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No generation sets out to lose everything the previous generation spent time building, but without time invested in planning succession and ensuring the readiness of the Next Generation it too often happens. The Arnault Family, whose dynasty began in the unassuming town of Roubaix in northern France and who are the owners of the LVMH empire, have set in motion a carefully devised plan for succession and transition.
However, it’s worth noting that there’s no definite guarantee that the $375 billion LVMH empire will automatically transfer to a family member. Many of France’s prominent families abide by a meritocratic succession principle, emphasising the importance of choosing the most qualified individual rather than simply inheriting the position.
This notion of succession planning based on who is right, rather than the right to inherit, was the subject of a recent New York Times article titled; “Bernard Arnault Built a Luxury Empire on ‘Desirability’. Who Will Inherit It?”. The Chairman of LVMH was clear about what was at stake: “it’s not an obligation, nor inevitable, that a kid is my successor” he said. And so, with 5 children the pressure is on to prove suitability.
This approach is a common practice among the hard-working families of Flanders. For instance, the Mulliez Family, responsible for the $46 billion Auchan supermarket chain, adopted a similar strategy. Each family member was required to demonstrate their value through junior roles in the business before advancing. There was no automatic entitlement to succession. In the generations that followed the reconstruction efforts after two World Wars in Northern France, a strong work ethic became deeply ingrained in their culture. Mr. Arnault held similar expectations for his children; he once stated, ‘I didn’t want them to start going to big parties, I made them work.’ All of his children now hold significant positions in the business, ranging from Chairman and Chief Executive of Christian Dior, to Chief Executive of Tag Heuer, and Executive Vice President of Tiffany.
This method may appear challenging for those in line for succession. It necessitates the early development of life skills such as resilience, leadership, and a solid understanding of business. Without these refined abilities, the succession process risks missing the opportunity for growth and evolution, becoming a potentially risky event. Failure to build upon the achievements of previous generations and veering off course can result in a strategic upheaval that erodes wealth. It is these strategic changes, not purely an excess of unbridled spending that poses the greatest risk.
Passing the baton can be a difficult process, particularly where there is an unwillingness from the Principal to pass control. Bernard Arnault persuaded the LVMH Board to increase the retirement age of the Chairman and CEO from 75 to 80, similarly, and Rupert Murdoch is still going strong at 92. Principals must envision a future role for themselves, whether as an Elder or Advisor. Only with this confidence can they proceed with embracing succession plans. Families can approach Succession and Transition with assurance, provided they have taken the necessary steps to establish contingencies and prepare. Being prepared is not an entitlement that is inherited. It is never too early to begin.
Tim Boughton is a Senior Partner based in Itriom’s London Office.
Itriom is the global impact platform helping leading families shape a better world. Itriom’s platform enables families to refresh and redesign their values, aligns them with the right UN Sustainable Development Goals, combining them in an agreed purpose and a Family Impact Charter. Itriom’s platform supports the development of impact initiatives and whilst providing discrete and secure spaces for peer-to-peer messaging and collaboration. Itriom’s core practices in leadership, geostrategy, and sustainability benefit clients by developing strategies to engage and support the next generation in building a lasting legacy of which families can be proud.
Itriom’s leadership and resilience practice instils all-encompassing leadership in support of principals of leading families and the next generation preparing for family succession, transition and evolution.
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