Tell me who owns you and I will tell you who you are
By whom a company is possessed matters, familyandtrends believes has much more importance than is normally said and thought.
Broadly owned companies are, almost always, listed on a financial market and owned by a large number of investors whose objective is to maximise the risk-return ratio on the efficient frontier defined by the Nobel Prize winner Harry Markowitz. Decisions are made by CEOs (delegated by other directors nominated by shareholders) with the objective of maximising the return for investors. Companies with 'closed' capital can be owned by employees or customers, e.g. cooperatives or mutuals, by the professionals working in them, e.g. professional firms or partnerships, by charities or non-profit organisations, e.g. foundations, by groups of blood relatives, e.g. family businesses. In this case ownership is 'exclusive', not everyone can buy shares, the owners and not the managers have authority over important decisions, always the owners decide on the objectives to be achieved, which are not always the maximisation of financial returns.
Each form of ownership has advantages and disadvantages: listed companies are under pressure for short-term results but can raise capital and exchange shares to grow through acquisitions; 'private' companies have less pressure in the short term which often helps them to have better results and more consistent visions over time on the other hand they are extremely weak when some relevant owner fails.
Ownership is also important because it determines the long-term strategy of the company. The statement is strong and will turn the noses of many strategy purists, especially the 'porterians': let us use the case of two beautiful luxury companies to reason about it: Hermès and LVMH.
Hermès went public in 1993 but has never exploited the advantages of the listing: it has not made capital increases or acquired 'paper for paper' competitors, it does not give any weight to investors' expectations so much as never declare budgets or prospective financial results in meetings with analysts. To make it clear that the market is worthless is one of the few, perhaps the only, listed company in the form of a limited partnership per share: Emile Hermès SAS with one share appoints the board of directors of the listed Hermès International. It listed for a (usually) misguided reason for entrepreneurial families: to liquidate a branch of the family; it was, in this case, a mistake that twenty years later risked the loss of ownership to LVMH itself. The type of ownership allows Hermès to remain tied to the founder Thierry's DNA: extreme craftsmanship, focus on a few product categories, little or no glitzy marketing, slow production, slow growth, slow business development. In the words of the founder's great-grandson and promoter of the Hermès we know today, Jean Louis Dumas: 'luxury is what can be repaired'.
