Family Owned Businesses: How Large International Firms Endure

The only good term for my politics is anarchist, meaning no+king,  a term the reflects the world in which there is no king, no hegemon.  Here is another example of the many times people are working without a government:

The constellation of firms around the trading companies were linked by multiple
institutional and contractual modes, with flows of managerial, financial, and trading relationships among those. The business groups possessed advantages related to imperfections in capital, labor, and product markets and in the area of property rights enforcement. There were numerous conflicts of interest and potential for opportunist behavior, but in practice rent-seeking was restrained. The external relationships surrounding the trading companies were also important elements of their architecture. These networks often relied on trust rather than contracts and were extremely durable. British merchants emerged from hubs such as London, Liverpool, and Glasgow and clustered in hubs overseas, and this provided one support for the high trust levels which facilitated such networks. Long-term relationships with banks provided a source of credit for routine operations, and support during crises. (Jones, 2000; Jones and Colpan, 2010)

Another way of looking at these same sets of facts is that bad credit drove out the good.  While until the changes mentioned below, these world trade firms had no problem financing from their own specific arrnagements, when EZ malcredit became available they changed their business structures and registrations to take advantage of this ersatz "money."  Why would anyone pay in silver and gold when they could finance with the lying promise of bankers, albeit bankers backed by sovereign states?  They wouldn't.

For the most part the basic organizational pattern of the network form of business groups
as they had developed by the early twentieth century remained in place until at least the 1960s.
The creation of new affiliate firms to undertake non-trading activities continued. After 1929, British exchange controls on investments outside the Sterling Area as well as the perceived risks of international investment effectively ended the flotation of new firms on the British capital markets. However well before then the trading companies had begun to make more use of locally registered firms or other types of institutional arrangement. The growing burden of British taxation on companies whose profits were earned largely abroad after World War 1 was initially an important consideration, and this led to the registration of several affiliated firms being shifted. It was really only in the 1960s that changes to this organizational form began to occur as improvements in corporate reporting and the emergence of organized capital markets in many countries meant that investors no longer needed the brand of a British trading company to guarantee that their savings would be “safe”. Indeed, complex groups with cross-shareholdings and internal transfers of commission and fees within the group looked less attractive as shareholders changed from being atomistic individuals to institutional investors (in Britain) or powerful business elites (in Asia and elsewhere). (Jones 2000)

Then the fellow who authored this article gets it exactly right:

The final and the ultimate arbiter of the fate of the diversified business groups, however,
was, however, the British capital markets. The capital markets which had made the creation of the diversified business groups possible before 1914 proved their nemesis from the 1980s. It was the declining share price of the publicly quoted firms which led to their ultimate demise as diversified trading companies. This was not due as a whole to poor performance, but rather of changed perceptions and priorities. The changed nature of British equity holders, which was different from before 1914 as individuals had been largely replaced by institutional investors such as investment banks and pension funds by the 1980s, played a major role in that end.
(Cheffins, 2008) While the individual shareholders before 1914—and indeed arguably through to the 1970s —were passive and often long-term holders of stock, the institutional investors that replaced them later on viewed shares increasingly as short-term investment vehicles. They were responsible to the owners of the funds that they invested, and as such had a duty to maximize investment returns. Consequently the main preoccupation of the institutions was short-term financial performance and share prices. Institutional investors held their own diversified portfolios, and since the 1980s preferred individual firms to focus on their “core” areas enabling their performance and prospects to be more efficiently monitored. (Jones 2000, Jones 2005b)

I have occasion to see many school children.  And boys and girls alike, the most common theme when drawing in free time is zombies.  Out of the mouths of babes.  They see what is going on, the undead, the zombie company.

It is not the anarchistic trading company model that is over, it is the tally checkers who count up the claims made in a fraudulent, consfiscatory, ethnic cleanser socio-political system, a system that has already died, already stinks, and awaits a final rejection of a remnant.

Next, is this not contradictory? No!

The ultimate family control of Swire’s and Jardine Matheson ensured their survival. Both
firms were sheltered from hostile host governmental pressures for localization during the 1980s, as the laissez-faire British colonial government in Hong Kong shared none of the protectionist and nationalistic sentiments of its neighbors in South Korea and Taiwan. The controlling families also took steps to consolidate their ownership of their multiple affiliates in response to occasional attempts by outside groups to take large equity stakes. As early as 1974 Swire placed most of its Hong Kong affiliates into a partly owned but publicly quoted (in Hong Kong) holding company,Swire Pacific, which in turn held equity in the principal affiliates, including Cathay Pacific and Swire Properties. At that time John Swire & Sons directly held 50 per cent of the China Navigation Company, the major shipping subsidiary which was British-registered, and in 1976 the firm acquired the remaining 50 per cent of the equity. Most of the other affiliates remained partly owned, different classes of shareholding meaning that full control remained in the hands of John Swire & Sons, itself still wholly owned by the founding families. John Swire & Sons employed 122,000 persons in 2014.

Family control saved these businesses.  Keep that in mind, roll with the punches.

Yes, as funny money came in and inflation followed, companies that would have died were invogirated by bad money, which crowded out good.  The Catillon effect, in inflation, says those closer to the currency issuer gets marginal advantage, wide enough to dominate.  Thus, politics becomes the driver of the economy, not customer needs.

During the 1960s the tightly regulated British financial system began to be liberalized, enabling a new range of funding opportunities for acquisitions as the subsequent decade of oil price hikes and extensive industrial strikes weakened long-established firms. They were also weakened by high inflation, while rapidly rising price levels also facilitated the claims of conglomerates to be able to turn around poorly performing firms, as nominal revenues rose sharply.

The smart thing is to know what once was, and get back to that process as the hegemons gnny money is exposed.

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