Families and fortunes

Accumulation, management succession and inheritance in wealthy families
Michael Gilding
Swinburne University of Technology, Australia

Since the managerial thesis (notably Berle and Means’ classic study), the role of the family in capitalist enterprise and organization has often been viewed as an anachronism, the remnant of an earlier era. This article uses qualitative interviews with wealthy Australians to argue that family relationships are an enduring influence in relation to accumulation, succession and inheritance. There are two reasons. First, the decline of family control in big business is not just a historical event, but also an ongoing event that informs the passage of most entrepreneurial businesses as they grow in scale and complexity; hence the enduring influence of nepotism in large companies such as News Corporation. Second, a variety of considerations – including dynastic ambitions, tax minimization and trust – encourage family members to cooperate in the management of inheritance through family business institutions, from family holding companies to family offices. These family business institutions possibly reflect the rise of ‘network forms of organization’ grounded in personal trust, at the expense of large companies. Keywords: accumulation, capitalism, family, family office, inheritance, management succession, wealth

Each year the business magazine Business Review Weekly (BRW) compiles a list of the ‘Rich 200’ in Australia. As far as possible, this is a list of the richest 200 individuals in Australia. Yet it is not entirely so: hence the ambiguity of the phrase ‘Rich 200’. There are in fact two lists in the Rich 200: the longer one consisting of ‘individuals’, the other of ‘families’. Even then, there remains ambiguity. Roughly one-tenth of the entries in the list of ‘individuals’ actually consist of more than one individual, invariably related through kinship: spouses, siblings and multi-generational groups.
Journal of Sociology © 2005 The Australian Sociological Association, Volume 41(1): 29–45 DOI:10.1177/1440783305050962 www.sagepublications.com

when an ‘individual’ fortune has become dispersed enough to count as a ‘family’ fortune. the capitalist class and the family. For a variety of reasons – notably. it addresses the long-standing literature concerning capitalism. This influence is exemplified in a complex of family business institutions. management succession and inheritance. Family businesses were the units of production and accumulation. there had emerged a new class of professional managers. in which shares were bought and sold through the stock exchange. Yet the problem is intractable. The article then addresses the enduring influence of family relationships in wealth accumulation. the terms of inheritance. This article uses the BRW Rich 200 as a launching pad to examine the institution of the family and its enduring influence in the accumulation and transmission of wealth. The problem is that fortunes are rarely vested in individuals alone. to family investment companies. The dispersal of share ownership had progressively undermined the influence of owners. transferring entries to its list of individuals. business partnerships. the capitalist class and the family The family was once at the heart of capitalist enterprise. based upon interviews with 43 individuals drawn from the Rich 200. Ultimately BRW is listing fortunes – or. In the 1920s Adolphe Berle and Gardiner Means documented a fundamental shift in the ownership and control of large companies. Capitalism. Most commonly. Second. Ultimately it is a qualitative judgement on the part of the compilers of the Rich 200 as to when a particular individual exercises such control over a fortune as to make it an ‘individual’ fortune. Succession was guided by family continuity. creating dynasties across generations. to family offices. 1995). ranging from family businesses. who depended upon training and technical skills rather than birthright or family connections for their position (Berle and . on one occasion BRW heavily culled its list of families. notably family dynastic groups.30 Journal of Sociology 41(1) There is no doubt that BRW would prefer to make the individual its unit of analysis. and protection against bankruptcy and criminal proceedings – they are usually spread out among groups of individuals. Accordingly. it describes the methodology of this article. with one of the satisfactions of ownership being the family name by which the business was known. Public companies. tax minimization. these groups of individuals are related through kinship. First. It is more consistent with the underlying narrative of the Rich 200: that any individual can become super-rich in Australia. and when a ‘family’ fortune has became so dispersed as to become a number of ‘individual’ fortunes. had broken the nexus between ownership and control. Instead. Many historians now describe this era in terms of ‘family capitalism’ (Rose. to put it in more colourful language. ‘piles of money’.

