Multi-generational French family firms

Many multi-generational family firms make up the French economy. They demonstrate resilience and renewal in hardship, good family organisation and, for some, acceptance of in-laws in top roles

Family businesses in France represent a large part of the economy: estimates are that between 60 and 70% of all businesses in France are family firms. Recent research validated that even among 250 of the largest traded firms on the Paris Stock Exchange more than half were controlled by families or individuals. Thus, France counts many multi-generational family companies in its midst, including some very large enterprises such as Carrefour, Michelin, Peugeot, Auchan and Hermés. The Hènokiens, an association of bicentary companies whose membership requires its members to still be managed by the founders' descendants, count ten members alone in France.

What follows is the story of an exception, of almost a dinosaur, albeit a healthy and living one: the story of the Wendel family that has been in business together for almost three centuries, all while witnessing and suffering from the French Revolution, wars and multiple changes of national borders (a troublesome issue if one's basis is Lorraine, in the eastern part of France).

The Wendel family
The business started in 1704, when JeanMartin Wendel purchased forges in Lorraine, very close to the German border. The region had many relatively small iron ore deposits and a large supply of wood for heating furnaces. Running a forge at the time was one of the rare economic activities allowed to aristocrats. Conversely, the French Kings, eager and grateful for their allegiance, regularly ennobled their forge masters. Cautiously, they attached titles with their forge master's activities, preventing these titles from being hereditary.

Jean-Martin Wendel's forges soon supplied iron bullets for the Kings and rapidly gained prominence. Jean-Martin's son, Charles I, further expanded the forges. He improved the process by adding coal as a heat source, allowing production to increase without devastating the area's forests.

Openness to in-laws and women
Towards the end of Charles'life, his wife, Marguerite d'Hausen, started to manage the forges with the help of her two sonsin-law. This great openness to in-laws, including women, is a notable characteristic of the Wendel family – one that has allowed the family business to survive.

Family commitment
Marguerite d'Hausen managed the company during the French Revolution (1789 and thereafter) until she was arrested in 1794. Then, the forges were closed and sold as "state properties". A new owner, who had no experience in iron production, rapidly went bankrupt. This allowed François de Wendel, Marguerite's grandson, to repurchase the forges in 1803, upon his return from exile. François de Wendel sold all his belongings and substantially indebted himself to allow the purchase. After a few years, he had reimbursed his debts and even acquired other forges in the nearby town of Moyeuvre. To recover some lost industrial processes, François went to England, and even returned with some workers. He also exerted political influence, being elected to the French parliament as a representative of his region.

Social policies
The continent's emerging industrialisation created a wealth of opportunities and the company expanded during the early 19th century. When François de Wendel died in 1825, the forges already employed 3, 000 people. After his death, his wife Josephine de Fischer de Dicourt managed the forges with her son and son-in-law. Pioneering social policies were introduced, including pension and health insurance systems, as well as a 13th month of wages. The family managers adopted an 'open-door' policy with their employees, any one of whom always had the opportunity to meet with them personally. The construction of railways and iron ships opened up huge markets for the forges, while protectionism contributed to maintaining high prices. New forges were built. In addition to housing for the firm's employees, the family built schools, a town hall and churches. A new town was triumphantly inaugurated by Emperor Napoleon III in 1857.

Family policies
After her son's death in 1870, Josephine Fischer de Dicourt owned the forges but had no surviving children. It was clear her grandchildren would eventually take over. To favour family cohesion and ensure the future of the forges, she created a partnership company in 1871, called "Les Petits Fils de François de Wendel", which owned 100% of the Wendel mines and forges. The articles of association stipulated that the shares could only be owned by François de Wendel's descendants. The first shareholders of this partnership company were François de Wendel's nine surviving grandsons and granddaughters. In-laws were excluded from share ownership, but could be involved – and indeed it was very much the case – in the management of the company.

