Family businesses, a social good to be preserved

by Pepe Fernández-Rúa, Associate Director at ECCO Spain | Cariotipo

Family business is a social good that must be preserved. This is one of the conclusions of the report "Factors of competitiveness and financial analysis of the family business" (Spanish document), of the Institute of Family Business, main family business association in Spain and member of the Family Business Network (FBN), formed by 1.300 companies from more than 80 countries worldwide. A message that Ramy Abourkhair, managing director of Santander Bank, announces in the report´s prologue, in which almost 50 universities have participated. The document provides data such as the number of employees per million billed (5 in the case of family businesses, 3 in the rest), reflecting the commitment of the family business to employment, at the expense of even greater benefits. Another fact that clearly illustrates the social value of the family business is its "mortality" rate, which is well below - in the case of small businesses up to three percentage points - of that faced by non-family business. This has a fairly simple explanation: family businesses have a commitment to stay over time, a long-term projection that allows the survival of the company and the generational changeover, transmission family values with a high sense of social responsibility.
There are three key factors of competitiveness for companies, according to the report: size, training and innovation. The most decisive of which is the dimension because, in addition to having a direct impact on the ability of companies to innovate and train their employees, it is the fundamental element that allows improvements in profitability and productivity.
However, the regulatory environment is often full of obstacles to the growth of companies. According to Juan Corona, general director of the Family Business Institute, "certain taxes, commercial and labour obligations prevent companies from exceeding 49 employees, since companies of that size do not have the capacity to support legal and administrative departments that allow them to keep to with those obligations. " That is to say, at the moment in which a company happens to be considered of medium sized, some bureaucratic demands suppose important extra costs, putting in hazard the business viability. In this way, the growth of our companies is discouraged, with negative repercussions in the economy, in terms of competitiveness and employment. In addition, if we take into account that a larger business size increases the probability of lasting over time, public policies should be aimed precisely at encouraging growth.

Considering that family businesses represent around 50% of Europe´s private employment, it seems evident that the average growth of the family business is a reliable indicator of the evolution of the economy. For example, in Spain 90% of family businesses are small or micro, so we have a lot of work to do. It would not be unreasonable to say that the policies aimed at favouring the development of the family business will have a direct, and positive impact on the any economy.
At a time with important political changes worldwide, the role of family business as pillars of the economy must prevail. The tax burden implied by inheritance taxes, donations and patrimony is undoubtedly one of the main concerns of this group, but is the quality of the education systems, the transparency of the institutions and the legal certainty. The figure of the Family Business is well recognized by organizations such as the European Union, including tax deductions for a reason: without them, our economies would suffer and the creation of quality employment would be just not possible.

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