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Barbara Murray is Editor of Families in Business magazine.

Myllykoski may fight its battles in the international marketplace but behind it is the support of a robust and dedicated family, united in ownership and stewardship of its investment

Not many people would consider the forest and paper-making industries to be dynamic, innovative and exciting. Few are watching for new developments by the minute. The time-frames for change and development are different, and you have to think long-term to appreciate the developments taking place. Of course, that kind of thinking can lead to a lack of appreciation for what is going on, for the intensity of competitive battles for position and efficiency. In Finland, it could lead to a lack of appreciation for the national and strategic importance of the industry and its role in society.

Why prudent stewardship does not have wider appeal in corporate reporting is a mystery. Perhaps the forthcoming Family Business Network World Conference, entitled The Future of Family Business – Values and Social Responsibility, will shed some light on the matter.

Under the surface, global players compete, armed with world class management, and best practices in family business development can be found. A closer look at the Björnberg family's business, Myllykoski (currently ranked number three in the world in uncoated paper production), provides some insights into how family custodianship of a global business is achieved.

It is a story of state-of-the-art business governance and the family's development of state-of-the art family governance. The two governance  systems are integrated and work together against the backdrop of a global industry in which growth and profitability ebb and flow in response to the tide of world's economy.

The facts
The Myllykoski Corporation is a holding company with activities in management, finance, control and IT of the companies held within the group. It is based in Finland with offices in Helsinki and Anjalankoski. There are eight paper mills within the group, employing 4,000 people mainly through Finland, Germany, Switzerland and the USA.

The group produces mechanical uncoated printing paper (number three in the world) and coated printing paper (number three in the world) and recycled fibre-based newsprint. The group invests €5 million on research and development, emphasising research into the environmental impact of the industry, the efficient use of raw materials and improving paper grades. Myllykoski is regarded as one of Europe's leaders in the use and development of recycled fibres. The group balance sheet for the end of 2001 showed a total of €2,157 million, up from €1,630 million the previous year, with a 17% return on invested capital. The dividend payout to shareholders was €25 million.

Myllykoski has been intensely active in the past six years, and especially so in the last year. The group comprises wholly-owned subsidiaries and a small number of alliances; for example, with M-real, the world's third-largest paper manufacturer, and the New York Times.

The alliance with M-real came about in 1996 to create synergistic benefits from combining some elements of production, sales and marketing. Both firms more than doubled their size through acquisition and internal growth. Over recent years, though, changes in competition regulations and the competitive environment led to diminishing returns from the joint alliance. The decision was made to split into two separate sales organisations by the end of 2002.

Sales for Myllykoski in 2001 were €1.57 million, up 16% from 2000, with an operating profit of 15.1% of net sales (€238 million), an increase of 14.5% over 2000. The whole industry felt the economic slowdown of 2001, accentuated by the terrorist attacks in the USA. As is typical of the forestry and paper industry, global economic slowdown brought contraction in production in Europe, Japan and North America. Demand for pulp and paper fell, and in the USA, consumption of newsprint contracted, demand plummeted and prices fell. In the same year the full inclusion of two acquisitions into the group took place, and modernisation of the Madison Paper Industries in Maine, USA, was completed.

Against this backdrop of economic fluctuation, plans for future growth are well established. MD Papier Gmbh was acquired from M-real for €300 million. In March 2001, a seven-year syndicated loan agreement for €250 million and several five to eight-year bilateral loan agreements were made to finance this acquisition and to fund future capital expenditure.

The outlook for the industry is best  described as "uncertain" in many respects; however, further bouts of excess capacity and downtime are expected. The emphasis within the group's operations is on maintaining prices, increasing efficiency, consolidation, and cutting costs. In the boardroom, the emphasis is on strengthening the board and bringing in the next generation's voice within the governance of the overall enterprise. While many other businesses of similar size and stature have gone to public, Myllykoski has remained fiercely independent. Hence the importance of prudent stewardship at this stage of the evolution of the family's enterprise.

A recent addition to the board is Barbara Hisinger-Jagerskiold, former Chairwoman of the Family Council (her successor on the Family Council, Charlotta Björnberg, also works within the company). This is a significant appointment as it marks the family's commitment to formal family business governance and to continuity of stewardship over the family's investment, and the responsibilities of ownership and investment in a global business.

The family
There are now about 50 Björnberg shareholders. Only 6% of Finland's five million population speak Swedish, and the Björnbergs are in this minority. Although the business has spread around the world, the family has not, although the many family branches are scattered around Scandinavia. The business is an important structure that keeps the extended family connected, and it is of great emotional significance to the Björnberg family.

