Overview of Family Business Relevant Issues. Country Fiche Iceland

Transcription

1 Overview of Family Business Relevant Issues Country Fiche Iceland 2008

2 Author: University of Iceland René Biasone, researcher Project Co-ordination: Project conducted on behalf of: EUROPEAN COMMISSION ENTERPRISE AND INDUSTRY DIRECTORATE-GENERAL Crafts, small businesses, cooperatives and mutuals In the framework of the study Overview of Family Business Relevant Issues This study has been elaborated with reasonable care. The authors and the project coordinator do not, however, accept responsibility for printing errors and/or other imperfections and potential (consequential) damage resulting thereof.

3 Overview of Family Business Relevant Issues - Iceland I Index 1 Introduction Understanding of family businesses in the national context Importance of family businesses for the national economy Characteristics of family businesses Institutional actors and their strategies, policies and initiatives Future issues Bibliography... 9

4 Overview of Family Business Relevant Issues - Iceland 1 1 Introduction Family business issues seem be a non-topic in public and policy discussion in Iceland. There are neither laws nor regulations which mention family business or family enterprises. At the National Library and University Library there are only four short articles dedicated to family business in Iceland: three of them are just describing or listing of some Icelandic companies that define themselves as family-run companies. Only one short article written by Benedikt Jóhannesson contains some information on situation of family business in Iceland. This is the only document available on this topic, which nevertheless shows awareness on this type of business, but still does not give any definition of family business. Jóhannesson remarks on the social importance of family business in Iceland, admits that capital availability and innovation are often weaknesses, as well as business transfers within the family components. According to the interview with Davíð Scheving Thorsteinsson from the Icelandic Chamber of Commerce, there is no differentiation between family business of different size classes, and the size of a family business, in terms of people employed, can vary from 1 to 70,000 employees.

5 Overview of Family Business Relevant Issues - Iceland 2 2 Understanding of family businesses in the national context There is no official definition of family business but common understanding defines family business all types of companies established, managed and owned by one or more member of the same family. The owners-managers can be either sole proprietors or holding a share of the company. There is not further explanation on the level of involvement of family members in ownership. This is probably due to the fact that there is no necessity for clarification with regard to legislation or programmatic documents. There is not any legal regulation referring to family businesses, such as company law, tax or labour law. However, the act 138/1994, which establishes the Private Limited Company, this is the most common legal entity adopted by family businesses. According to the interview of official form Icelandic Chamber of Commerce, most of the Icelandic businesses are in fact family business. Most of them are SMEs, but also many of big emerging enterprises were established as family business and are still managed and owned by family groups. It seems that among the public opinion there is big awareness about the heterogeneity with regard to ownership structure and management structure, but there is nothing such as family business sector, nor a typology of family businesses.

6 Overview of Family Business Relevant Issues - Iceland 3 3 Importance of family businesses for the national economy In spite of lack of definition of family business, and especially in spite of lack of laws and regulation referring to them, family business represents nevertheless a very important structure of the Icelandic economy. The fisheries sector in Iceland still represent an important share of the national GDP and in this sector most of the companies are in fact family business, whether they are owners of small boats, or owners of big enterprises with several high tonnage freezing trawlers. In the last decades the families involved in fisheries decreased enormously, especially due to the market of fishing quotas, which centralised the fisheries in the hands of few families, which today controls almost the whole industry. In tourism sector the family business is a very common type as well in manufacturing production, import-export, and even oil-companies. Also the banking sector counts an important example of family business, as management and ownership of one of the biggest bank of Iceland are directly referring to a family (father and son). Therefore family businesses detain big share of enterprises and of employees, as well as share of value added. These shares have not been calculated but can be estimated on about 60-70% in reference to the value added, 70-80% in reference to enterprises and employees. The gap between these two shares are explained by the expansion of energy-intensive industries (not family businesses), which are increasing their importance in the national GDP, and being not labour-intensive businesses. There is not concentration of family business in specific industries or legal forms, but it is possible to assume that most of the family businesses are Einkahlutafélag that is Private Limited Companies. There is no information available on the size class of family businesses. They can vary from very small up to large-scale. It is possible to assert that most of micro or SME are in manufacturing and tourism sector, large-scale family business are in import-export, fisheries, banking, airlines, construction, insurance, investment company, food food manufacturing company. The biggest Icelandic family business is Baugur investment company which operates in the retail and fashion sectors in the UK, the USA and Scandinavia. Companies related to Baugur Group employ some 70,000 people worldwide in over 4,300 stores with a total turnover of 9.0 billion. The Executive Chairman is Jón Ásgeir Jóhannesson, son of the company founder. Baugur's principal investments are the supermarket chain Iceland, the toy retailer Hamleys, Woodward Foodservice, the jewellery chain Goldsmiths, fashion chains MK One and Jane Norman, the health products chain Julian Graves, fashion company Mosaic Fashions, renowned UK department store chain, House of Fraser, Hagar, Iceland's largest retailer, the famous Danish department store chain Magasin du Nord and Illum, one of Denmark's largest department stores. Baugur also has a substantial, but non-controlling, indirect stake in the AIM-listed wholesaler Booker Group.