1970). and that the ‘anti-managerial counter-revolution’ of the 1980s had resulted in the reassertion of owners at the expense of managers in any case (Useem. DiMaggio. 1960. loose groupings of major shareholders). More specifically. 1957. another US sociologist Marvin Dunn documented the emergence of a new institution. that direct family control through majority ownership had given way to ‘control through a constellation of interests’ (that is.Gilding: Families and fortunes 31 Means. Playford. 1993. the firm might once have been an appropriate unit of analysis (as assumed by the managerial thesis). 1969). In the same spirit. engaged in the competitive struggle for profit and organized in various forms of alliance and combination’. 1990. 1979: 73. During the same period. ‘making it difficult to know where the firm ends and where the market or another firm begins’ (Powell. Wheelwright. deployed according to circumstances. In particular. Galbraith. the US sociologist Maurice Zeitlin anticipated debates around ‘network forms of organization’ when he described large corporations as ‘administrative units of “social capital”’. diverse lines of inquiry drew attention to ‘network forms of organisation’ (Powell. Whitley. Baran and Sweezy. The family office. 2001: 58). 1966. but this was no longer the case. some neo-Marxist sociologists observed the enduring influence of the family at the top levels of business and society. Berle and Means’ ‘managerial thesis’ had become an orthodoxy. 1994). but rather ‘principal capitalists. rather than management control (Scott. First. responsible for managing the finances of wealthy families whose economic power would otherwise dissipate as the fortune was transmitted across generations. ‘functions to perpetuate internal and external . the remnant of an earlier era. Dunn observed. Podolny and Page. By the post-war decades. several distinctive – and somewhat marginal – lines of inquiry challenged the managerial thesis in terms of its account of family control in English-speaking societies. involving ‘a complicated structure of family and charitable trusts and foundations’ (1989: 27–8). 1968). In other words. 1945. family groups and companies were both nodes within networks. Researchers argued that the thesis was not generalizable beyond the USA. Redding. ‘the family office’. 1998). From this perspective. not just in the United States. or perhaps the English-speaking societies (Wong. the managerial thesis came under growing critical scrutiny. including companies and ‘family spheres of influence’ (1989: 44). In turn. More generally. 1996. It was also the basis for more wide-ranging arguments – across the political spectrum – about the irrelevance of the family in relation to the organization of the capitalist class (Bell. ‘family spheres of influence’ operated both within and between companies. In this context the role of the family in capitalism was regarded as something of an anachronism. 1985. From the 1980s. the ‘basic units of capital’ were not large companies. 2001: 20–2). but in other English-speaking countries such as the United Kingdom and Australia (Burnham. 1990: 360).

Family control still operated among a small number of large companies: in Australia. The point of departure for this literature was the generally unacknowledged scale of family business. Ultimately neither line of inquiry undermined the orthodoxy – originating with the managerial thesis – that the family is an anachronism at the top levels of business and society. The literature then proceeded to address new types of problems and issues in the management of family businesses. Happily. most small and medium-sized enterprises were family businesses. Ward – one of the pioneers of family business research in the USA – explained how family businesses faced new challenges in reconciling family and individual ambitions. John L. 1980: 43).32 Journal of Sociology 41(1) coordination’ of the family fortune. This was one aspect of a general falling away of sociological research about class. the business literature on family business went from strength to strength. 1996: 32). including the ‘family offices’ documented by Dunn. 1985. Second. Many vehicles help reconcile this contradiction. 1987–2003. Smyrnios et al. 2004: 128). power and wealth in the 1990s (Gilding. the neo-Marxist literature on ‘family spheres of influence’ fizzled out. drawing attention to the . such as corporations. Family Business Review. For example. political parties. he argued. 1998). and provides the majority of growth and employment increase in the Australian economy’ (Connolly and Jay. ‘the upper-class family and its mechanisms of control and cohesion have taken on new organisational form’ (1980: 18). but barely made a mark in the social sciences. and the institutions to which foundations give’ (Dunn. For example. ‘Rather than having been broken up’.. one Australian study estimated ‘that family business constitutes about 70 per cent by number of the total of Australian companies. It achieved external coordination through its links with ‘other social institutions in society. 1996. there was a burgeoning literature – mostly by business academics – on the scale and dynamics of family businesses (Rosenblatt et al. 1997. PBL (the Packers) and Visy (the Pratts) are well-known examples. Gersick et al. Neubauer and Lank. 1988: 5) As it happened. In particular. holding companies. employs more than half of the private enterprise workforce. News Corporation (the Murdoch family). (Ward. Westfield (the Lowys). Both of these lines of inquiry provide an important point of departure for this article. It achieved internal coordination among the extended family through the management of joint stock holdings. More to the point. it elaborated on strategies for reconciling divisions and conflicts in family businesses. On the other hand. trusts and foundations.. 1997. giving rise to new ‘vehicles’ or institutions: The overriding challenge is how to integrate the need for business continuity and the need for personal independence. Leading and governing this process of reconciliation is the central task for the family. Connolly and Jay.. committed families can learn from other families pursuing the same dream.