Brothers Fredrik and Carl Björnberg are, respectively, the current Chairman and Chief Executive Officer of Myllykoski. In 1892, two brothers, their grandfather (Fredrik G) and great uncle (Claes), bought a bankrupt mill and developed the business beyond the small population of Finland by seeking export markets. 

Claes' son, Björn, had been appointed successor to the company, but he was killed in the War of Liberation in 1918. Fredrik G's son, CG, was then only 17 years old, so the company was left with no obvious successor within the family at that point. Claes took the death of his son very heavily and withdrew from an active role in the company, leaving his brother, Fredrik G, to continue the work.

To strengthen the company, a decision was made to look outside the family circle and this led to an alliance with Rudolf Waldén in 1920. A joint venture with Waldén's paper mills led to the establishment of Yhtyneet Paperitehtaat Oy (United Paper Mills) with Waldén as Chairman.

Fredrik G died in 1924 and was succeed by his son, CG, now aged 24. Waldén and CG continued working until the outbreak of World War II in which Waldén was a general and also Secretary of Defence. He did not return to the business after the war and his daily duties were taken over by his son, Juuso, who worked with CG as a two-man CEO. Rudolf Waldén died in 1946 and CG took over as Chairman of the Board.

However, Juuso and CG did not share the same views on how the company should be run and in 1952 the business was split in two. UPM went its separate way to become what is today – UPM-Kymmene – and CG continued with what became once more Myllykoski. 

Fredrik, the current Chairman and son of CG, was 24 when he was appointed to the board. A geologist, he led the mining interests of the business until these were divested in 1984. CG worked as Chairman until 1978, when he was succeeded by Fredrik, and as Vice-Chairman until 1984. He died in 1995.

Carl, the current CEO, has worked in different positions in the company for most of his working life. A third brother, Hans, left Myllykoski to become CEO of Partek Oy in 1987. Sadly, he died at the early age of 46 in 1990.

The Family Council
This somewhat complicated background has given rise to 11 family branches, in which there are around 50 shareholders. Family values have always been promoted in the business, specifically the value of a family company tradition (emphasising continuity), individual integrity, customer focus and openness to change. Nowhere are these values more evident than in the family's approach to the design and implementation of their Family Council. 

In 1995, a year before the strategic alliance with M-real was forged, the Björnbergs were introduced to the Family Business Network in Finland. They attended a seminar that John Davis, a US-based family business consultant and professor at Harvard University, was presenting on family business governance.

Always a close family, the Björnberg family branches naturally felt the forces that gradually pull families apart: new branches form when offspring marry and it is not easy to communicate as people live different lives in different locations. When families evolve to this stage, a network of related families, some of whom have strong network connections and others more remote, replaces the original "core" family.

Fredrik and Carl were looking for a way of holding the family together. When they heard about the concept of governing the family and the business, and the strategic role of the Family Council in this process, they saw the benefits of having a formal structure that had an official relationship with the business. They immediately began to plan the development of their own Family Council.

The Family Council has 11 members, each representing one branch of the family. Each branch selects its own delegate independently and the Family Council works on a one-man, one-vote basis (no account is taken of the proportion of ownership in the company).

The Family Council meets at least four times a year. There is no connection between the composition of the Board and the Family Council; currently, the Board has five family-owner members, of which two are on the Family Council.

At the time as the Family Council was created, a decision was taken that official roles within this structure of governance would be open only to bloodline family members. This was not a device to exclude female participation because women had already had positions in ownership and on the board. The bloodline rule was agreed simply because it was felt that it would be easier to make decisions without the presence of spouses.

Since its creation, the Family Council has been just as occupied with the business of the family as the Board of Myllykoski Corporation has been with the strategic and operational business of the business. Family Council business, though, is complicated because it deals with the areas of overlap between family interests and business interests.

There is never a clear-cut answer to these kinds of questions, and so meetings, naturally, are forums for education, discussion and negotiation or consensus-building before decisions can be put forward for ratification. The Björnbergs have dedicated a great deal of time to creating their Family Plan or Constitution, setting out:

- How to become a member of the Family Council;
- What the family believes in and stands for;
- How people want to work together;
- Ground rules for managing conflict;
- Family employment policy;
- Eligibility for membership of the board;
- The conditions for the sale or purchase of shares by family members.

Custodians of the future
It is clear that while the Myllykoski Group fights its battles in the global marketplace, it has behind it the support of a robust and dedicated family. Aided by the workings of the Family Council, the family is united in ownership and stewardship of their investment.

The next generation of family members have taken their responsibility as future custodians of the family enterprise very seriously, and begun the process of creating a system of governance that will help keep the family connected and united behind the business and its objectives in the international marketplace.

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