Study finds Swiss firms keep it in the family

Basel-based pharmaceutical giant Roche is still in family hands. roche.ch

Nearly nine out of ten companies in Switzerland are in the hands of families, according to a study published on Monday by accountancy firm Ernst & Young.

The report also found that six of the 20 largest companies listed on the Swiss stock exchange (SWX) are family-run.

The study, carried out in conjunction with the Swiss Institute for Small- and Medium-sized Businesses at St Gallen University, found that family-owned companies represented a “significant” part of Switzerland’s corporate structure.

Just under 100 of the 268 companies listed on the SWX – including Basel-based pharmaceutical giant Roche, Swatch, Kudelski and Unaxis – are in the hands of families.

“The data available from other countries leads us to believe that the number of family-run firms in Switzerland is high,” Urs Fueglistaller, one of the authors of the report, told swissinfo.

“Many of these businesses have far-reaching roots, since families were able to keep control of their firms even during the Second World War,” he added.

According to Fueglistaller, the family remains to this day “a very important source of financial and human resources for firms of all sizes”.

“In financial services, for example, family firms have managed to become and remain key players, as can be seen in the private-banking sector.”

But he added that the number of companies managed by families was even higher in Spain and Italy.

Corporate governance

The report found that family-run companies possess some “unique features from the point of view of corporate governance”.

Typically, more than half of the capital of such firms is in family hands. Over 60 per cent of family businesses were found to have “complete control” of company management.

“This means that in many cases the board does not provide a fully independent external control,” said the report.

The study’s authors found that most families were focused on “preserving their independence… and protecting and growing the family fortune”.

“We found that the owners of many of these companies cannot easily accept that there might be suitable successors… from outside the family,” said Peter Bühler of Ernst & Young.

Not sluggish

Thomas Zellweger, who also worked on the report, said the widely-held view that family-run companies were “sound but sluggish” was false.

“The results of our study clearly contradict this preconception,” he said.

“Measured against the overall market, Swiss family companies actually produced a considerably better performance.”

The report concludes that the shares of family-run businesses tend to make “above-average” gains during periods of growth, but post “higher losses than shares of non-family companies” when the market takes a downward turn.

“This helps us understand why family companies tend to be sceptical when it comes to opening themselves up to the capital market and pursuing the objective of increasing their stock price.”

swissinfo, Ramsey Zarifeh

Key facts

According to Ernst & Young, 99 family-run firms are listed on the SWX.
Six of the 20 largest companies on the SWX – Roche, Swatch, Holcim, Schindler, Unaxis and SGS – are in the hands of families.
More than 88% of all companies in Switzerland are controlled by families.
Around 63% of family businesses have complete control of the company management.