43 individuals (39 percent. while the remaining 10 were substantial stakeholders in family fortunes. 1999: 169–76). The minimum point of entry was A$75 million. Of the 43 interviewees. making 201 fortunes altogether.8 billion. their median age was 56 years. it provides the best available profile of the largest personal fortunes in Australia (Gilding. assembled by entrepreneurs who began with small businesses. and 26 (60 percent) had fortunes that were held mainly through private companies. Of the 174 individual fortunes. 39 were men and 4 were women. Altogether I contacted 110 persons drawn from the 201 individuals and family groups included in the 1999 Rich 200. it provides scope for exploring family dynamics in relation to wealth accumulation and succession.Gilding: Families and fortunes 33 enduring influence of family relationships in the accumulation and transmission of wealth. large public companies – as described by Zeitlin – were not necessarily as effective for wealth accumulation by ‘principal capitalists’ as smaller private companies. Frank Lowy’s Westfield Group). valued at A$6. 19 (11 percent) actually listed more than one individual. The 1999 Rich 200 consisted of 174 ‘individual’ fortunes and 27 ‘family’ fortunes. Of the 201 fortunes. 95 were listed by name as the owners of ‘individual’ fortunes and 15 were substantial stakeholders in ‘family’ fortunes. The main vehicle for two-thirds of the fortunes (134. Even so. only 20 (10 percent) had their beginnings before the Second World War. Of these 43 informants. rather than a public company (say. As already observed. 39 (91 percent) had fortunes that were assembled during the post-war era. is based on public information and necessarily reflects the limitations of such information. 33 were listed by name for separate individual fortunes. In other words. Of the 110 persons contacted. like comparable lists in the USA and UK. The Rich 200. Method The research for this article involved interviews with 43 individuals drawn from the 1999 edition of the BRW Rich 200. or 22 percent of the Rich 200) agreed to be interviewed. all related through kinship. Of these 110 persons. or 67 percent) was a private company (such as Richard Pratt’s Visy Industries). 28 (65 percent) were based in the two major cities of Sydney and Melbourne. Of the ‘individual’ fortunes. The largest fortune in the 1999 Rich 200 was that of the media magnate Kerry Packer. their median wealth was A$128 million. In turn. Most of the fortunes were of relatively recent origin. methodological difficulties in compiling the Rich 200 highlight the intractable influence of kinship in wealth accumulation and transmission. Table 1 makes a comparison between . 38 (88 percent) were born in Australia. 56 (32 percent) were accumulated by entrepreneurs who had been born overseas.

family management succession and ownership succession. Accumulation Families inform wealth accumulation because. sex and birthplace. Interviews varied in length from 45 minutes to three hours. All of the names used in this article are pseudonyms. for the sake of consistency. as the family business literature observes. this study is biased towards Australian-born entrepreneurs. with most lasting about 90 minutes. 84 percent were born in Australia. Questions were mostly openended.34 Journal of Sociology 41(1) Table 1: Selected characteristics of listees on the Rich 200 and respondents ‘Rich 200’ N = 201 Wealth (median A$millions) Age (median)* Men (%)* Born in Australia (%)* Based in Sydney or Melbourne (%) Fortune made since Second World War (%) Mainly held in private company (%) * Individual listings only (not family listings). with one exception (as required by the respondent) where notes were taken. They were taped and transcribed. family relationships are pervasive in small and medium-sized . 76 percent were born in Australia. It has not been removed for those respondents who did not request confidentiality. They were then coded on the basis of family involvement in the business. Of individuals listed in the 1999 Rich 200. and of those who agreed to participate. of individuals invited to participate in this study. family succession in the management of businesses. Only individual fortunes are compared in relation to median age. The one characteristic where there was substantial difference between respondents and the larger population was place of birth. followed up by probing where appropriate. Interviews addressed the family dynamics of wealth accumulation. in order to preserve the richness of the data. 68 percent were born in Australia. and family succession in the ownership of the business and the fortune. Respondents N = 43 128 59 93 84 65 91 60 145 62 95 68 72 90 66 the sample of interviewees and the population of individuals and families listed in the Rich 200. By implication. Of the 43 respondents. 31 requested that the interviews were confidential and 12 – all of them first-generation entrepreneurs – did not. Identifying information has been removed for all respondents who requested confidentiality.

