This brief is part of the Insights @ Center for Emerging Markets, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets.
By Kathryn Slomski (Northeastern University)
In Short: Farhad Forbes is Co-Chairman of Forbes Marshall, a privately held engineering company approaching its 80th anniversary, and served two terms as global chair of the Family Business Network International, representing 4,000 family companies across 65 countries. This note is based on Forbes' keynote at CEM's Family Business Summit in October 2025. His message: Family businesses face a dual mandate: managing the business itself while managing the family's relationship to that business. Mastering both determines whether families build lasting enterprises or become cautionary tales.
The Hidden Business Within the Business
Every business faces operational demands such as strategy, finance, and competitive dynamics. But family businesses carry an additional burden: managing the family as a stakeholder system with its own complex governance requirements.
Family businesses tend to carry less debt, maintain longer time horizons, and build deeper community ties than publicly traded alternatives. They also tended to weather the pandemic better, retaining employees when others laid off workers. Yet without proper family governance, conflict and succession struggles poison both family relationships and business performance.
Preventing Governance Breakdown
When firms start small with limited shareholders, informal decision-making often works. Problems surface as shareholding divides across family lineages. Majority owners make decisions without considering minority shareholders' interests, even when those minorities are relatives. Boards often include people who rubber stamp decisions and the company does not develop governance mechanisms.
Continued success requires structures separating family governance from corporate governance and establishing clear ownership protections. Forbes implemented this eighteen years ago in his own company, creating a non-statutory board with external directors to provide complex market expertise, enforce owner and management accountability, and offer neutral ground for resolving disagreements.
Ensuring Succession Succeeds
Research shows that only one-third of family-owned firms make it through the second generation, and just 13% make it through the third, yet firms surviving the third generation are much more likely to continue, because they know how to manage generational transition. The challenge has two dimensions: the senior generation struggling to let go and the next generation lacking adequate preparation or space to lead. Forbes emphasizes that succession requires working across generations with compromise, patience within the next generation for implementing changes, providing the space to the next generation for their ideas, and perseverance when conflicts arise. He also advocates bringing senior and next generations to family business forums together where they can learn from peers navigating identical challenges across cultures and industries.
Engaging the Next Generation in the Right Role
Beyond transitioning authority lies a deeper question: what role should each generation play? Forbes outlines three roles: owner-manager running operations, owner-governor serving on boards while non-family runs operations, or responsible owner-shareholder influencing values and overall business direction without direct involvement. Each generation should engage differently as the business and economy change.
Forbes emphasizes getting the best person for the job for operational roles, regardless of family affiliation. Family members often understand the business and company culture deeply and benefit from mentorship by long-tenured executives. But, without proper education or passion for the business prevailing, professional non-family management is preferable, with family preserving company values without operational involvement.
Practical Imperatives
Forbes concludes with three pieces of guidance. First, invest in family governance before crisis forces action – through independent boards, and clear ownership agreements. Second, establish channels for learning and cross-generational dialogue to facilitate smooth transitions. Third, recognize that each generation should engage with the business differently, matching capabilities and business needs.
The challenges facing family firms are real, but solvable through deliberate planning.
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Contact
If you are interested in learning more about this work, contact Kathryn Slomski.
