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Chapter 9
Conclusion
9.1
This is the first federal parliamentary inquiry to focus specifically on
family business issues. It is long overdue. Too often, the understanding of family
business has been conflated with micro and small business issues. The media may
point to highly successful large and medium-sized businesses that are owned and
managed by a family. But for policy makers, the key issue has been the size of
the business (in employee numbers and turnover) and the type of legal
organisation. The issue of business ownership has not, generally, been of
concern.
9.2
Family businesses come in all sizes—micro, small, medium and large—and in
all legal forms—companies, trusts, partnerships and (if a definition allows)
sole traders. In a financial sense, their issues and interests certainly
overlap with those of non-family businesses. However, as this report has
discussed, family businesses face unique challenges including internal governance
and dealing with sibling rivalry, developing and retaining the family's skill
set while employing outside talent, and planning and executing succession
(chapter 5). They also appear to have unique characteristics: a long-term
risk-averse mindset, greater flexibility in their decision-making than
non-family businesses; a commitment to retaining staff; and a significant
contribution to the community in which they operate (chapter 4). As one witness
described family businesses: '[T]hey are different; they are significant and
they are overlooked'.[1]
9.3
The principal reason why family businesses have been either ignored, or
subsumed within the debate on small business in Australia, is that very little
reliable data is available. Indeed, there is no definition of 'family business'
upon which official data could be gathered (chapter 2). Without a definition,
and without accurate and reliable data, the debate on family business in
Australia has been stunted: it has not captured the attention of Australia's
policy makers in any systematic way.
9.4
For the past 20 years, consultancies and academics have conducted their
own surveys on family businesses (chapter 3). The surveys have various
shortcomings. Among surveys conducted by the same researchers, the methodology
and even the definition of 'family business' has changed over time; the questions
have changed one survey to the next; and the sample sizes have often been low. Nonetheless,
these surveys have begun a discussion about family businesses. The findings
draw attention to the diversity, economic contribution and resilience of these
businesses. There has also been growing academic interest in family businesses,
particularly in the links between their governance and performance and whether
they employ labour more productively than businesses that are not family owned
and managed (chapter 4). This research is important and to be encouraged.
9.5
The main purpose of this report is to further the conversation within
government about family business issues that this inquiry has started. Given
the early stages of this discussion, at this time the committee believes it may
be counterproductive for it to present a conclusive definition of family
business to be used by policymakers in Australia. Rather, to encourage the best
outcome and to ensure that the costs associated with the collection of any
official data on family business are justified, it appears that various
government departments and agencies require a process through which they can:
(a) further consider the issues that are particularly or uniquely relevant to
family business and how these issues interconnect with distinct policy areas;
and (b) deliberate on how a definition can capture these issues.
9.6
Accordingly, the committee's central recommendation is that government
agencies should meet as part of an Inter-Departmental Committee (IDC) to
discuss a number of issues related to this inquiry's terms of reference. Most
crucially, the committee recommends that the IDC should focus agencies'
attention on the public policy need to identify family businesses. In
particular, it must identify what has been, and what could be, the need for
these agencies to use data relating to family businesses in the development of
public policy. This task would lead the IDC to consider whether a survey is
needed and if so, how questions could be framed.
9.7
Chapter 2 of this report suggests that the IDC would have to consider
two broad types of questions: a first set that relate specifically to
determining whether a respondent is a family business; and a second providing
policy-makers with the necessary information about these businesses (such as
location and sector, financing, productivity, tenure of employment,
philanthropic contributions and planning for succession). From this discussion,
a definition of family business would be formed. It must address key threshold
issues such as whether to include sole traders, how to define a family member,
whether to require the intent to pass the business on, and whether to set a
limit on size (by number of employees or annual turnover).
9.8
The proposed IDC is an opportunity for policy makers to consider
carefully the issue of succession. Chapter 5 of this report has identified
succession planning as a key and unique challenge for family businesses. It has
also suggested that succession planning should be of concern for government,
given some survey evidence of the large number of family business owners
intending to retire over the next decade. The committee has recommended that
the proposed IDC should consider whether to quantify the number of family businesses
in different sectors whose owners plan to retire over the next ten years.
