The asset management industry has a central role to play in furthering good corporate governance in publicly traded family businesses, believes March Asset Management chief executive officer Miguel Angel Munoz. Addressing points raised by a new paper on the topic he said: “Diligent asset managers need to take corporate governance into account when valuing family businesses. Strong governance, together with the greater long term profitability demonstrated by family businesses, provides a compelling investment case. Managers have a central role to play in that process.”
His comment follows publication of a report from the Madrid-based Business School – Corporate Governance in Publicly Traded Family Firms – which shows that those publicly traded family businesses (FBs) with good corporate governance are more profitable than those FBs which demonstrate poorer corporate governance.
Professor Cristina Cruz, one of the co-authors, said that improving corporate governance was a “profitable” investment for family businesses because the research showed that those family companies which have above average corporate governance, were more profitable than those with lower standards of corporate governance.
Professor Cruz said: “In earlier reports we showed that listed ‘family firms’ out-performed listed non family firms. This third report shows that adding ‘company with good governance’ to that combination substantially improves performance and so the ‘Family Premium’.
The report is based on research which compared 1,127 publicly traded companies in the United States and Europe. In the report, Professor Cruz commented about the “superiority” of the ‘Anglo-Saxon’ model over its European counterparts when it comes to good corporate governance practices.
She said of ‘Anglo Saxon’ firms: “US and UK family firms continue to lag behind non-family firms in terms of governance, but their situation is much better than their peers in the rest of Europe”.
Professor Cruz pointed out that while European family businesses were heading “in the right direction”, they still had “some way to go” to reduce the corporate governance gap. She suggested that it was in the interests of European Family Businesses to improve corporate governance because “in an increasingly global market investors are looking for profitable companies that meet universal good governance criteria, regardless of their origin or their capital structure.”