As 500 maiores empresas familiares globais conjuntamente generated $7.28 trillion in revenue and employed 24.1 million people in 2021, according to the Global Family Business Index. Despite this achievement, a global study by PwC highlights that only 36% of such companies make it to the second generation. In subsequent generations, this number dwindles even further: 19% survive to the third generation and merely 7% make it to the fourth.
Conflicts are a challenge in family enterprises, making it arduous to maintain harmony among members to facilitate peaceful successions and business management. A 2021 study by PwC reveals that out of 282 Brazilian family firms, only 16% claim to have never experienced disagreements among members, while 13% state that conflicts are a regular occurrence.

According to Helena Rocha, a partner at PwC Brazil, “Family businesses tend to expand their membership much faster than the actual business growth. Consequently, the ownership pie often needs to be divided among more individuals than the business figures are growing.”
These conflicts, Rocha notes, cast doubts on the succession of corporate leadership to the next generation. Furthermore, emotional attachment to the created business can complicate the management transition. “Sometimes, especially for the founder, letting go of the role and the business they created is very difficult. Therefore, it’s important for the person passing the baton to find a purpose, which could be a social cause or becoming part of the board of directors,” the consultant asserts.

Succession Plan
Considering these challenges, a transition plan can aid in the continuity of family businesses. According to PwC, only 24% of current-generation members leading Brazilian family firms have a robust succession plan. “We’ve observed that the greater the governance a company has, the higher the chances of its business continuing. When established controls, processes, and effective communication are in place, the success rate for transitioning between generations increases significantly,” Helena Rocha suggests.

Financial Market Solution
As per the Global Family Business Index, 10 Brazilian family firms are listed on the stock exchange. However, only 3 – CSN, Magazine Luiza, and Energisa – have family CEOs. In the remaining seven, non-family members hold executive positions. Yet, this doesn’t imply that the owning families aren’t involved in the succession process.

To avoid conflicts, family members can take an investment approach rather than competing for leadership succession. Carlos Portugal Gouvêa, a corporate governance specialist and professor at USP, explains, “In the United States, for example, it’s common for founders, even of these large modern companies, to own around 5% of the total shares of family firms.”

This means that by selling a portion of the company’s assets, these families are diversifying their wealth. Consequently, the heirs are no longer direct owners of the company and instead act as investors in that enterprise. “This often leads to the establishment of a structure that I would call a family office, where the family manages its wealth similar to an investment fund,” Gouvêa elucidates.
In addition to providing insights into family businesses and the challenges of succession in such enterprises, this Sunday’s (4) CNN Soft Business segment also includes a review of humanoid robot prototypes that made their debut in 2022. American company Tesla, Chinese firm Xiaomi, and British firm Engineered Arts showcased their creations this year.