Gilding: Families and fortunes 35 enterprises. At that stage. So when I joined him. and coerced all the family members to help. We probably had a staff of about 20 people or something of that nature. (Harold Jackson) We [father and brothers] didn’t even take home the basic wage for many years. children. (Tom McKay) Management succession Most small and medium-sized family businesses have a short life. 27 (63 percent) founded the businesses on which their fortunes were built. (Isabel Downer) We [brothers and cousins] ploughed the dividends back into the business. For example: We [husband and self] thought. (John McAdam) See. siblings and in-laws) in the course of building their businesses. we doubled our workforce. the opportunity to work at his right hand was there. and built it. at the time I got involved. I worked closely with my father. everyone else was the worker. (George Montgomery) Another six respondents had joined small and medium-sized family businesses and then played a major role – sometimes the main role – in building the business. well. Frank Lowy and John Saunders’ continental delicatessen in Sydney’s western suburbs (the global Westfield shopping centres) or Andrew Kelly’s stall at the Sydney Markets (Strathfield Car Radios). You know. I thought. some of these small and medium-sized enterprises become large enterprises over several generations: for example. putting profits back into the business. the staff numbers went from five to six. Only a small proportion are passed on to the second generation. the Brown family farm-turned-winemaking business. ‘Well here’s an opportunity’ … So we set up the manufacturing in my mother’s living room and [my husband’s] mother’s living room. and an even . Respondents described how family members were prepared to work long hours for small rewards. Of the 43 respondents. there was my father with this business … why didn’t I go back and join him? … I joined my father and worked with him. and sometimes uncles. was fairly small. We paid practically nothing in the way of dividends. 15 (56 percent) had worked alongside family members (spouses. he only had one employee. often siblings. (Ernest Rowley) [My father’s] ambition was more about survival. There was no management structure as such. or the small paper factory established by Richard Pratt’s father. aunts and cousins. The company. parents. For example: The hardest step in going into business is the first step. Alternatively. We kept the money in the company and just built it. and built it. Family relationships meant that family members trusted their sacrifices would eventually be repaid. They necessarily worked alongside parents.… When I joined him. Some of these small and medium-sized enterprises go on to become large enterprises in the lifetime of the founder: for example. Of these founders. He was the boss.

where children still follow their parents into management. (Tony O’Kane) So in theory you get more commitment from the family. Perhaps the fact that management succession was regarded as a ‘natural desire’ meant that respondents did not feel much need to elaborate on the case for family management succession. Of the 43 respondents in the current study. When they did elaborate. because I don’t have a high opinion of professional management.36 Journal of Sociology 41(1) smaller proportion make it to the third. the growing scale of the business made it increasingly difficult to bring children into the business without damaging staff morale. (Tim Cohen) In fact. it creates a totally different environment … . they worried about the effects of management succession on the business (and the fortune). Gerald Singer. there were two main concerns. more energy. Even those who had not brought their children into the business sometimes expressed a ‘natural desire’ (as one respondent put it) for family succession. and the strong carry the weaker. another 6 (14 percent) had once had at least one child in the business. 14 (33 percent) had at least one child currently in the business. Eighteen respondents (42 percent) had joined their parents’ business at some stage. One is that the firm needs to be professional at the extreme level. These include Brown Brothers’ wine-makers (five generations). two things. Once you’ve introduced somebody without the skills. For example. for management! That’s why I want my kids to come in. they worried about the effects of management succession on their children and their relationship with their children. Second. fourth and fifth generations. who had decided against management succession for his children. either through joining the business of their parents or bringing children into their own business. In any case. There’s not – every six months. more motivated. There’s more stability. respondents observed that a family management team was more cohesive. we have to report to the bloody Stock Exchange. respondents were much more forthcoming about the difficulties with family management succession. We can waste some money or invest some money for five years down the track. You can have more Japanese long-range planning. more loyalty. Nonetheless there are some well-known examples of substantial – sometimes very large – multi-generational family businesses in Australia. the Michell family’s wool processing business (five generations). simply because he’s your son or daughter. Kerry Packer’s PBL (four generations) and Rupert Murdoch’s News Corporation (three generations). and more able to take risks than professional managers. That’s understood in the family. For example: By management. First. For first-generation founders. 31 (a remarkable 72 percent) had personal experience of management succession. reflected: Our genuine feeling is that. They were concerned that their children might not have the skills or motivation to operate the business effectively.

