Object of all covetousness since the dawn of time and subject of much discord even today, power seduces, attracts, inhabits, sometimes to the point of becoming one with its holder; however, in politics as in business, the holding of power has a limited lifespan, at least officially. The question then arises of letting go at the “right” moment.
This question is even more complex when we look closely at the transmission of power (ownership and leadership) in family businesses, businesses where the scenarios are multiple, like the singularity of the histories of the families and the profiles of the leaders.
Recent news: a priori, Bernard Arnault, 73, would not leave his position as CEO of LVMH in 2024 as provided for by the articles of association before April 21, 2022, the date on which 81.63% of the shareholders of the luxury group voted in favor of extending the CEO’s retirement age limit to 80 instead of the originally planned 75.
Some would be tempted to get lost in a labyrinth of interpretations; but if this decision really tells us anything, it is that it is probably not yet the “right” moment to pass the torch of leadership at LVMH.
The “right” moment, but for whom?
Although Bernard Arnault does not reveal any clues about his future successor at the helm of LVMH, he has so far taken the greatest care in training the next generation of Arnaults since today these five children occupy positions of responsibility in the family business. Another major fact, he has already transmitted 75% of the luxury group in bare ownership to them, as well as to his two nephews (children of his deceased sister). He therefore retains 25% of the group and the usufruct of the whole, according to Le Monde.
In family businesses, if the strategies of individuals and organizations differ with regard to the transmission of power, we can only observe the multiple dimensions of what could be defined as the “right” moment, both the factors that come into play vary according to context and situation. Then comes an essential question: the “right” moment for whom?
The succession process directly or indirectly involves several stakeholders, who have different expectations and challenges: the family manager, the potential successor(s), family and non-family shareholders, historical suppliers, etc. ., to quote only those. Their perception of reality is not always the same: the “right” moment from the shareholders’ point of view, for example, may seem too early for the manager or too late for the potential successor.
The results of my research work on the subject, carried out with my co-authors, also make it possible to identify this lack of alignment of perceptions among the potential brakes on the success of transmission. As much as family businesses are able to create resources that are very difficult to imitate thanks to “familiness”, they are threatened by not being able to transfer these resources to the next generation.
This can be partly explained by the feeling of psychological ownership in the family manager, a feeling that translates into a strong emotional bond between him and his company. These emotional ties can become a real obstacle preventing him from leaving office and passing control to the next generation. A lack of confidence in the ability of the successor to perpetuate the family heritage sometimes accentuates the entrenchment of the leader. This is particularly the case if he is afraid to leave his business in the hands of a Fredoin reference to Alfredo Corleone (Fredo) in The Godfather of Francis Coppola, as we pointed out in an article published in the world of the Grandes Ecoles last February.
“A big blow of spleen”
Marcel Dassault, founder of the Dassault group, only left his chair as CEO to his son Serge after his death in 1986; Marcel was then 94 years old and his successor Serge 61 years old. Since then, Serge Dassault has fought to gain legitimacy. He will succeed in developing the family group to make it a real empire and become one of the greatest fortunes in France.
However, he will in turn leave this world in 2018 at the age of 93, leaving Charles Edelstenne, 80 years old at the time, his right arm and transitional successor, to carry out the succession of the group, with the support of the committee of wise men he created in 2006.
Serge Dassault did not make it a personal matter, as he pointed out in the book from Dassault from Marcel to Serge (Perrin editions) by Claude Carlier:
“The shareholders will choose the best, the most suitable to lead the group, whether they are family members or not, and this will be in everyone’s interest. I made my choice for my own succession by appointing Charles Edelstenne to the position of successor statutory president. It will be up to him, in consultation with the family and with the help of the committee of wise men, to appoint his own, when the time comes. The only thing I demand is that the capital of the group stays in the family”.
Another family, another story of succession: in 2003, with the Pinaults, François Pinault, then aged 67 and still in great shape, handed over the presidency of Artémis to his son François-Henri to whom he said: “If I was your age, I would like to have the power so I give it to you”, but he admits to having suffered the blow a year later:
“I didn’t anticipate it would be so hard. As I had told everyone to see things with my son from now on, overnight there were no more phone calls. Nothing. I had a great stroke of spleen”.
This is where preparing for the transmission and spreading it out over time could have made for a smoother transition.
American researchers Jeffrey A. Sonnenfeld and Padraic L. Spence, authors of the research paper The Parting Patriarch of a Family Firm (1989_)_, propose a typology with four exit/departure styles of family leaders: the “monarch” who clings to his chair to the end; the “general” who says he is stepping down, but remains very present, hoping that he will be needed to save the company; the “governor” who has a real behavior of withdrawal with most often a clearly announced departure period; and the “ambassador” who retires from his duties in the family business with peace of mind while agreeing, if necessary, to provide advice and expertise in a specific area.
In fact, a family leader can have a mix of attitudes and behaviors regarding the succession process, and even evolve from one style to another over time.
Within the Center of Expertise in Entrepreneurship and Family Business at KEDGE Business School, I am currently conducting research with colleagues not on the success factors of intra-family transmission but on the explanatory factors for failure. Our first results are unequivocal: real or perceived lack of competence in the successor(s), lack of trust between key stakeholders (leader, new generation, potential successor(s), shareholders, suppliers, customers, banks, etc.), violation/breaking of the psychological contract and inadequacy/inefficiency of governance arrangements.