Izzy Asper never wanted his children to work at Canwest Global Communications, the now defunct media empire he founded. His drive and hunger for acquisitions turned Canwest into one of the most powerful firms in Canada and, for a time, earned the Aspers a spot on the Rich 100. He wanted his kids to succeed elsewhere, however.
“They were all practising lawyers and were doing very nicely on their own. It was they who got this dynastic glaze in their eyes—which I generally discouraged,” he told journalist Peter C. Newman. “I don’t believe in dynasties.” But his daughter, Gail, “slipped through the net” to become general counsel at Canwest, and brothers David and Leonard followed. It was under Leonard’s stewardship that Canwest filed for bankruptcy in 2009.
The collapse led Newman to malign the state of business dynasties. “Two dozen of the most powerful families that had once held sway over the Canadian economy have lost their influence and their pride of place,” he wrote in Canadian Capital. “The notion that blood relatives who assumed the leadership mantle could automatically be relied on to add value proved to be pure bunk.”
MORE ASPERS: Inside Leonard Asper’s Bold New Venture »
The statistics behind the longevity of dynastic companies are well-known. The Family Business Institute in the U.S. has found that only 30% of these firms last into a second generation with relatives at the helm; a slim 3% make it to the fourth generation. Our own ranking of Canada’s wealthiest individuals paints a slightly different picture. Some dynasties (the Aspers, the Eatons, the Bronfmans) have indeed faded from prominence. But many have seen their fortunes rise: the Thomsons, the Westons and the Desmaraises, among others. Families and estates account for almost half of the Rich 100, suggesting that dynasties are as powerful and as relevant as ever.
A few traits separate a fallen empire such as the Aspers’ (cut off in the second generation) from those that have endured for decades. Good governance is one. Companies need a strong board stacked with independent directors to ensure the firm is managed professionally and not run according to the whims of the familial clan. Indeed, Loblaw Cos. Ltd. and Linamar Corp. are now thought of as public companies first and family businesses second, in part because of the governance, management and disclosure policies they have in place.
Successful family firms also identify and groom future leaders early. Not only does this develop business and management expertise, but it also makes the succession plan clear to everyone, including descendents. This transparency reduces the likelihood of heirs feuding with one another. The Westons, for example, have established a long, steady path toward succession. In an essay published in the book Re-Imagining Capitalism this year, Loblaw executive chairman Galen G. Weston writes that the family follows a concept called “planned nepotism”: “We do not seek professionals to run our family business; we use our business to develop professionals within our family.”
MORE FROM THE ESSAY: The Secret to the Success of Family Firms »
Other firms have gone the opposite route and installed professional unrelated CEOs. David Thomson is chairman of both Thomson Reuters and family holding company Woodbridge—but not the operating CEO. This type of arrangement provides a buffer between family politics and business decisions. At the same time, it ensures the company doesn’t lose what makes it unique. Claudio Fernández-Aráoz, an executive fellow at Harvard Business School, argues successful multi-generational companies maintain “family gravity,” meaning one or a few key family members stand at the centre of the organization to provide a corporate identity, to represent the firm’s values and to think long term about the business.
When dynasties do fade, it’s usually because inadequate policies and weak boards of directors failed to safeguard the company from the animosity, resentment and petty squabbles burbling beneath the surface of many families. The Bronfmans fell victim to such turmoil. Samuel Bronfman, patriarch of the Seagram distilling empire, pounded the notion that “blood counts” into his children. As such, second-generation CEO Edgar Bronfman tapped his own son, Edgar Jr., to follow him. The scion made an ill-fated jaunt into the entertainment business, which precipitated the fall of Seagram. Years later, the elder Edgar was somewhat contrite. “It’s just as well that we have rules that make it very difficult for families to stay in control of businesses,” he told this magazine in 2008. “The blood does get watered down.”
A number of families on the 2016 Rich 100 are preparing for or have recently completed transitions. The Desmarais clan is grooming the third generation to assume control of Power Corp., following an equitable approach designed to minimize internal friction: Future leaders Paul III and Olivier are the sons of current co-CEOs Paul Jr. and André, respectively. Real estate firm Iberville Developments is now under the leadership of third-generation member Joshua Adams, who took over from his father, Sylvan. Likewise, Saul Feldberg handed control of Global Group to his son Joel last year.
These scions would do well to remember the odds of success are not in their favour. But the satisfaction in defying the odds could prove to be the best motivator of all.