disappointed. I always played the game. When it became my job to make the decisions. These respondents had always held a stake in the business alongside other family stakeholders. some allowed their children to join the business with reluctance. in some instances both respondents and their children acted in concert to bring about management succession. autocratic management at the expense of sons and daughters. Many times I lie in bed and try to read a book. you know. when he was 23. Accordingly. (John McAdam) One of the troubles you get in families … is that everyone knocks off work. Respondents described a variety of family tensions and conflicts around management succession: notably.. and as to whether their children wanted to join the business. role confusion between business and family relationships. resulted in disasters for the individuals! Second. conflicting interests between different branches of the family.Gilding: Families and fortunes 37 The second thing in terms of succession and so on – I believe that the best thing you can do for your children is a good education and some help.. Some respondents did not allow their children the option of joining the business. The more generations. For example: My strong feeling … is that we wouldn’t have nepotism in the firm. which I think was really triggered by a feeling of hopelessness and a lack of mentoring. Most people want their family in their business. (Keith Lumley) I had the beginnings of a psychotic depression soon after I joined the company. some tried to bring reluctant children into the business. but not the authority to make the decisions. ‘I don’t want you in my . If you look at the Gettys and various other families who went totally discombobulated. They need to have their own skills and their own sense of value for themselves. albeit in a variety of ways. Disappointed. (David Langer) I gave all these businesses to my son.. and between those who joined the business and those who did not. probably. they had always been obliged to negotiate with other family members to greater or lesser extent. but … yes. (Gerald Singer) I wasn’t successful [in persuading my children to join] – no. the more this was so. For example: At that time I didn’t understand the important role my father had in adjudicating those [resource] decisions. yes... there was enormous diversity as to whether respondents wanted their children to join the business. my brothers were not at all ready to do that and they still defaulted to my father. I was given the responsibility of running the business. third and fourth generation respondents were even more eloquent about the practical difficulties of family management succession.. (George Middleton) In the context of ambivalence... and family members who had not earned their positions and did not have the skills to run the business.. but they look at it differently. My children know that. Really my brother hasn’t worked for 40 years.

We believed that. described how he had ‘a bit of a job persuading them [his children] to come into the business’. For example. the decline of family control is not just an event in the past. Bill McAdam.38 Journal of Sociology 41(1) business. who had established a structure of family business institutions (including a family constitution and a family assembly) in order to formalize family management succession. His youngest son was saying. Westfield and News Corporation. for example. by the time they marry into lawyers. it wasn’t fair to have them all dependent on one family business and have some working in it. The potential problems of that! Even those respondents who were most strongly committed to family management succession did not expect the business to stay in the family for more than one or two generations. The next generation of cousins are going to have to find a way of working together. ‘I’ll come into the business now. Yet the management thesis presented the decline of family control in historical terms. Kevin Poster described how he and his brother decided to sell the second-generation family business on account of the next generation: Some will want to go into the business. There is a sense in which respondents’ narratives reaffirm the decline of family control. the overwhelming majority of respondents – 34 out of 43 (79 percent) – did not expect their children to take over the management of their businesses. in the longer term. where people want to get out and take their share. or accountants. It is on this account that the majority of respondents have grappled with family management succession in personal terms. or into other disciplines. in another 20 to 25 years’ time. some will want to go and do other things. (Bob Thompson) Notwithstanding diversity. I’d be surprised if it’s still a family business by the time that they get into it. then they want to touch it. it is an ongoing event. Tom McKay. It is on this account also that family management succession and ‘nepotism’ remain enduring issues at the commanding heights of the economy. as first proposed by the managerial thesis. explained: I have two grandsons.’ Right? Simply because it’s like wet paint. occurring progressively between the late 19th and mid-20th centuries. Inheritance The transmission of large estates across generations usually requires the consolidation of the estate at the point of generational transfer. as reflected in PBL. but I don’t know whether I’m going to stay in the business. In fact. In aristo- . some not in it. Rather. informing the passage of most entrepreneurial businesses as they grow in scale and complexity. I really can’t see that happening.’ Similarly. Some respondents had already sold their core businesses on this basis.

