Discrimination wanes against women in family business

Under Japanese civil code, business families with no son to carry on the family name can turn to an unusual solution: adopt one. Around 10 per cent of business-owning families with no male heir adopt a son, says Kazunori Kaneko of the consultancy Business Succession Center.

Japan is not the only country where family businesses will go to some lengths to hand over control of the company to a man. Nor is it the only country where family business leaders can be determined to hand over to someone who will continue the family name, although this practice is not often seen today.

“No Chinese man would want to change his name,” says Annie Koh, professor of finance at Singapore Management University. “But in the past few years because of the one-child policy in China, if the family firm is fixated with their own surname, in rare cases you have found a man who will change his name.”

That desire to preserve the family name might have been one factor that has prevented women from rising to the top of family businesses in some countries, but experts say other explanations for historical discrimination have been even harder to overcome.

Sometimes the barriers have been legal. In what was then West Germany, for example, married women only gained the right to work without their husband’s permission in 1977, says Dominique Otten-Pappas, senior research fellow and assistant professor of German family businesses at the University of Witten/Herdecke.

“Before that, a husband could forbid his wife from working and this had repercussions for family businesses,” she says.

Even today, resistance to women inheriting the family business persists. “Probably some of the males in my generation see it as a given that it is their right to succeed,” a third-generation female respondent from New Zealand told researchers for PwC’s 2016 Next Generation survey, which examined the views of the next generation of family business leaders and included a special section entitled: The Female Perspective.

Because of the one-child policy, you’re seeing more China family firms willing to have the daughter take over

Nevertheless, such attitudes appear to the shifting. In the same PwC survey, 30 per cent of the women interviewed had a seat on the board (in the US only about 21 per cent of board seats at S&P 500 are held by women, according to Catalyst, a pressure group that works to improve representation of women in the workplace). And more than 50 per cent of the women interviewed did not think their gender would be a barrier to them running the family business, according to the 2016 survey.

In addition to the shifting attitudes towards women in the workforce, demographics are playing a role, with the global trend towards having fewer children pushing up the number of women leading family businesses.

China is an extreme example of this. The decades in which limits were placed on childbirth have left families with little choice. “Because of the one-child policy, you’re seeing more China family firms willing to have the daughter take over,” says Prof Koh.

Sian Steele, head of PwC’s family business group in the UK, sees the growing desire to become more strategic as a powerful driver of increased gender diversity in the leadership of family businesses. “There’s a strong emphasis on professionalising their governance, making sure they have a clear strategy and that the succession plan is based on skills and not gender,” she says.

Whether or not it involves relatives, this approach appears to be favouring senior level gender diversity in family businesses. In EY’s 2017 Women in leadership report, 70 per cent of family businesses were considering a woman for their next chief executive and 30 per cent were “strongly considering” this.

In many parts of the world, growing access to education for women and girls has made a difference, says Fiona Moore, a professor at the school of management at Royal Holloway, University of London. “It means you have women who are better educated, better able to take over the business and possibly more assertive.”

Some see increased female leadership as a positive development for family businesses. “It dramatically increases family talent pools, helps with succession planning and can make firms more sustainable,” says Adam Rowse, head of business banking at Barclays. “It also helps avoid situations where a son feels a particular obligation to work in the family firm when they would prefer another career.”

Ms Steele believes the benefits could extend beyond the sector itself. “In 10 to 15 years, you could see some significant family businesses being led by women,” she says. “That’s a great opportunity to create role models.”