Joachim Schwass is Professor of Family Business IMD and Director, the IMD – Lombard Odier Darier Hentsch & Cie Family Business Centre.
Just one year before the Bonnier Group celebrates its 200th anniversary, the Bonnier Group were the recipients of the 2003 IMD – Lombard Odier Darier Hentsch Distinguished Family Business Award
The Bonnier Group is a leading Scandinavian diversified-media conglomerate of over 200 privately owned companies. The ownership is in the hands of 73 family members from the fifth to eighth generations who are direct descendants of the founding family.
The founder, Gerhard Bonnier (1778-1862) was born in Germany as Gutkind Hirschel, son of a banker in Dresden. When he was 22, Bonnier migrated to Denmark. There, making a fresh start, he grew his modest library into a book publishing business. He married a Danish girl in 1803. They had 11 children. Adolf, the first-born, opened bookstores first in Gothenburg, Sweden (1827), in Uppsala and then in Stockholm. Another brother, David Felix, took over in Gothenburg; he later started the daily newspaper Göteborgsposten. Meanwhile, the youngest son, Albert, took multi-year training in various publishing firms in Scandinavia and abroad. In 1837 he opened his own Stockholm publishing firm, called Albert Bonniers Förlag, which became the platform for today's media group.
Albert and Betty had three children: two daughters and a middle son, Karl Otto (1856–1941). Following the pattern of selecting the first-born male descendant, the parents viewed Karl Otto as the natural leader of the family company. At the death of his father in 1900, Karl Otto became the sole owner (his sisters received no shares in the business). The first three generations upheld a strict ownership strategy: total ownership control by one descendant, either prepared for this role, or by separation from other family members. This laid the foundation for the culture that drives the family today: a strong interest in culture, and trusting, respectful relationships with authors. In the third generation Karl Otto took the company in two directions.
The business model was broadened to prepare for diversification into daily papers and magazines. The family moved to a stately family home in an elegant part of Stockholm where Karl Otto and his wife, Lisen, would often entertain Bonnier Group authors. The Bonnier children attended many of these dinners and grew up with intellectual curiosity and cultural education. Gradually the boundaries between family life and business life faded.
In the fourth generation, Karl Otto's first son, Tor (1883-1976), assumed both business and family leadership. Daughters were again excluded from the family business. At Karl Otto's death business ownership went to Tor, Ake and Kaj (a fourth son, Gert, was pursuing an academic career). The distribution of ownership was slightly decreasing following birth order. After three generations of ownership concentrated in one hand, for the first time, shared ownership came into play. This working partnership model, however, was in no way egalitarian – Tor dominated. Ake moved to the US and Kaj assumed leadership of the Bonnier's traditional book publishing.
A new business model
The fourth generation rigorously pursued the new, enlarged business model: under Tor's leadership the magazine publishing firm Ahlen & Akerlund was acquired in 1929. This was a big risk: the price of well over €1 million equalled the approximate value of the family business. The acquisition soon became a benchmark: future Bonnier generations revisited it whenever they were considering large investments.
The Bonnier family business was now in book publishing, newspaper editing and weekly magazines editing. The public image of the family business was, nevertheless, still associated with book publishing. Internally, the family was growing more critical of Kaj's leadership. In 1952, Kaj asked to be bought out by Tor and Ake, and his shares were distributed pro rata parte. Taking account of the initial unequal shareholding, this brought Tor to about 54% ownership, and Ake, who was still living in the US, now had 46%. The family business returned to a dominant owner stage – the model on which it had been founded.
The Impact of a growing family
Tor had married three times. He had three boys with his first wife Greta: Albert Jr (Abbe), Johan and Lukas. The next two marriages produced three more male descendants. Ake, Tor's brother, had one son only, Gerard, which simplified the ownership inheritance. But Tor's situation was more complicated. During his first divorce, his first wife, Greta, strongly defended the ownership rights of her sons. Each received a third each of Tor's shares, with Abbe, the eldest, getting an additional 1% so his siblings would see him as the dominant leader. When the younger half-brothers were born, each of the eldest brothers gave 1% of their shares to them. From two owners in the fourth generation, the family business now had seven owners in the fifth generation with very unequal shareholdings, both inter- and intrabranch. To gain clarity and commitment, a 50-year ownership contract was drawn up along the following lines:
- The family wanted to stay together and build the business;
- Family members wanting to sell were not allowed to go outside the family.
While other cousins in the fifth generation pursued outside careers, management responsibilities were divided among Abbe, Lukas, and Gerard. Abbe looked after the newspaper business and emerged as the leader, with a strong entrepreneurial drive. Lukas looked after the magazine business and Gerard became head of book publishing.
