Next-generation successors face an uphill battle to overcome a “wealth stigma” and restore public trust in family businesses eroded by an underlying “mass-class” conflict.
That is the stark warning from Richard Edelman—second-generation president and chief executive of public relations firm Edelman following its report 2017 Trust Barometer—Special Report: Family Business.
“The playbook of low-key, let-the-results-speak-for-themselves behaviour, traditionally displayed by family businesses, will not work in an increasingly sceptical society upset by growing wealth inequality,” he said in a blog about the study.
The 15,000-respondent study across 12 global markets found a majority of people around the world believe that the system is biased against regular people and favours the rich and powerful.
“Nearly three out of four [respondents] agree the gap between the wealthy and everyone else has grown,” the report said.
Overall trust in the next generation has slumped eight points since 2014 with those leaders looking to take over the business 17 points less trusted than founders.
Next-generation leaders were viewed as being less capable, with 63% agreeing they would mismanage the company, 53% agreeing they were less impressive and talented, and 56% affirming the next generation were less committed and passionate about the company.
This “wealth stigma” meant there was a 27 percentage point difference in respect and admiration towards people who had earned their wealth (61%) than those who had inherited (34%).
This has significant implications for wealthy families as $30 trillion in financial and non-financial assets is expected to pass from the baby boomers to their heirs in North America alone over the next 30 to 40 years.
The report did suggest the top factors to ensure that trust was maintained when a business was passed from one generation to the next. These included:
- Appointed on merit (80%)
- Committed to the future of the business (80%)
- Innovative (79%)
- Experienced with the business (79%)
- Transparent about their plans for the business (78%)
- Committed to legacy (74%)
The report suggested a range of measures to improve public trust from increasing communication about a company's history and founding story to improving transparency about how business decisions were made.