Half Title Page

Family Firms and Family Constitution

Series Page

LAW AND MANAGEMENT OF FAMILY FIRMS

Series editors:

Holger Fleischer, Max Planck Institute for Comparative and International Private Law

Stefan Prigge, Institute for Mittelstand and Family Firms (HSBA Hamburg School of Business Administration)

The pioneering Law and Management of Family Firms series publishes volumes following the annual Hamburg Conference: Law and Management of Family Firms, the international and interdisciplinary forum for family business research.

Uniting two distinct and previously disconnected disciplines of law and management, it is the aim of this conference and book series to be the forum for international and interdisciplinary exchange for a given family business topic. Crossing boundaries, it brings together law and management scholars, and practitioners such as lawyers, consultants, and heads of family offices to add diverse perspectives. Law and Management of Family Firms unites people from different countries and continents for globally applicable research and discussion.

The first volume will be Family Firms and Family Constitution. Future volumes will include Listed Family Companies and Enterprise Foundations and Family Firms.

Title Page

Family Firms and Family Constitution

EDITED BY

HOLGER FLEISCHER

Max Planck Institute for Comparative and International Private Law, Germany

AND

STEFAN PRIGGE

HSBA Hamburg School of Business Administration, Germany

United Kingdom – North America – Japan – India – Malaysia – China

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Emerald Publishing Limited

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First edition 2024

Editorial Matter and Selection © 2024 Holger Fleischer and Stefan Prigge.

Individual chapters © 2024 The authors.

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ISBN: 978-1-83797-203-6 (Print)

ISBN: 978-1-83797-200-5 (Online)

ISBN: 978-1-83797-202-9 (Epub)

Contents

About the Contributors

Sebastian Bong is a Civil Law Notary Public (Notar) in the Free and Hanseatic City of Hamburg. Previously, he worked as a Research Assistant at the Max Planck Institute for Comparative and International Private Law. His doctoral thesis examines family businesses and the corporate law effects of a family constitution on a family business governance agreements.

Isabel C. Botero, Ph.D., is a Faculty Member in the Department of Management and Entrepreneurship at the University of Louisville, an Advisor at Generation 6 Family Enterprise Advisors. She is a Fellow for the Family Firm Institute, holds an Advanced Certificate in Family Wealth Advising, and is a Certified Exit Planning Advisor. Her research focuses on strategic communication processes, governance, and next-generation issues in family enterprises. She is an Associate Editor for the Journal of Family Business Strategy and a past FOBI Scholar. Her work has been published in multiple management, communication, and family business books and journals. She also holds a board position at IFERA - International Family Enterprise Research Academy.

Donella Caspersz is a Associate Professor and Director, UN PRME at the UWA Business School. Donella’s research and practice focuses on family business management and matters relating to management of migrant labor.

Katrin Deckert is Associate Professor (Maître de conférences) at Paris Nanterre University, and former Deputy Secretary-General of the International Academy of Comparative Law. She studied law in France and Germany, and holds a PhD in German, French and European corporate and securities law from Panthéon-Sorbonne University (Paris, France) and the University of Hamburg (Germany). Katrin Deckert teaches and researches in German, French and European business law, law & economics, and comparative law.

Tomasz A. Fediuk, Ph.D., is a Founder and Managing Director for Family Business Strong. Tomasz holds an Advanced Certificate in Family Wealth Advising and is a Certified Exit Planning Advisor. His research focuses on strategic communication processes, and opportunities and challenges of business ownership and next-generation issues in family enterprises. His work has been published in multiple communication, management, and family business outlets.

Holger Fleischer is a Professor of Law and Director at the Max Planck Institute for Comparative and International Private Law in Hamburg. His main fields of research are company law, capital markets law and commercial law, including their comparative dimensions.

Chris Graves is a Chartered Accountant, Associate Professor in Entrepreneurship and Family Enterprise, Head of the Entrepreneurship, Innovation and Family Enterprise Department and Co-Founder / Director of the Family Business Education and Research Group [FBERG] at the University of Adelaide Business School.