Lukas said of this arrangement between the cousins: "In a way, we did not need a paper contract. The bond was strong. We wanted to stay together and had more than enough trust in each other."
By now, the Bonnier family business had such a strong position in publishing and editing in Sweden that public concern was growing. The family, it was said, was too powerful. Abbe was troubled by this and adopted the view that the family's future was in unrelated diversification, away from Swedish media. So Abbe launched a more than three-decade expansion. The group made initial investments in vertically related industries like paper and acquired companies in unrelated industries such as furniture production, disposable tableware, packaging, engineering and ferry service. Lukas said: "Abbe was unstoppable. But he did consult with his cousin Gerard, the single largest owner, before making any investment. And there was good corporate back-up by a solid finance director."
In the early 1950s, Abbe shifted the responsibility of the traditional businesses to Lukas and Gerard. They enjoyed freedom to run the newspaper, magazine and book publishing businesses as they saw fit. Abbe got involved only when the two of them faced difficulties or needed money. By 1957, Abbe saw his main responsibility as managing the concern and diversification projects. But his entrepreneurial energy and enthusiasm spilled-over to the non-family managers he had put at the top of newly acquired companies.
CEO selection and appointment was the most important vehicle for the owning family to influence the growing business. Although the family's ownership interests were combined in a holding company over which Abbe presided, there was no formal governance structure. Abbe was the leader; he made all key decisions.
By the mid 1970s, with new legislation requiring employee representation on corporate boards, the Bonnier family's decision process needed to change. Soon, decisions were taken more formally, but the family came to board meetings with one voice and a consensus reached in previous informal consultations, often during family meals.
Abbe continued the industrial diversification, financing it entirely from cash the family's businesses generated. This meant that the traditional publishing business had a hard time, since it could have benefited from the financial resources that were flowing to the industrial companies.
In 1978 Abbe stepped up from working president to working chairman of the group. He was 71, but still very much in control. Since no family member was ready for the presidency, a non-family outsider was chosen. Until Abbe's death in 1989, there were two non-family presidents, no doubt because it was difficult to work under an active, powerful chairman. This governance structure, born of necessity, later became the new model for the family: either a family member or a non-family member would hold the chairmanship and the presidency respectively; thus, power between ownership and management was balanced. Abbe held the chairmanship until 1988, at which time his younger brother Lukas succeeded him.
The sixth generation arrives
The sixth generation was growing up, and there were more family members now. The Tor and Ake branches, which had grown to seven male descendants and owners in the fifth generation, had now evolved to 28 male and female descendants in the sixth generation. For the first time, female descendants were entitled not only to ownership but also to employment in the business. Abbe did not seem to be overly concerned with succession planning. He also had two daughters, which according to family tradition meant that a male nephew would succeed him. And so it was Carl-Johan, the third son of Abbe's brother Johan, who became the next generation leader. He said: "There were no real succession discussions in the family. It just happened that several of the sixth generation members entered the business in various functions. For me, it was just natural and easy to enter the family business because it seemed so much more interesting than any other business."
Succession from the fifth to the sixth generation represented an enormous paradigm shift for the family and for the business. Up through the fifth generation, the concept of the dominant owner had prevailed – even though the number of owners had grown. Lukas reflected on this breakpoint for the family business: "When I was Chairman, after the strong and entrepreneurial leadership of Abbe, I believed that the only way forward for our enormously diversified business and for the very large number of sixth-generation family members would be to go public. I sincerely believed that we had reached the limits as a family business. But I had not counted on the energy and enthusiasm of the next generation. They persuaded me that they were ready, willing and able to take our privately held family business to a new level, by building on the tradition, but in an innovative, different way. I changed my mind and encouraged them to do it."
Managing a complicated generational transition
In the early 1990s, the sixth-generation members – together with Lukas – went through an educational programme about family business structures and strategies, which created a platform for learning, discussion and development. Carl-Johan emerged as the natural leader and was appointed CEO in 1991. Lukas Bonnier soon thereafter stepped down as chairman of the board and was replaced by a trusted non-family former executive.
The business model Abbe had created now came under pressure. The diversification strategy had stretched financial resources and human resources to the limits. The sixth generation rapidly concluded that it should focus on the traditional industry – media – and capitalise on new opportunities there, instead of spreading resources thinly across the unrelated diversified industries. In Carl-Johan's words, "The family had a name in media – the family always liked the publishing of books, papers and magazines; therefore, it was an easy decision to pull out of the wide diversification and instead focus nationally and internationally on the business that is in the blood of the family."
Another turning point came in 1998 when the family considered increasing its investment in Marieberg, a publicly traded publishing business in which Bonnier held just under 50% ownership. The Bonnier family essentially had two choices:
- Merge the Bonnier Group into the publicly traded Marieberg company, thus providing access to further growth capital on a public stock market and providing family members with exit opportunities, or
- Take Marieberg private and merge it into the Bonnier Group (still 100% privately owned by the Bonnier family).
