovation and sustainable growth is a failure. Of course, public listed companies also play an important role. But it has been proved that the shareholder value concept does not lead to more social balance or greater corporate social responsibility; and in public companies, the shorter terms in office of management can create a higher risk of giving short-term results a priority over long-term investment. The latest financial crisis showed that improper behavior can, and does, happen.
Again, the role and importance of family businesses for job creation and GDP growth is unquestionable. So why is it so difficult to take the next step, to think about how family businesses can be encouraged and how transitions in family businesses can be supported?
Of course, governments do sometimes give family businesses special treatment to try to encourage the sector. The German Government is among the best in this respect. Angela Merkel attends family business conferences and talks about the “hidden gems” of Germany’s family-controlled Mittelstand business sector. From time to time, other governments around the world also make positive statements about the sector.
But I think family businesses across the globe should get used to the fact that they aren’t going to get much support from governments. To be fair, I think most family businesses already have, despite what they often say in public.
David Bain, Business journalist, Editor of EY Family Business Blog