Ownership and control in French family businesses

By Katie Barker

Two of France's largest and most famed family businesses, Hermes and L'Oreal, have taken steps this week to bolster family control and reaffirm the family's commitment to the company. But the question remains as to whether this is enough to ensure continued family ownership, writes Katie Barker. 

Hermes moved first with its family members setting up a holding company in an attempt to fend off unwelcome advances from much larger rival LVMH Moet Hennessy Louis Vuitton.

Pending regulatory approval, the holding company will control 50% of the Hermes shares. The new holding company will also have the first right to purchase any shares family members wish to sell, so aiming to keep the majority of the company in family hands and defend it against minority shareholders such as LVMH.

Over 70 decedents of Hermes' founder, Thierry Hermes, control around 74% of the Paris-based company. 

Following on from the Hermes move, L'Oreal heiress Liliane Bettencourt and her daughter Francoise Bettencourt-Meyers have reconciled after a three-year feud that threatened to tear the family apart and undermine family ownership of L'Oreal.

With the announcement came news that the family has bolstered its control of its holding company Tethys, as Bettencourt-Meyers's two sons will take roles in the company. Again, like Hermes, L'Oreal is trying to give more power to family members.

But will this be enough to ensure both companies stay family owned? Alexandra Sharpe, associate consultant at family business advisers Peter Leach, has her reservations. "In the Bettencourt case, if they are to overcome the shadows that will be cast by the legal proceedings that has divided the family for so long, they must concentrate on creating a new vision for the family and define a new way of working together," she said. 

Family business analysts would also point to a lack of strong family leadership in both companies as a cause for concern and an issue that should be addressed if the family is to remain connected to the business.

Sharpe goes on to explain that when families become embroiled in a feud, it can lead to them making reactionary decisions as opposed to making decisions based on what is best for the family and the company in the future. "This is of course dangerous for both family harmony and corporate success," says Sharpe. 

"By acknowledging how deeply held and damaging family patterns can be and by taking measures to act with self awareness and purpose, the Bettencourts will greatly increase their chances of a harmonious and prosperous future," Sharpe concludes.

Whether this can be achieved at L'Oreal, as well as Hermes, remains to be seen.