Women in Family Firms

Cristina Stenbeck, Kinnevik and the power of trust-based governance

Cristina Stenbeck, who is taking on an ownership role at Kinnevik. Image: Kinnevik.

Cristina Stenbeck, who is taking on an ownership role at Kinnevik. Image: Kinnevik.

Fourteen years after she took over from her father as head of her family's investment company, Cristina Stenbeck is changing jobs. Her story illustrates how family ownership can make a business flexible, and fast. 

Last week the Swedish investment company Kinnevik announced that its well-known head Cristina Stenbeck, the third generation of the founding family to run the business, is to step down as executive chairman.

According to Kinnevik she will use “her amazing network, her amazing energy, her ability to inspire new businesses and founders” to find and build businesses in the education, healthcare and fintech sectors.

Now aged just 39, Stenbeck has led the company for a decade and a half, having been anointed as successor when her father died in 2002. At that time she had just two years of work experience, for Ralph Lauren, but she quickly impressed and has been on the board since 2007. 

Through their investment vehicle Verdere S.á.r.l., Stenberg and her brother own 10.6% of the shares in Kinnevik, but 44.8% of the voting rights. The Klingspor and Horn families, who co-founded the company with the Stenbecks in 1936, control 10.5% and 3.3% of votes, respectively.

This strong family ownership explains how Stenbeck has been able to transform Kinnevik as spectacularly as she has. 

Quick change artist

Stenbeck's story highlights several strengths of family ownership. Like her father Hugo before her, who changed Kinnevik’s focus from manufacturing and agriculture to telecoms in the 1980s, Christina was able to switch sectors astonishingly quickly. (Among the companies in which it owns a stake at German online retailer Zalando, and start-up incubator Rocket Internet.)

It's a great example of how family firms can be more nimble than others. “When ownership and management is combined, you will speed up the decision-making,” says Ken McCracken, Head of Family Business Consulting at KPMG. “In a conventional set-up a major re-allocation of capital would have to go through various checks and balances, but if you are the owner, it is your train-set.”

Giving power to a 24-year-old might sound odd, or even foolhardy, to Anglo-Saxons, but that is because their ideas about corporate governance are based on the idea that managers might try to act in their own interests rather than the family’s, says McCracken. It is effectively based on mistrust, and so all sorts of checks and balances are needed to hold managers to account.

In contrast family businesses, and especially Scandinavian ones, are based on a stewardship model in which trust is paramount. “The question is, would you trust your 24-year-old relative more than a vastly more experienced outsider? Some families would say, to be honest we trust the family member more,” says McCracken.

“You might say to the family, ‘they might make a mess of it’, and they say, ‘yes, but so might an outsider’. For some families, it is genetically impossible for them to trust an outsider in a crisis. They decide they need someone with the business in their DNA, and they will give them enough advice to make the right decisions.”

Female focus

Another aspect of Stenbeck's story is that it proves that women - at least female family members - can have a better deal at family-owned firms than at others. Businesses in Scandinavian countries tend to be more female-friendly and to have more women in senior positions than in other parts of the world, but even so having a 24-year-old woman parachuted in to lead a huge company is unusual. 

It is hard to imagine many companies allowing someone in Stenbeck's position to make the move she has. Similarly, the decision of Margarita Louis-Dreyfus, the chairman of the Louis Dreyfus commodities company, to take time off to have twins, then come back to her position, is unusual. Nobody expects Stenbeck or Louis-Dreyfus's career to suffer one jot, or their authority to lessen.

Are family businesses are cuddly havens of sexual equality and feminism? Sadly, no. We recently wrote about research of German family firms which found that when a male and female potential successor were available, in just 19% of cases was the woman chosen. Overall, just 23% of the family businesses studied had a female head. 

What really lies behind the Stenbeck and Louis-Dreyfus cases is probably something far simpler: that it's hard to say no to the owner. That is often seen as a weakness of family businesses.

But whether it really is, depends on the owner. 

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