In the last couple of years, Italian octogenarians have been challenging the current status quo of the Italian financial and corporate landscape. They have challenged younger CEOs in long term proxy campaigns, ousting experienced and non-family related leaders and members of the corporate governance.
Today, it is more likely that the octogenarians are challenged more by the accelerating spread of Covid-19 more than investors. The threat is not only directed toward their personal health, but the fact that older entrepreneurs and founders are forced to face impermanence and unpredictability, despite all the success achieved. In terms of corporate governance, the local component has prevailed, risking their empires to implode on themselves.
The Covid-19 pandemic highlights all the limits of a corporate governance which has been established with a short-term strategy and the need to rethink its meaning completely—more importantly in its application. Globalisation is a mantra for all those companies invented and still led by a first-generation entrepreneur. These include companies such as Luxottica and Benetton, which made their fortune with their globalisation attitude. This approach has been embedded in their business model, marketing campaigns, location and production. However, what remained extremely local is their corporate governance.
Innovation is essential, but we have only seen it be applied from an industrial point of view, and not from a governance point of view. How can family businesses and their corporate governance model avoid becoming obsolete?
Octogenarian entrepreneurs struggle with letting go of company leadership. CEOs who are founders of their company often believe in their own immortality. They are protective of their legacy and are reluctant to relinquish the empires they have dedicated most of their lives to build. This leads to issues with investors and within the c-suite as there is no contingency plan, or an in-depth succession strategy for the business. This indicates that there is no innovation whatsoever in their governance model. When a new leading strategy is finally implemented, it is often too late, which has negative repercussions on the company.
Innovative succession plans must be taken seriously, and they are crucial to ensure stability and longevity, not for the single entrepreneur but for the company. Building an organisation that can be sustainable with its best performance is the only way to define real social responsibility value creation. Currently, the acronym ESG includes one of the fundamental values which is still being forgotten when it comes to business strategy, and that is innovation. If the environment and sustainability are the only competing factors in ESG, in terms of how many parameters are set up to measure and benchmark every single company and for all stakeholders, then corporate governance is still behind.
What does corporate governance stand for?
Today, governance does not only mean filling the gender gap at a board level, it also implies rethinking all business engagement rules. It is difficult to identify who has the willingness and skill to sit down and completely re evaluate their business model. It is important to sit down and acknowledge that we are in a new era. When thinking about business transformation it is important to identify the only parameters that could accelerate such a process and think about innovation across the board. If the global language of business is not spoken in the C-suite, then the future of a company, in terms of attracting new talent from around the world remains uncertain. If investors or global stakeholders do not identify an established and effective succession plan, then how can new and fresh human capital be integrated into the company?
Innovation means making the company attractive not only from a commercial point of view, but from a global point of view. Octogenarian founders must remember that market capitalisation is not directly related to the longevity of the entrepreneur—but it is linked to the future of the company which can only be explained with an innovative approach. If there is no innovation, constant development and rethinking in corporate governance, then the original and brilliant entrepreneurial idea on which the company was built will eventually be the end of its founders.