More hardships
François' grandchildren faced two major difficulties: on the political side, Lorraine had been annexed to Germany following France's defeat in the 1870 FrancoPrussian war; on the industrial side, steel was increasingly replacing iron, but the excessive phosphorus content of the Lorraine iron ore prohibited the Wendels from producing steel. One of the grandchildren, Henri de Wendel, decided to stay in Lorraine, and received German nationality. He sought election in the German parliament as a "protesting representative of Lorraine". He also made a point of continuing French as the language of use in the forges. He built houses in France, close to the border, to allow workers to keep their jobs in the forges while remaining French. Henri also spent most of the 1870-1880 decade searching to develop a process for manufacturing steel with Lorraine's highly phosphorus iron ore. During those years, the forges went through considerable economic hardship. Yet, the cousins refused to receive funds from German investors. As Henri then stated to his family members:

"Our business is getting worse and worse, because of technical problems . . . If we sold, we would regret it, and I can hardly envisage selling our company to Germans after our resistance of the past years. Our people also follow us unanimously in such a decision".

At last, a new process became available and a few years later prosperity returned. However, it was not the end of difficulties for either family or business.

During World War I, the Wendel operations were confiscated and largely destroyed. After the war, with Lorraine's return to France, the Wendels were warmly acclaimed in the region. Forges were restarted and rebuilt using both war indemnities and family reserves. One of the key family figures of this period was François II de Wendel. He managed operations, at the same time was a prominent member of the French parliament and, through his leading role in the Banque de France, also made his mark on French monetary policy.

Unfortunately, economic recovery was short-lived, and put to an end by the great depression of the 1930s and World War II. The forges and mines were, once more, confiscated by German authorities, and some equipment disassembled and transported to Bohemia. Several members of the family took a leading role in the war: the most notable member was Maréchal Leclerc de Hauteclocque, an in-law, who successfully led allied liberation forces into Paris, Nancy and Strasbourg.

The end of the steel adventure
The end of World War II allowed the Wendels to once again rejoin their beloved Lorraine region. Times, however, seemed to have changed. The atmosphere was by no means as triumphant as in 1918. Buildings had been devastated. In 1946, the coalmines were nationalised. Steel prices were frozen by the French government, which increasingly regulated and interfered with the management of the steel companies. After a few good years in the 1970s, the steel crisis shook all Europe's industry and state support was envisaged throughout. In France, this support took the form of increased indebtedness towards the State and the nationalised banks.

In 1977, the Wendel family managers proposed, as an alternative to outright liquidation, a major restructuring programme of the Wendel family holdings. The essence of their proposal was to dissociate the steel activities from the other activities, which consisted of a loose collection of hardly profitable companies, up-stream and down-stream of the steel process. The proposal from the family management had to be accepted by the unanimity of family members in order to be implemented; hardly a common requirement in business, but a price to pay to preserve family unity and a future for a family enterprise. The family managers wished to receive the backing of all family shareholders to continue. If one were to refuse, they would not proceed with the plan. All 350 family shareholders eventually accepted the management proposal to continue the family business history, with the leftovers of the steel adventure. Ultimately, the steel activities were nationalised, through the transformation of state loans into equity, and the family developed its non-steel activities under a newly created holding company, CGIP.

A business family
Following the family's acceptance of the creation of CGIP, the restructuring of the portfolio of 'leftovers' was initiated. Ernest-Antoine Seillière, great-grandson of Henri I de Wendel, had just joined the company and, together with his uncle Pierre Celier, then CEO, transformed their collection of 50 hardly profitable companies into a holding with a few stakes in large companies. CGIP developed its own philosophy of "shareholder-entrepreneur":

"As a long-term shareholderentrepreneur, CGIP is committed to building international market leaders in fast-growing technology services sectors and in industry. CGIP takes a long-term view and is involved in defining strategies, participating in the organisation of financing, and selecting management"(CGIP's website, 2002).