leaving the estate in the hands of the oldest male son (Flandrin. and we all have different goals. Indeed. if not in the hands of the oldest son. that is. or 88 percent) planned to leave the larger part of their fortunes to their children. When you get over a certain size. or putting them in some shape or form isn’t realistic. ‘Does that still make sense?’ (Kevin Poster) Nearly all the wealth was in the business.. I mean. then at least in the hands of those sons who were actively involved in the business (Clarke. (Alexander Waterman. They’re individuals. More than this. 3rd generation) In this context. Of the 43 respondents. For example: I think that [unequal inheritance for sons and daughters] is appalling. the Fairfaxes and the Clarkes – has usually involved a degree of consolidation. I don’t think that there should be any obligation for them [my children] to go in here [the new family business] after me. (Bob Thompson. Gilding. The continuation of most famous family business dynasties in Australian society – for example. 2002: 134–48). then you’ve got to stand back and say. (Darren Kennedy. ‘Let it go!’ (George Miriklis) . or 93 percent) upheld the principle of equal inheritance among children. respondents in the current study (38. and 12 (28 percent) had already divested the original business. at least 16 (37 percent) had private investment companies that managed a diversified portfolio of investments. We thought. Every one of my children – or every one who has my blood – will participate in it dead-set equal. or anything like that. They’ve got a life to lead. including daughters. protecting the fortune sometimes meant selling the business. Consolidation meant that the family business – and the family fortune – were not split between different branches of the family. Overwhelmingly. I think. you work like hell to try to build up and you have all your money in one asset or one business. 1979: 242). 1991. we are moving into a very individualistic age.. they overwhelmingly (40. It was time to take some money out – you know. ‘The individual’ was a constant point of reference in the course of interviews. playing it safe. 1st generation) I think that we’re individuals. 1st generation) Having broken that chain [of family succession in the business]. thereby facilitating management and ownership succession across generations.. They also consistently emphasized that the family estate and the family business should not stifle children’s capacity for independent action. 1946. This business of trying to harness them [children]. In their own words: When you’re a smaller size. 18 (42 percent) no longer had the larger part of their fortune in the original business. respondents were more concerned with transmission of the family fortune than transmission of the family business – whether its management or its ownership. You couldn’t risk it forever.Gilding: Families and fortunes 39 cratic English society the vehicle for such consolidation was the institution of primogeniture. Souter. aspirations and preferences.

On this account ‘the best chance of going forward’ was in setting up ‘a very loose structure’. so ‘you’re really stuck’. we have a disproportionate amount of our assets tied up in the [public company]. move away from their original business. Tight structures could be ‘extraordinarily stressful’. and reasonably. irrespective of family continuity. controlled by a family holding company. and there’s no income’.’ If we followed that advice. respondents identified at least three important dynamics leading to family business institutions and ongoing involvement among family members... First. They move to structures which are much broader investment companies. The transition was ‘probably mostly driven by succession’: ‘our family came to the realization that I wasn’t immortal’. loose structures allowed individual family members to follow their own interests and preferences. addressed the same issues in more general terms. Even so. What you see with generations is that people. I don’t particularly want us to do that. given that respondents were often reluctant to elaborate on inheritance arrangements. Respondents also described enduring tendencies towards the creation of family business institutions. They’ve built investment companies outside the core business. The Myers have done it. as first proposed by the managerial thesis. Family members all had to ‘work there and wait until Dad dies or something’: ‘all the capital is there. So while I’m head of the family that won’t happen. One of the biggest issues for the holding company was ‘how much of the family’s assets should be tied up in the one entity’: At the moment. the founder’s descendants). and that’s for flexibility. a fourth-generation respondent. you can foresee that – in a generation’s time – the original business is almost irrelevant. Family businesses. when they’re setting up in a generational sense. were like family farms insofar as they were both ‘tight structures’. But at least we have a vehicle where they can do it easily. If you go to any financial adviser. Yet the dynamics are more complex than this. he’ll tell you.40 Journal of Sociology 41(1) Diversification and divestment also facilitated the formation of flexible vehicles for the division of the estate among children. The staff don’t want us to do that. concerned with the management and distribution of the estate.. he observed. The following discussion of these tendencies is necessarily tentative. we’d sell out most of our shares in the company. ‘Don’t have all your eggs in one basket. James Armstrong. and fairly. Respondents set limits . But emotionally. described the transition from a private family company to a public company. there was the will – in both senses of the word – of the founder (and to a lesser extent. You’ve seen the Lowys do it. Respondents’ accounts of the shift from ‘tight structures’ to ‘loose structures’ are consistent with the diminishing role of the family in capitalist enterprise. for example. they don’t sell down the shares in the company quite substantially. within another decade or even less. But when I die … I’d be surprised if. a number of the family members don’t want us to do that. After all. Ernest Rowley. At the end of the day.