Rachel Heeringa is the oldest of the 4^th generation of the family business NZZ described in the case study that she co-authored. She is a Manager at a consultancy firm. She’s very interested in business families. She wrote her law-thesis on family governance and assisted in this case study.

Lorenz Holler is a German Lawyer and Partner at the Hamburg-based corporate boutique law firm VOIGT WUNSCH HOLLER Partnerschaft von Rechtsanwälten and a member of the expert group Hamburger Kreis Recht der Familienunternehmen at the Bucerius Law School, Hamburg. His major fields of interest are corporate/M&A, corporate governance and succession (planning) with a special focus on family businesses as well as dispute resolution.

Lena Jungell is a PhD student at Hanken School of Economics in Helsinki, soon defending her doctoral thesis: Family governance; managing dispersed ownership within the owning family through procedural justice. She is the Chair of the research council of the Finnish Family Firms Association and an Ambassador within the Family Business Network International. She is also a fourth-generation family member and a member of the owners’ council in the 131-year-old family business.

Susanne Kalss, Prof Dr. Dr. h.c., LLM (Florence), is Head of the Department of Commercial Law at the University of Economics and Business at Vienna. Her main fields of interest are Corporate Law, Law of Family Business, and Capital Markets Law. She organizes the annual family business day in Austria.

Hermut Kormann is Apl. Professor of Governance and Strategy of Family Enterprises at Zeppelin University, Friedrichshafen, and Visiting Prof at University Leipzig and Beijing Institute of Technology, Center of Family Enterprises. His prior career was in Management of a German Family Enterprise.

Ilse Matser’s core interests include responsible ownership and family governance. Until 2020, Ilse was Professor of Family Business at Windesheim University of Applied Sciences in the Netherlands. Currently, she is an Independent Educator and Advisor for business families.

Katharina J. Mengers has a background in business management and family firms. After obtaining her MBA at the HSBA Hamburg School of Business Administration, she has since continued researching in the field of family firms besides enhancing her entrepreneurial activities.

Stefan Prigge is a Professor of Finance and Accounting at HSBA Hamburg School of Business Administration and a Member of the IMF Institute for Mittelstand and Family Firms in Hamburg. His major fields of interest are governance and finance that he has applied to family firms (since 2011) and professional sport (since 2014).

Julia-Mara Rückert has completed a Master’s degree in Corporate Governance at HSBA Hamburg School of Business Administration. She has several years of experience in internal auditing and now works in the compliance field.

Sarah Speidel completed a Bachelor’s degree in International Business Administration at Aalen University.

Felix Thiele received his Doctorate from Leuphana University Lüneburg in association with HSBA Hamburg School of Business Administration with a thesis on the financing of family businesses.

Jill Thomas is a Senior Research Fellow at The University of Adelaide Business School and Co-Founder of its Family Business Education and Research Group (FBERG). She is a former Director of Family Business Australia (FBA), a Fellow of the Family Firm Institute (FFI), and a Life Member of FBA.

Patrick Ulrich is a Full Professor of Corporate Management and Control (W3) and Head of the Aalen Institute for Corporate Management (AAUF) at Aalen University. He is also an Adjunct Professor at the University of Bamberg and a Lecturer at several other universities.

Jan Willem van der Vloot van Vliet works as a Lecturer at Saxion University of Applied Sciences. He is a PhD student at Hasselt University. His PhD project is about the relationships between the (business) family and the non-family employees.

