Family Business: The New Heartland of America

Wednesday, October 1, 2008

On September 25-26, 2008, the Center for Family Enterprise at the University of St. Thomas Opus College of Business hosted the Family Capital, Family Business and Free Enterprise Conference. Attended by 26 policy experts, academics and business leaders, the conference was designed to discuss family business research findings and public policy, thereby surfacing important issues and creating an agenda for ongoing analysis and action. The conference introduction was delivered by Ritch Sorenson, Opus Chair in Family Enterprise.


I believe that the new heartland of America is the family business. America’s heartland is often thought of as the family farms in the Midwest, a particular kind of family businesses in a particular location. However, other family businesses have the “heartland” characteristics of a family farm.  ALL family businesses combine two institutions: family and business.  

The family farm is close to and a steward of the land; other family businesses are close to and stewards in their communities. A recent National Federation of Independent Business Study indicates that 91 percent of small businesses volunteer in and make donations to their local communities. 
Because of close ties to family, family businesses in general tend to have a strong values base and a long-term focus, unlike many public corporations. An attorney who recently worked on white collar crime in the U.S. Attorney’s Office noted that individuals who work in large corporations find it easy to divorce themselves from their families and communities and to make unethical decisions that they would never make at home. In family firms, you are always at home. Your family—spouse, parents, siblings and children—is always with you. 

America’s heartland, the family business, exists everywhere, in every community, in every city. And family businesses have a tremendous influence on the U.S. economy. In all of the statistics I am about to give you about the economic impact of family business, the low estimates are in the 50 percent range. The high estimates indicate that up to 80 percent of U.S. businesses are family businesses, and that family businesses generate up to 64 percent of the gross domestic product, employ up to up to 80 percent of the work force and generate up to 85 percent of the new jobs in the U.S. Thus, family business might be considered a national resource, a national treasure. Like the goose that lays golden egg and keeps on laying golden eggs, family business is something that we should promote and preserve.

Given their tremendous contribution, you would think that family businesses would have a major voice in national affairs and considerable influence in public policy. But they don’t. Family business needs a national voice. The current economic conditions cry out for a voice that speaks from and for the heartland. Why, for example, should the heartland invest 700 billion to prop up a broken Wall Street system, one that not even Wall Street bankers understand? Are policy makers considering the impact on America’s heartland of both the bailout and the additional taxes required for the bailout? Should the heartland not have a voice?

For too long family businesses have not had a strong voice in defining who they are, issues important to them and policies that would promote the common good. Family business needs that voice. Tonight, we are joined by the chair of the board for a newly minted organization that intends to be a voice for family business in America—Family Enterprise USA (FEUSA). He is here to participate and to listen to what you have to say and to determine whether this kind of conference would be something FEUSA might sponsor at other universities and locations across the U.S.

Here, we will envision the ideal environment for family business and polices that would help create that environment. The purpose of this conference is to ask the question, “From a policy perspective, what can we do in this country to promote and preserve family business?”  For the common good, what can business owners, policy experts and academic researchers do to promote family business?

The theme of this conference is “family capital, family business and free enterprise.”  We will examine the interconnections between these entities as they relate to public policy. To illustrate, let’s assume than an individual, a young entrepreneur, wants to start a construction company. So she looks around for start-up resources. Lo and behold, there is her family—a group willing step up to the plate. Parents provide financing; a husband offers to be a specialist in arranging construction loans for customers and joins the business; a father and brother provide advice, contacts and extra labor when needed. Thus, the business becomes a family business.

Upon starting the business, family members immediately find that they are a part of a larger enterprise system, sometimes referred to as the free enterprise system. But they quickly find that free enterprise isn’t exactly free. They find that competitors have an inside track to business in the community and to government contracts. They even have international competition. Finally, they discover numerous policies and regulations shape how they do business. They had no influence in creating these policies, but they have a huge impact on their business. And they are so busy trying to survive that they see no way to have influence.

That is what this conference is about—giving family businesses a voice and defining a favorable policy climate for family business. To focus our attention, you will find that the papers presented here examine issues related to the intersections among family capital, family business and free enterprise. For example, you will find that a variety of kinds of family capital influence the creation and success of a family business. You will also find that policies designed to regulate the enterprise system influence family business success.

Other countries have used public policy to promote family business. In Australia and Spain, governments regularly obtain input from family businesses. India, thinking that it would promote reinvestment and family business growth, abolished the estate tax in 1985, which resulted in economic growth and booming capital markets. Sweden was so concerned about retaining family business viability that its government sponsored education seminars and provided support for successful transfer of family businesses.

What policies could be created in this country to promote family business? In the U.S., it is estimated that in the next 18 months 1 million privately held businesses will change hands. What policies has our country created to help make these transitions successful? Most financing for family business comes from family and banks. What policies could make financing more readily available from family and banks? What policies could be put in place to have smaller family businesses be taxed at the favorable rates given to large public corporations?

The U.S. government has a plan to devote 700 billion in tax capital to buy bad debt. Is this plan in the best interest of the heartland? What do we want our representatives and policy makers to know about what would be best for common good?

Could we find ways to promote stability in families and to promote positive models of families on the national stage to strengthen both the families in business and the family members they hire? In other words, what kind of environment do we want in America for family business and what kind of public polices could help? In all of this, we want our focus to be the public good, not just the good for the privileged and the powerful.

Tomorrow, as we think creatively, imagine the future, and engage in dialogue, we hope to create agendas to generate policies that will help promote and preserve the heartland of America—the family business.  We will ask, “What should our policy makers and representatives know about America’s heartland?” 

University of St. Thomas Press Release, 10/01/2008