but I don’t know. some respondents created family trusts and philanthropic foundations. ‘Here’s $10 million’. For example: I’ve got too much wealth! If I said to any of my children. It will be one of those fortunes that will multiply indefinitely. and partly because they feared that the fortune might damage their children.’ (Craig Thomas) In turn. At the same time. but it’s not your asset. I think this will go on the same. I don’t know. Bill Pease.. I think they wouldn’t know what to do with it... But recognizing that we all had a common business legacy and an ongoing philanthropic duty. They wouldn’t be capable of controlling it. affecting their initiative. without any particular Rockefeller running the thing. for example. You’ll be a beneficiary and you might end up being trustees of the trust. including family philanthropic foundations. and it has just grown organically from there. ‘but we’ve come to use it ourselves’: Originally there were just one or two advisers. whereby children and their descendants would necessarily be involved with each other. or interstate. accountants and financial managers. When they’ve got hundreds of millions of dollars. was a term imported from the United States. Sam Walters – a third-generation respondent – described how the complicated will of his grandfather had led to a complex of family business institutions. Pease described his model as ‘something like the Rockefeller Foundation. annual family assemblies. they wanted one central point of contact. we decided that it was best to try to create a space where these organizations could be together. I think that we’ve got the perfect system. partly because they feared that their children might squander the fortune. A second dynamic that promoted the creation of family business institutions was tax minimization. It’s not Mum’s. ‘What’s in the family trust passes on. It’s not my asset. and these types of things’: They’re big families and they’ve managed to keep going. It’s there to exist as an entity in its own right. as far as I’m concerned. (Bill Pease) I said to the kids. did not want his children to follow his footsteps in the management of his diversified private business empire. the children – and their lineal descendants – were the major beneficiaries of his estate and could expect an income for life. You physically won’t own that ever. or overseas for a while. a family council.Gilding: Families and fortunes 41 on the dispersal of the fortune among individual children: partly because they still harboured a dynastic ambition of sorts. In earlier times this consideration encouraged . a family charter of values.. self-esteem and social relationships.. he reflected. and a family office where the business and philanthropic activities of the family were coordinated. With requests for services from other family members who were living outside the city. Nor would they be able to sell their stake in the empire. Similarly. The term ‘family office’. Mine [the fortune] will go on forever. it’s a bigger problem still..

James Armstrong. For a family shareholding. By the same token. it’s much more interesting than the public company. Essentially. Ernest Rowley explained that he did not ‘have any assets at all.’ In his own words: The thing is: for a family thing to go on. The family office. Rowley described the involvement of all his children as directors of the family holding company: We have regular board meetings. the investment company portfolios – it’s very easy: you can either take your portfolio away.’ Following this logic. even though they owned farms that were worth several million dollars. Instead. Nowadays the owners were ‘the Australian institutions. To avoid that. Just as personal trust underpinned the enduring role of family relationships in small and medium-sized businesses. and so on’: ‘they can look after themselves’. Businesses such as I had were very difficult to value. or put it in. for example. observed that whereas trust once depended on shared institutional background (such as schools.. he observed. the Australian Superannuation Council. That flexibility means that there are not the stresses . For example. he had created a ‘family office’. Directors’ meetings – they’re dull by comparison. unlike his father’s generation. such that the death of the owner does not crystallize the capital gains of the business. they vary like that. Capital gains tax promotes the formation of entities such as family holding companies and family trusts. Some of the most interesting company debates are in the family company. so it promoted cooperation among family members in the management of family estates. whereby family members were able to work together and pool their resources. it’s very difficult. ‘has the flexibility and characteristics to go on for some generations – if that’s what people want. I can tell you! The third dynamic that promoted the creation of family business institutions was trust. ‘the owners were the owners’. That’s because their wealth varied tremendously with the business cycles. I essentially gave all my wealth to my kids. For example. he had not joined the boards of public companies. so that when I died. family holding companies and family trusts require family members to work alongside each other. Also. Farmers were often bankrupt. it now depended more on personal relationships. and so there were terrible situations – particularly for farmers. but for anyone in business. In his father’s day. clubs and boards of directors). it’s much more through individuals. In turn. I gave it all to my kids. or put part of it in. notwithstanding his individual listing on the Rich 200: Because 30 or 40 years ago. In his own words: ‘It’s not necessarily coming through some sort of wider association. The removal of death duties in the 1970s meant that there was no longer cause to transfer assets to children.. everybody who is in it has got to want to be in it. That was because at the time we had death duties.. I wouldn’t have anything. apart from the clothes I’ve got on and a few things’.42 Journal of Sociology 41(1) wealthy individuals to transfer their assets to their children before death. capital gains tax – introduced in the 1980s – has (in Rowley’s words) ‘almost taken the place of a death duty’.