The family currently counts over 700 shareholders, regrouped into two closed family holdings, which ultimately control CGIP. CGIP is publicly traded and the boards of the two closed family holdings play the role of family council. All branches of the family are represented on these boards. Annual shareholder meetings are the occasion for the family to meet: each family member wears a badge with a colour representing his or her branch and young family members aged 15 years or older are invited to a cocktail that follows the assembly. An internal family market allows family members to buy and sell shares of the closed holding companies, and the genealogy of the family is regularly updated and sent to all.

Common traits
Though the story of nine generations of family entrepreneurs is not the 'norm', many French family businesses have parallels with the Wendel family, in one way or another. Longevity, acceptance of in-laws in top management positions and large families can be found in a number of businesses.

Longevity
The spokespeople for longevity are The Hénokiens. They are proud to affirm that their 31 members represent more than 63 centuries of existence. The name Hénokiens comes from Henoch, a patriarch from the Old Testament of the Bible, who lived for 365 years and never died, but was taken up into heaven.

The Hénokiens have ten French members. The oldest, Baronnie de Coussergues, traces back its origins to 1488. Other French members include the jeweller Mellerio dits Meller (tracing back to 1613), three wineries, a producer of silk material, a cookware porcelain manufacturer, a music publisher, two trading companies and a manufacturer of hooks and screws.

Without necessarily having been through two full centuries of family ownership, many businesses actually managed several successions and are well past the third generation. An example is Peugeot, the car manufacturer, still controlled by the family with almost 25% of the shares and 40% of the voting rights. The family has strong Protestant roots in the Doubs region in the East of France. It started in business as early as 1810, with the manufacture of rolled steel for saw blades and clock springs. Interestingly, their product scope extended to coffee and pepper mills, sewing machines and other household appliances. The company started to produce bicycles in 1885 and a few years later the first automobiles were developed. Peugeot merged with Citroën in 1976, and in 2001 the group's output exceeded 3. 1 million vehicles.

Because of family ownership, Peugeot was seen by some analysts as doomed to disappear as an independent player, but the 2001 results surpassed the targets – both in terms of vehicles sold and in operating margin. Consolidated sales for 2001 amounted to €51. 7 billion, an increase of 11. 3% versus previous year in comparable terms. Net income for the year amounted to €1. 7 billion, an increase of almost 29% versus the previous year. Its non-family CEO recently appeared on the cover of Fortune magazine.

A few members of the Peugeot family work in the firm. Their goal is not necessarily to become CEOs of the company – a position that has been held by non-family executives for the past years – but to work and be present in the company their ancestors founded. In doing so, they perpetuate the family values of work well done and commitment to the business. The dual board structure, with a management board ('Directoire') and a supervisory board ('Conseil de Surveillance') also allows the family to play an active role in the governance of the firm.

Large families
The Wendel family expects to have about 2, 000 shareholders in 20 years. French inheritance law forces parents to share evenly three quarters of their estate between the children. Thus, several French business families have several dozen shareholders. The families from the North of France, in particular, have the reputation of having particularly strong family organisations, where family programmes (seminars, trips, plant visits) can be found alongside family charters. These families have also been very diligent in converting their activities from ailing economic sectors into dynamic ones, as illustrated for instance by the extremely entrepreneurial Mulliez family in France, who moved from textile to retailing with the creation of the Auchan hypermarkets and several other businesses.

In-laws as resources
The role of in-laws often triggers heated discussions in family business seminars. Some families advocate their absence from ownership, management and even family meetings while others fully include them, even at the ownership level. Many families take intermediary positions. In France, several family businesses have been managed by in-laws. The Wendel family is an example of the role that spouses (both male and female) can play. Galeries Lafayette, the department store company, is co-run by two in-laws, husbands of two sisters, great-granddaughters of the founder, and the three previous generations CEO were also in-laws.

Conclusion
Multi-generational family businesses often share a common characteristic: the realisation that business benefits from family commitment and attachment that developed over several generations. Conversely, the family benefits from its business, which not only provides it with financial rewards, but also with less tangible but important rewards: a feeling of belonging, the "social capital"brought by the family networks, and pride of being part of a long business adventure. As long as both the family and the business benefit, their alliance is worth pursuing!