Peter Thornton's Agenda for Discussion with Government

A business environment that is more supportive of family businesses would improve, stabilise, and support the British economy - and importantly, be a cornerstone to the coalition’s ambitions for the future economic strength of the UK.

Peter Thornton and Bruce Sachs’ proposals for the steps that government should take based on their report prepared for Vince Cable in August 2010. The purpose is to achieve economic stability by creating the right milieu for family business to maximise their potential contribution.  These proposals are far from exhaustive. 

  • Acknowledge and adopt the EU “Final Report of the Expert Group” – “Overview of Family-Business-Relevant Issues: Research, Networks, Policy Measures and Existing Standards” for government action wherever practical and appropriate. Particularly:
    • Create a ‘family business contact point’ at national government level. Utilise ‘Best Practice, as above in this respect: Lobbying / policy advice / awareness raising.
    • Introduce the common EU definition of a family business (as defined in the above report) and implement it via the Office of National Statistics.
    • Regularly report statistics for Family Business including numbers of businesses, closures, transfers, profitability etc.
    • The present Business Property Relief from Inheritance Tax needs to be continued and/or improved for those taking over management of Family Companies whilst being fair to other sections of the population.
    • Find ways of encouraging lower debt-equity ratios.
    • Consider issuing regulations to grant access to finance to family enterprises, without threatening decision-making powers within the company (e.g. by allowing non-vote stocks).
    • Utilise ‘Best Practice’ guidance as identified in the above report for consideration of all taxation and legal structure matters: Taxation and Company law.
    • The main issue to tackle to successfully complete ownership transfer is to raise awareness of the importance of early preparation, and to make available tools for the transfer (e.g. specialised training for the parties involved). Utilise ‘Best Practice’ guidelines as above: Planning business transfer.
    • More efforts need to be made to disseminate information on family governance. Utilise ‘Best Practice’ guidelines as above: Family governance.
    • Management is not an elitist specialism, it is practised throughout society and in all organisations, management and leadership education should therefore not be marginalised to business schools. The present style of management training in business schools which seems to be based on the corporate model should be completely considered.
    • It should be somehow included in the curricula of all professions to promote the entrepreneurial spirit in all fields. The concept of ‘ownership education’ should be further developed.
    • Entrepreneurship education should aim to foster new family entrepreneurs, but also to promote entrepreneurial behaviour (including innovation) in existing family firms. This knowledge should enable heirs to re-invent the business, which is proved to be what keeps the company going from each generation.
    • National governments could plan to make changes to their education systems and work closely or in partnership with private-sector organisations and educational institutions (e.g. business schools and universities) to develop family-business-specific courses as part of existing curricula or as new curricula. Utilise ‘Best Practice’ guidelines as above; Management / Entrepreneurship / Ownership-specific education. 
  •  Some Personal Ideas from PT and BS
    • Take steps to increase the awareness of policy makers of the specificities of family businesses and their economic and social contribution.
    • Build in some sort of conceptual understanding together with the common EU definition of ‘Family Business’, something like the German Mittelstand concept.
    • Make the success of business more important than the imposition of bureaucratic controls. Dramatically reduce bureaucratic controls on small business as these cause serious distraction and a decrease in profitability or even failure. Consider eliminating all but the most essential bureaucratic controls for all companies under a size of £2m turnover and then introduce them gradually as the firm increases in size and becomes capable of coping with them.
    • Maybe introduce some sort of official naming system such as “Limited Family Company” and “Family Partnership”. To qualify for these names Family Businesses would have to meet certain standards on the ‘Best Practice’ list.
    • Establish a sub-Department of the Department for Business, Innovation and Skills for “Family Business and Social Economy Affairs.”
    • Commission a selection of Universities to carry out a detailed research project to establish more exactly the reasons why German Family Business is more successful than UK Family Business.
    • We believe that ‘trust and respect’ from management to employee and employee to management is the best environment to achieve success and satisfaction in any organisation. Family Business tends to achieve this naturally owing to its nature. On the other hand we also believe that the security and involvement of employees in an organisation and therefore the organisations productivity is improved by having a degree of ownership and therefore responsibility and authority. 
    • Family Business starts naturally and Social Economy companies do not normally start naturally – conversion from Family Businesses is the normal initiation.  We think that moving towards some degree of employee ownership (Social Economy) is a very positive measure. Take steps to ensure that the interest of the employees in business has equal importance to the interest of the shareholders in important decisions. This can be achieved by having a shareholding trust for the employees varying between a very small share and 100% as in the John Lewis Partnership. Such measures can achieve a much needed controlling mechanism in favour of the employees in the case of company takeovers.
    • Consider what fundamental changes are needed in the structure of the quoted sector in order to bring its performance up to the level of Family Business.

 This is currently the Agenda produced by Bruce Sachs and I, the first part being based on 'The Final Report of the Expert Group' and the second part being our own ideas.

 

 

Please review and comment so that we can develop an agenda that we can say is the view of the UKFBA.

Peter Thornton

Chairman, UKFBA

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