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Family business
How to stay in control of your business – when the world is trying to pull it apart
What family expansion, professionalization, and fading emotional ties mean for control – and the tools to counteract them.
Rapid read:
- Control in family enterprises erodes gradually, not suddenly. Growth, professionalization, generational expansion, and geographic dispersion fragment ownership and weaken psychological attachment unless governance evolves in parallel.
- Sustained control depends on deliberate design. Families retain influence through aligned ownership structures, effective boards, and a clear stance on the trade‑off between growth, liquidity, and control.
- Winning families engineer both structure and cohesion. Legal tools such as shareholder agreements and buy‑sell vehicles must be paired with strong family governance and a compelling reason for heirs to stay engaged.
Family businesses are built for longevity. Yet the very forces that enable them to endure across generations – growth, capital, professionalization, and global expansion – also create powerful centrifugal pressures that pull families and ownership structures apart.
Today, these pressures are intensifying. A historic wealth transfer, rising geopolitical uncertainty, and unprecedented geographic dispersion of heirs are accelerating structural shifts in family enterprises. As families expand geometrically, ownership fragments, emotional attachment weakens, and leadership professionalizes. Many families move from owning a single operating company to overseeing a diversified portfolio of businesses and assets.
Control is rarely lost in a single event. Instead, it typically erodes gradually – through dilution, disengagement, and governance structures that fail to keep pace with change. Understanding this process is the first step; designing against it is the next. Here, we explore why families lose control and outline the practical mechanisms your family can use to retain influence while adapting to change.
What do we mean by control?
In family enterprises, control is best understood as the ability to influence key decisions over time. It rests on two interrelated pillars: ownership and leadership.
Ownership: legal and psychological
Legal ownership confers formal rights: voting power, economic claims, and transferability of shares. Psychological ownership reflects identity, pride, and the sense that “the family is in charge.” Over generations, legal ownership often fragments while psychological ownership fades even faster.
Leadership: influence without management
Families do not need to manage day-to-day operations to retain influence. Many successful family firms rely on a professional CEO and management team, while maintaining control through board governance, voting structures, and long-term strategic oversight.
Every family faces a fundamental trade-off between growth, liquidity, and control.
The trade-off: Growth, liquidity, or control
Every family faces a fundamental trade-off between growth, liquidity, and control. Optimizing for all three simultaneously is rarely possible. Families that prioritize perpetual control typically accept limits on scale. Others deliberately dilute ownership to fund growth, professionalize operations, or provide liquidity.
Over time, many families transition from preserving a single operating company to sustaining the business family itself. Control moves from one firm to a broader portfolio, raising a more strategic question: where should control be retained and how it is exercised?
To help answer that question, we offer two toolkits to retaining control in your family enterprise, even when the odds are stacked against you.
Rather than preventing exits, effective agreements make them predictable and non-disruptive.
Toolkit one: Shareholder agreements, trusts, and flexible exits
As ownership spreads across generations, control must be engineered. Mechanisms such as shareholder agreements, trusts, dual-class shares, and clearly defined governance frameworks clarify how shares can be sold, transferred, or redeemed. Rather than preventing exits, effective agreements make them predictable and non-disruptive.
Effective systems do not prevent exits – they manage them. Key elements include:
- Rights of first refusal
- Structured internal buy-sell mechanisms
- Access to liquidity to expedite the process
- A separation of economic and voting control
When designed intentionally, these tools reduce friction, preserve alignment, and prevent external actors from gaining unintended influence.
Toolkit two: Family councils, constitutions, and assemblies
Cohesion is not a byproduct of ownership; it is a strategic asset that must be actively groomed. Formal governance structures and informal mechanisms are equally important in creating space for dialogue, alignment, and decision-making and to reinforce identity, alignment, and engagement.
Vehicles and programs include:
- Family councils
- Family constitutions
- Family assemblies
- Philanthropy
- Internships within the family business
- Storytelling
- Pedagogical education.
Critically, families must articulate a compelling and clear value proposition for staying together. Remaining within the family system must be economically, socially, and emotionally superior to exiting.
Regarding the second tool, Jotun has developed a wide range of activities to maintain family members’ motivation to support the business.
The case of Jotun
This Norwegian paint and coatings manufacturer offers a compelling example of how families can proactively defend their control.
The multimillion-dollar family enterprise remains majority family-owned, with 64 family shareholders spanning three generations. Their foresight and flexibility have allowed them to form part of the 5% of family enterprises that survive three generations, but that isn’t to say the business hasn’t faced risk. Like many, it faces ownership fragmentation, generational distance, and the presence of a large external shareholder holding a significant minority stake at 46%.
Anticipating this imbalance, the family established a dedicated investment vehicle, Gleditsch, which was founded two decades ago with the sole purpose of purchasing shares from family members wishing to exit. Through a right of first refusal and highly liquid assets (including cash and government bonds), it ensures that transactions are swift, fair, and minimally disruptive. Pricing transparency and governance integrity are also reinforced by the fact that all board members derive from active family shareholders in Jotun, including the chairman of the board. This allows shareholders to rely on the integrity of the share-sale process, especially the pricing. The chairman’s ability to understand the shape of Jotun’s business is also key. Perceived fairness is all, with no elements of price manipulation.
Regarding the second tool, Jotun has developed a wide range of activities to maintain family members’ motivation to support the business. Family gatherings, with all 64 owners as well as in-laws, are held three times per year. At these gatherings, the President of Jotun who is an external, non-family member, as well as other senior executives from the firm and external experts, give presentations and make themselves available for Q&A’s. Other issues are discussed too, such as environmental issues, AI, or those linked to Jotun’s global strategy. There is typically plenty of food and drinks, offering a different contextual marker for the family to participate and engage with the business and, importantly, align with its objectives and long-term ambitions for control.
The forces pulling family businesses apart are structural, not cyclical.
Control is engineered, not inherited
The forces pulling family businesses apart are structural, not cyclical. Growth, complexity, and generational change will continue to test even the most fortified family enterprise. Families that retain control are those that design for change early, deliberately, and transparently. Control is not preserved by tradition alone, but sustained through clarity, discipline, and intentional design.
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