Designing Generation Change in Family Firms: Lessons from Italy

Abstract

In Italy, as in most other European countries, around 85-90% (in absolute numbers: 780,000) of all enterprises are family firms, which contribute to 80% of GDP and account for 70% of employment. 60% of publicly-traded corporations have a family as majority shareholder. However, only 20% of the family firms survive until the third generation. Already these first figures show the crucial importance of intergenerational succession in Italian family firms. In the management literature, family firms, and especially the topic of management succession, are widely investigated. Lawyers, on the contrary, still lag behind in this research field. The present paper seeks to close the research gap. First, the legal prototype for the governance of generation change processes in Italian family firms, i.e. the patto di famiglia (family pact) is analysed. The many limits and practical constraints surrounding this legislative product makes it necessary to look at alternati ve private orderings devices and evaluate their pros and cons. Thus, attention is drawn to the succession planning choices made by important Italian family firms (Benetton, Caprotti and Brunello Cucinelli), which opted for a regulation mainly in the corporate charter or by way of testament or trust. The casestudy approach here followed shall contribute to the better understanding of the practical tools employed in the design of such generation change and make them available for a broader comparative circulation.