9.9
The committee is not prescriptive about how government should handle
the matter of family businesses' succession planning. However, it does consider
that the IDC should discuss certain succession issues. For instance, should it
be of public policy concern that a large block of family business owners in
various sectors of the Australian economy are soon to retire? Should it be of
concern to government if these businesses do not have a succession plan in
place? More specifically, should it be an objective of public policy to assist
in the preservation of family ownership of a business passing from one
generation to the next? Is there a productivity or employment gain possible
that a public policy response could enable? There may be a constructive role for
government in certain industries to conduct an education campaign to inform
family business owners of issues relating to succession planning. Without data,
it is difficult to discern a public policy response to these and other
questions that have emerged in the course of the inquiry.
Representing and educating the sector
9.10
This inquiry has provided the committee with insight into the
representation of the family business sector. Family Business Australia (FBA)
is the national peak body devoted to the promotion of family business issues. It
is not-for-profit and membership based. The committee commends the FBA for its
work in developing and conducting national education programs, as well as state
based programs run by the local FBA chapters. It also encourages the FBA's
efforts to involve academic institutions in these programs.
9.11
As this report has noted, there is a small but growing body of important
research into the family business sector in Australia. The proposed IDC will
benefit from these insights. The committee is impressed with the work of the
Australian Centre for Family Business at Bond University, Professor Smyrnios and
his colleagues at RMIT, Dr Graves and Dr Thomas at the University of
Adelaide Business School and Professor Barrett at the University of Wollongong.
The committee recognises that the work of these academics will be greatly
enhanced if official data is collected.
9.12
The FBA emphasised in evidence to this inquiry that family business is
more than simply small business. The point is well taken. Indeed, the
committee's observation is that many FBA members are medium and large-sized
businesses. They are generally highly successful and attuned to the complex structural
and governance issues that face them as the owner-managers of a family business.
The contribution that many of these members made to this inquiry was
substantial.
9.13
On the other hand, the committee believes that many micro and small
family businesses are not aware and not engaged in issues that affect them as
family businesses. The committee received only one submission from a family
business owner that was not a member of the FBA.[2]
The Council of Small Business of Australia (COSBOA) told the committee that many
of its members equate family business with small business. COSBOA leaves the
representation of large family businesses to the FBA.[3]
The concern, therefore, is that many micro and small family businesses may not be
adequately informed about issues that relate specifically to their family business
structure, including the remuneration of family members, superannuation,
taxation matters and succession planning.
9.14
There does not currently appear to be a body that is genuinely
representative of all family businesses in Australia. Recommendations 3, 14,
15, 16, 18, 19 and 21 of this report refer to the need for consultation with
the family business sector. The question arises, however, as to which body
represents the sector's interests. To paraphrase a former United States
Secretary of State, 'who do I call if I want to call the family business
sector?'
9.15
The committee believes that at present, the groups best able to
participate in these consultations are the FBA and COSBOA. The FBA should consult
primarily on matters relating to section 113 of the Corporations Act
(recommendations 16 and 17), Division 83A (recommendation 18) and director's
duties and liabilities in the Corporations Act (recommendation 19). Recommendation
21 calls on the Reserve Bank of Australia to include representatives of the
family business sector on its annual small business panel in each state and
territory (chapter 8). COSBOA should have principal responsibility for identifying
these representatives.
9.16
The committee anticipates that, depending on the deliberations of the
proposed IDC, the representation of family businesses in Australia will broaden
and mature. It understands COSBOA's current position on family businesses given
the lack of a definition and official data on the family business sector. It is
likely that should this information become available, the sector will quickly
find representatives that reflect how policy makers identify the sector. In the
interim, however, the committee encourages COSBOA to give consideration to how
the findings of this report might enrich their current understanding of the
small and medium-sized business sector with a richer awareness of the family
elements of Australian businesses.
9.17
The committee also foresees that if official data is collected based on
a definition of family business, the needs of family businesses will be
articulated and more likely to be served. It may be, for instance, that the
government's Enterprise Connect program could be tailored to reflect the needs
of small and medium-sized family businesses identified in the official data.
There may be a need for Enterprise Connect to run the type of programs that are
currently being offered by the FBA.
9.18
A final note on the proposed IDC: while the committee believes it is
important that the IDC is established, it does not wish to pre-empt or pressure
its findings. As this report has emphasised, the key concern of the IDC should
be the agencies' policy need. Only after this discussion should a judgment be
made whether to collect data and if so, on what definition and in what form.
Ms Deborah
O'Neill MP
Chair
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