7 Overview of Family Business Relevant Issues - Iceland 4 The second largest Icelandic family business is Bakkavör Group, a food manufacturing company specializing in fresh prepared foods and produce. The Group operates 60 factories and employs over 20,000 people in nine countries with a pro-forma turnover in 2007 of 1.5 billion. The Group s Head Office is in Reykjavík, Iceland. Bakkavör Group was founded in 1986 by two brothers who are still managing the company.

8 Overview of Family Business Relevant Issues - Iceland 5 4 Characteristics of family businesses As mentioned in the previous paragraphs there are no specific characteristics of Icelandic family businesses in reference to legal form, size, industries, and number of employees. Nevertheless there is the perception that in recent years there are new trends in reference to the gender and ethnic dimension. In fact many family businesses are today established, took-over and run by women and also foreign people with legal residence in Iceland, who are establishing and running companies in the form of family business. As there are no statistics available these are only perceptions of interviewed officials from the Icelandic Chamber of Commerce, the Confederation of Icelandic Employers and the Organization for the Icelandic Industries. In these interviews it came clearly out that the main strengths of family business is the rooted tradition into the Icelandic society that provides the company the necessary knowledge of the market, and discovers windows opportunities for increasing or differentiating the company activities. The weakness of family business, beside the difficulties in obtaining large amount of capitals, is when the company faces a generational change. Not always the family component who takes over the company management has the same skills, charisma or strong-will to his/her relative. By generalising, it is possible to assume that non-family businesses are often foreign companies with their Icelandic daughter-companies and, as already mentioned, the energy-intensive industry which are the sector of metal production (aluminium smelters) and also in hands of multinationals.

9 Overview of Family Business Relevant Issues - Iceland 6 5 Institutional actors and their strategies, policies and initiatives There is neither specific institutional actor nor network that offer strategies or make legal regulation being specifically beneficial for family businesses. Nevertheless, the Act 138/1994 which establishes the Private Limited Company, had an implicit relevance for family businesses. Explanation institutional features name of the actor Ministry of Commerce X government employers organisation support service provider (information, advice, education) nature of the actor research centre network/family business specific organisation (including interest groups/representative organisations/lobbies) others, namely: Ministry of Business Affairs - Solvholsgotu address Reykjavik - Iceland telephone Tel.: (+354) Fax: (+354) web-page postur@vrn.stjr.is content based features name of the strategy/initiative/ Act 138/1994 on Private Limited Company regulation fiscal regulation/tax law labour law/social security law X company law awareness raising measures corporate governance codes, family governance, family protocols, family constitution, family council, family assembly or similar type education/training measures information/advice business transfer support instruments financial support marketing networking others, namely: The act which establishes the Private Limited Company, objective legal form most used by family businesses initiation 1994

10 Overview of Family Business Relevant Issues - Iceland 7 content based features contents/description of the initiative/measure user based features eligibility criteria/target group Explanation Private Limited Company has low registration share ( ISK, about Euros, is designed for SMEs, sole proprietors or with few shareholders. As most of the Icelandic family businesses have these characteristics, this act indirectly benefits them by giving a set of rules manageable also for small businesses. One of the owners/shareholders has to be permanently resident in Iceland, unless the Minister grant an exemption there from.

11 Overview of Family Business Relevant Issues - Iceland 8 6 Future issues It is difficult to anticipate what the main future opportunities and threats of family businesses will be. The Icelandic market, as well as the national stock exchange, is very small and very young. In these conditions it is a common believe that family businesses will be the most appropriate form of business for many decades to go. The socio-demographic changes will probably play a role in the development of the family businesses but this is seen as a far future scenario.

12 Overview of Family Business Relevant Issues - Iceland 9 7 Bibliography Benedikt Jóhannesson, Fjölskyldufyrirtæki: bölvun eða bless [Family Business: curse or blessing?], in Vísbending, 2000, 18(51) pages 7-8. Interviews and conversation with: David Scheving Thorsteinsson, Economist and Business advisor from Icelandic Chamber of Commerce. Hannes G. Sigurdsson, manager of the Confederation of Icelandic Employers. Bjarni Már Gylfason, Economist from the Organization for the Icelandic Industries.