Guido Corbetta Chair AIdAF-EY of Strategic Management in Family Business

In memory of Alberto Falck

Helsinki, 19th September 2014

Long-lasting Family Business

Family Business is the most diffused form of capitalism in many countries

Country% of family businesses

Large sized or listed family businesses

BRASIL 90% * 70% of large sized groups

USA 80-90% ** 35% of Fortune 500 companies

CHINA 85% * 37% of listed companies

FRANCE 83%40% of the 250 biggest

companies

ITALY 82% 58% of large sized groups

GERMANY 79% 50% of listed companies

INDIA 67% 67% of listed companies

* Non listed companies. * * North America businesses. - 2 -

50

100

150

200

250

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12

Global family owned businesses Index MSCI World USD Index

Family Business may outperformnon family businesses

+133%

+65%

50

100

150

200

250

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12

Global family owned businesses Index MSCI World USD Index

Share price (Index: June-2003=100)

- 3 -

01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-1290.0

110.0

130.0

150.0

170.0

190.0

210.0

230.0

250.0

107.1115.3

131.3143.3

164.9

184.2195.2

177.7

203.4

224.9218.7

102.3 110.2120.1

129.9

144.4

158.5169.4

160.7

178.9

193.0 190.6

Familiari AUB Non familiari

Cumulated revenues growth

Source: AIDA database

Italian family companies

Italian non family companies

(Index: 2001=100)

Family Business may outperformnon family businesses

- 4 -

2003 2004 2005 2006 2007 2008 2009 2010 2011-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0,9

1.81.5

1.7

3.2

2.6

2.0 1.9

1.3

-0,4-0,2 0,2

-0,5

1.2

0,2

0,70,9

0,3

Familiari AUB Non familiari

(*) Average of the relevant industries based on all the limited companies in the AIDA database

Italian family companies

Italian non family companies*

Source: AIDA database

Return on Investment

Family Business may outperformnon family businesses

- 5 -

Family businesses may last for more than … 100 years (1/2)

- 6 -

Family businesses may last for more than … 100 years (2/2)

- 7 -

Family businesses may last for more than … 200 years

- 8 -

Generation Δ ROI Δ ROE Δ Growth

First generation +0,6 +2,1 +1,5

Second Generation =0,0 -0,4 = 0,0

Third and following generations -0,8 -2,5 -2,1

Data processing is related to the period 2000-2008

Source: Aida database

But Italian data confirm that the first generation builds, the second maintains

and the third...

- 9 -

Age of the leader % Δ ROI Δ ROE Δ Growth

Less than 40 years 7,5% -0,4 +2,4 +1,5

40-50 20,2% +0,3 +1,2 +0,9

50-60 26,0% -0,2 -0,7 +0,5

60-70 27,7% -0,2 -0,6 -0,9

More than 70 years 18,6% +0,4 -1,1 -1,2

And Italian data confirm that some experience is good, too much is bad

- 10 -

Data processing is related to the period 2000-2008

Source: Aida database

For all FBs:• Strong resistance to change of the senior

entrepreneur and managers• Nepotism• Conflicts between family members• Sub-optimal strategies (control versus growth)

Mainly for SME FBs:• Poor strategic management processes• Ambiguous organizational structure and

systems

We can conclude that there are some weaknesses and traps of family ownership

- 11 -

How to overcome weaknesses and traps ?

John Elkann’s ideas

Groups like ours typically go

through three stages in their

development:

a time of strength,

a time of privilege

and a time of vanity.

For me the first is the only one that

counts.

Giovanni Agnelli

- 12 -

• Conservative capital structure

(little/no debt)

• Frugality

• Diversification

How to overcome weaknesses and traps ?

John Elkann’s ideas

- 13 -

An ownership capable of supporting the enterprise with “patient” capital:

an owner family is a positive factor for an enterprise when

it’s capable of balancing its own short-term interests and

the enterprise’s long-term development

a conception of ownership that sees the enterprise as a

precious asset which, whilst being the property of a few,

must be managed with a deep sense of responsibility

towards all stakeholders and not just the majority

shareholders

How to overcome weaknesses and traps ?

Ermenegildo Zegna’s ideas

- 14 -

A corporate leadership capable of effective

entrepreneurial change: a selection process that strictly avoids the risk of

nepotism

Professional governance enabling talented non-

family (and family) directors and managers to be

attracted and retained: having a clear distinction of roles and responsibilities

between owners, directors and managers. In this context,

the make up of the board of directors with independents

deserves special attention- 15 -

How to overcome weaknesses and traps ?

Ermenegildo Zegna’s ideas

… Vision

… A bit of luck

… A lot of energy

- 16 -

How to overcome weaknesses and traps ?

Ermenegildo Zegna’s ideas