Preface

The Conference Series

The Hamburg Conference: Law and Management of Family Firms is a joint initiative of the Max Planck Institute for Comparative and International Private Law, Hamburg, and the Institute for Mittelstand and Family Firms (IMF), also based in Hamburg. Family firms have increasingly become object of research activities in a variety of disciplines, such as law, psychology, management, and sociology. Exchange between the disciplines has taken place in some cases; for instance, the concept of socioemotional wealth (SEW) reflects contributions from management and psychology. However, exchange between law and management has been very rare so far, although fields like law and economics, law and finance, or corporate governance have been examples of how beneficial such an exchange could be. That was the starting point to originate the Hamburg Conference: Law and Management of Family Firms. The conference is supposed to be a forum of exchange for legal and management scholars who share the interest in family firms. It is structured as a research conference with about 10 presentations from both fields, providing enough opportunities for discussion among the participants. Participants include, in addition to the presenters, a small group of further researchers and practitioners with an interest in family firms. In the best case, a cross-disciplinary discussion unfolds. To our great satisfaction, that is what happened in the first edition of the conference. This experience has encouraged us to define the conference as an annual event, taking up a specific topic each year that is of interest for law and management.

The family constitution was the topic of the inaugural edition of the conference. This increasingly important, but under-researched instrument is part of the family governance structure, which in turn forms, together with the business governance structure, the governance framework of family firm and owning family. As already pointed out above, governance is a subject for which the benefits of interdisciplinary exchange between law and management have already been proven. This volume assembles 12 contributions, 10 of them were presented during the conference. For these articles, the book includes a brief summary of the discussion following the presentation. Unfortunately, hurricane “Irma” made it impossible for Isabel Botero to present her paper in Hamburg. The article by Patrick Ulrich and Sarah Speidel was integrated subsequently into this collection, as it adds welcome and substantial information and facts about family constitutions in Germany.

In its entirety, this collection of articles represents the richness of family business research. There are comparative and conceptual papers as well as empirical articles analyzing either a single case or data from a large sample.

Part 1 of the book begins with two surveying articles by Fleischer, and Prigge and Mengers. Therefore, this preface could be rather brief. Fleischer considers historical development and legal nature of family constitutions in five countries. Prigge and Mengers provide an overview of the stock of research on family constitutions that management research has put forth.

Part 2 on managerial research covers conceptual and qualitative analyses. Botero and Fediuk develop further Botero’s reasoning about family business governance in a framework made up of equity theory, psychological contracts, and organizational justice. In their article, they claim that governance actually involves interactions between two parties, i.e., sender and receiver. Thus, governance analyses should be aware of the existence of these two parties; their contribution explores the receiving party’s perspective in greater detail. Matser and her colleagues Heeringa and van der Vloot van Vliet share their insights they derived from the very close companionship of a Dutch family and its family governance. Jungell focuses on owner families where ownership disperses more and more. She derives from in-depth interviews and her own experiences conclusions about the potential benefits of family governance systems for those families. Kormann introduces the Failure Mode and Event Analysis (FMEA) from the design of mechanical systems into the discussion of family businesses and applies this framework to explore the contribution of governance to the longevity and survival of the family firm.

Part 3, also on managerial research, is dedicated to quantitative analyses and surveys. Graves and his collaborators Caspersz and Thomas have submitted one of the very few studies that explore family constitutions empirically on a large sample, in their case of Australian family-owned businesses. They found a positive and significant relation between the existence of a family constitution or a code of conduct and financial performance, however, surprisingly, not for family-oriented performance. Ulrich and Speidel report about the results of their recent questionnaire of German family firms and provide fresh evidence about, for instance, the reasons why families develop a family constitution and the importance of the development process leading to the final document.

Part 4 focuses on legal research. Bong explores the interplay between a family constitution and the family business’s binding legal agreements. In doing so, he describes four different forms of family constitutions that have evolved from different consulting approaches in German practice. Kalss concentrates on the complicated interplay between company law and succession law in family firms. Deckert gives an overview on family constitutions and their legal relevance in the French company law landscape. Holler explains in detail the complexity of family businesses from counsel’s point of view. He points out that, contrary to a widespread belief, family constitutions may indeed have legal effects of one sort or the other under German law.

Fleischer and Prigge conclude the book with a brief survey of future research opportunities that were developed by the participants during the two days in Hamburg.