Guido Corbetta Chair AIdAF-EY of Strategic Management in Family Business In memory of Alberto Falck Helsinki, 19 th 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 BRASIL90% *70% of large sized groups USA 80-90% **35% of Fortune 500 companies CHINA85% *37% of listed companies FRANCE83% 40% of the 250 biggest companies ITALY82%58% of large sized groups GERMANY79%50% of listed companies INDIA67%67% of listed companies * Non listed companies. * * North America businesses

Family Business may outperform non family businesses +133% +65% Share price (Index: June-2003=100) - 3 -

Cumulated revenues growth Source: AIDA database Italian family companies Italian non family companies (Index: 2001=100) Family Business may outperform non family businesses - 4 -

(*) 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 outperform non 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 -

GenerationΔ ROIΔ ROEΔ 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 Source: Aida database But Italian data confirm that the first generation builds, the second maintains and the third

Age of the leader %Δ ROIΔ ROEΔ Growth Less than 40 years7,5%-0,4+2,4+1, ,2%+0,3+1,2+0, ,0%-0,2-0,7+0, ,7%-0,2-0,6-0,9 More than 70 years18,6%+0,4-1,1-1,2 And Italian data confirm that some experience is good, too much is bad Data processing is related to the period 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

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

Conservative capital structure (little/no debt) Frugality Diversification How to overcome weaknesses and traps ? John Elkann’s ideas

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

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 How to overcome weaknesses and traps ? Ermenegildo Zegna’s ideas

… Vision … A bit of luck … A lot of energy How to overcome weaknesses and traps ? Ermenegildo Zegna’s ideas