The Bonnier cousins preferred the second option. They feared that going to the stock market could increase the risk of the family business breaking up over time. The emotional attachment to the media industry, and more specifically to the traditional book publishing business, was so strong that the family was willing to pay the price of this acquisition. In fact, the overall purchasing package was close to €500 million, which represented about half of the Bonnier Group's assets. This project reflects the continuing entrepreneurial drive in the owning family. Several times in earlier generations the family had proven to be willing to accept large risks by acquiring large companies, which helped them take the family business to a new platform.
Modern business structures
Through this acquisition, the head of Marieberg, Bengt Braun, joined the Bonnier Group. He became Group President and CEO, and Carl-Johan Bonnier became Executive Chairman of the Board. Braun had had a successful career with Procter & Gamble before taking over at Marieberg in 1989. He brought experience of a structured organisation and management competence to the Bonnier Group. Bonnier, representing the family owners, and Braun were at the top of the heirarchy of the organisation and shared the power.
The important generational transition in the 1990s brought two family issues to the fore.
Firstly, the family was growing rapidly. The family would be more and more widely dispersed around the globe, with only a fraction of the younger family members living in the Stockholm area.
Secondly, the old shareholder agreement from 1952, binding family owners together, would expire in the year 2000.
The sixth generation family members realised that the three-year transition from the fifth to the sixth generation had produced an effective outcome for the family and the business because they had jointly built a transparent decision-making process that involved all family members.
A new approach to governance
The family constructed a new approach to governance that rests on two pillars.
On the business side, Albert Bonnier AB combines the family ownership interests in a holding company, which has 12 family members plus three honorary family members on the board. The operating company, Bonnier AB, fully owned by the holding company, has a board with five family members, five non-family members and three employee representatives, as required by law. This board decides on any investment larger than €2 million. Today the chairman of both the holding and operating companies is Carl-Johan Bonnier.
On the family side, The Bonnier Family Foundation takes care of all family issues. The chairman of the family foundation is sixth generation Hans-Jacob Bonnier, who holds a six-year mandate. The Bonnier Family Foundation has become a meaningful, well-structured institution whose mission is to keep the family together and actively involved in a range of activities that go beyond ownership. The board, which meets five times a year, is elected every two years in order to allow a broad involvement of many family members.
Gutkind & Company, a committee which is part of The Bonnier Family Foundation, came into being in the late 1990s as a formal initiative to prepare and educate the young next-generation family members for ownership. The agenda is based on education and fun. The Family Foundation chairman, Hans-Jacob Bonnier, who initiated this activity, recalls how the first meeting was launched: "We wanted to create a strong bonding between these young family members who did not all know each other. So we put them on a boat going to a barbecue on one of the islands outside Stockholm. We staged a technical engine problem so all had to organise themselves in an emergency situation. That really got them going, and the whole event became more dynamic and fun!"
In the hierarchy, a general assembly is above the business holding company and the family foundation. The general assembly today includes all 73 family owners who meet once a year for a full day meeting preceded by a dinner the night before.
The family ownership philosophy
In 1998 the family unanimously signed a new shareholder agreement, well before the 50-year agreement expired in 2001. The new agreement is valid for 30 years, long enough for the current sixth and seventh generations to protect their unity, but short enough so the following generation could freely decide on their own ownership structure.
The family defined their ownership philosophy: "We want to be responsible owners with high integrity, moral and ethical standards." Hans-Jacob Bonnier comments on the ownership philosophy: "For me, my grandfather's statement that we are in the business to be servants of the free speech has really meant a lot."
In 2003, 12 family members were working on different levels in the group. No one family member reports to another family member. Marcus Forsell, a seventh-generation family member who heads the activities in radio, said: "As family members we have to prove more and work harder than non-family employees."
The non-family president Bengt Braun notes: "It is in the company's interest – and mine as a president – to have more family members work in the business. The family knows that they must be competent for the job, of course. And as family members they bring a deep seated commitment and understanding which is good for all."
In 2003, just one year before the Bonnier Group celebrates its 200th anniversary, the sixth and seventh generations appear to be firmly committed to the future as a family business. The group has governance structures in place – both for the business and for the family – that they use actively and to ensure transparency, commitment and emotional attachment to the business. This represents a logical evolution since the first generation. The chairman Carl-Johan Bonnier states: "Clearly, we have survived so many generations because the business has always been successful. In addition, our industry is exciting, glamorous and fun, and makes it attractive for family members to work. Of course they must be competent and follow the rules. I am convinced the business will continue to perform for another generation. If it is still a family owned business – that is up to each coming generation to decide."