It is also consistent with ‘network forms of organization’. but you can combine to get the benefits of pooling resources. as described by Dunn (1980: 18). or the remnant of an earlier era. There are also enduring advantages of family . accumulation and succession There is no doubt. a variety of considerations promote family continuity and family business institutions. They place more weight on individual autonomy (for sons and daughters) at the expense of family continuity. the family office becomes one node within a network of companies and other entities. ‘loose structures’ such as holding and investment companies facilitate the dispersal of family fortunes among individual family members. There are two reasons for this. the new family business institutions are not the functional equivalent of earlier institutions. family relationships continue to be important as some entrepreneurial small and medium-sized enterprises become large companies. the decline of family control in large companies does not imply that the institution of the family is an anachronism in relation to capitalist enterprise. and administration. Even so. Or. they are ‘loose structures’: ‘everybody who is in it has got to want to be in it’. By the same token. there is a tendency for both management and ownership of the business to pass out of family hands. In turn. as Armstrong observed. limiting the dispersal of family fortunes. they are contingent. that family control has declined among the largest companies in capitalist societies. This is consistent with Zeitlin’s account of ‘family spheres of influence’. Second. In this context. promoting family interests within and between companies. and talents and so on. As businesses become larger and more complex. In turn. Wealthy individuals still harbour dynastic ambitions that will shape the trajectories of businesses and families. Family investment companies. from family holding companies to family offices. family holding companies and other family business institutions can be understood in similar terms. flexible and voluntaristic.Gilding: Families and fortunes 43 involved. The taxation system encourages the formation of family entities. By implication. In turn. as the managerial thesis first proposed. More than this. notwithstanding the decline of ‘family control’ in large companies. as observed by the family business literature. Families. First. The decline of family control is not just a historical event. hence the enduring issue of ‘nepotism’ at the commanding heights of the economy. family relationships are still pivotal in the transmission of wealth across generations. ‘the upper-class family and its mechanisms of control and cohesion have taken on new organisational form’. ascendant since the 1980s. family relationships are still pivotal in small and medium-sized enterprises. but also an ongoing event that informs the passage of most entrepreneurial businesses as they grow in scale and complexity.

Berle. Hampton and I. Melbourne: Pitman. M. (1946) The Clarke Clan in Australia. J. Acknowledgements The research for this paper was made possible by a Large Grant from the Australian Research Council. trans. Connolly. G. Boston. It is also why the family presents an intractable problem for the compilers of the Rich 200. Briefly. A. Gilding. Harmondsworth: Penguin.. pp. Boston. Clarke. Bell. New York: Monthly Review Press. IL: The Free Press of Glencoe. allowing more weight for individual autonomy. (1960) The End of Ideology. Galbraith. The upshot is enduring ‘family spheres of influence’ among wealthy families. these institutions are more flexible structures than in earlier times. 17–44 in G. K. Accumulation and the Capitalist Class’.) The Twenty-first Century Firm: Changing Economic Organization in International Perspective.) Power Structure Research. Journal of Sociology 35: 169–82. I am endebted to Karen Farquharson for her penetrating comments on an earlier draft of this paper. D.W. This is why the individual is a plausible unit of analysis for the compilers of the Rich 200. and Paul M.-F. Princeton. pp. M. I am also indebted to the constructive criticisms of the anonymous reviewers for JOS References Baran.A. MA: Family Firm Institute. Sweezy (1966) Monopoly Capital: An Essay on the American Economic and Social Order. Burnham. NJ: Princeton University Press. P. Domhoff (ed. MA: Harvard Business School Press. and C. M. at the expense of large companies. Harmondsworth: Penguin. (2001) ‘Introduction: Making Sense of the Contemporary Firm and Prefiguring Its Future’. It is possible that these spheres of influence have become more important with the rise of ‘network forms of organization’. Beverly Hills.E. . Paul A.44 Journal of Sociology 41(1) cooperation within ‘loose structures’. J. 3–30 in P. Lansberg (1997) Generation to Generation: Life Cycles of the Family Business. Flandrin. By the same token. F. family business institutions – from family businesses. Davis. Household and Sexuality. grounded in trust. R. Southern. Glencoe. to family offices – exemplify the enduring importance of the family in wealth accumulation and succession at the top levels of business and society. Family Business Review (1987–2003). DiMaggio (ed. and G. New York: Harcourt Brace World. Means (1968) The Modern Corporation and Private Property.M. CA: Sage. Jay (1996) The Private World of Family Business. (1999) ‘Superwealth in Australia: Entrepreneurs. J. J. as described by some Marxist sociologists. Cambridge: Cambridge University Press. (1979) Families in Former Times: Kinship.K. DiMaggio. Melbourne: privately published. (1980) ‘The Family Office: Coordinating Mechanism of the Ruling Class’. Dunn. Gersick. (1945) The Managerial Revolution. to family investment companies. (1969) The New Industrial State.

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