• Article
  • Board Dynamics & Ethical Decision Making
  • Codes & Regulations
  • Other
Organisation type
  • Family Business
  • Listed Company
  • SME


Family businesses – private and public – count amongst the largest, most successful and enduring organisations in the world. In the US, notorious examples include Walmart Inc., Ford Motor Co., Oracle Corporation, Nike Inc., and Berkshire Hathaway Inc.. In Europe, the list includes Volkswagen AG, Exor N.V., Roche Holding AG, IKEA Group, ABInBev, Bekaert Group, and Colruyt Group. The contribution of family businesses to the European economy is tremendous. According to the EFB they account for about 50% of GDP and 60 million jobs in the private sector.

In Portugal, there are also exceptional family businesses that count amongst the oldest and most successful in the country. For example, the food retailer Jeronimo Martins SGPS, SA controlled by the Soares dos Santos family has existed for 225 years, and turns over nearly € 20 billion. The conglomerate Grupo SONAE SGPS, SA with interests spanning food and non-food retail, telecoms, manufacturing, real estate and financial services has very successfully survived the iconic founder Belmiro de Azevedo, turning over nearly € 7 billion – it really creates lasting value for its stakeholders. For yet another example, Corticeira Amorim SGPS, SA controlled by the family with the same name, has just turned 150 years and is world-leader in cork products, turning over € 800 million and leading innovation in the sector. Portuguese examples like these exist in disparate sectors such as pharma, construction, manufacturing and technology. One obvious question is: how does corporate governance provide the foundations for the long-lasting, extraordinary success of these family firms?

In 2018-2020 I had the opportunity to sit down and interview in-depth over 34 directors, chairmen, CEOs and other stakeholders in Portugal both from family-listed, private and non-family listed entities. The results showed that family firms in Portugal distinctly use a highly effective stewardship approach to developing managerial talent. The extraordinary finding was that while these firms still had a strong compliance in terms of the local governance code and had substantial procedural governance, where governance really added sustainable value was in the way it enabled the development of a unique culture via the strategic long-term development of the companies’ managerial talent.

Tone from the Top – the Chair of the Board as the Chief People Officer

All of these firms have extremely strong cultures based on principles and values that have passed on from generation to generation and into the management team by the controlling family. The board chair – typically from the controlling family – is described as an inspirational leader, guardian of values and principles and galvanizer of the board and executive team for common objectives. The chair is described as someone that profoundly understands the sector as well as the business and its key people and is engaged almost like a full timer, albeit not necessarily with executive responsibilities.  The profound knowledge of operations and principal stakeholders enables the chair a deep understanding of the chief risks and tensions that beset the business, as well as of the opportunities, allowing him/her to be a highly effective steward and vigilant of the strategic direction, business performance and executive conduct. In many instances the chair emerged as the ultimate Chief People Officer that really ensures that the right trusted and talented people are in the right places. Some 8 years ago, one iconic c of a very large Portuguese family firm was stepping down as chair of the board. He told me: “I have handed over everything over time. The only thing I am reluctant to handover and I still have responsibility for is the people. They are the most important”. The chair was someone that liked to informally invite many of the executives – not just from the top team – for one to ones over lunch. He was described as an excellent conversationalist. With different styles – many chairs of family firms in Portugal converge in this idea of having a central responsibility around people. Not surprisingly most of these firms have a unique set of practices to manage their top human capital.

The Nominations and Remuneration committee(s)

Known as the Cinderella committee in the UK, the nominations committee is possibly the least researched and the one that has had the least attention from regulators. In Portugal, a recent recommendation by the regulator requires listed companies to have a committee staffed with independent directors for the nomination of executive and non-executive roles. This recommendation in businesses has been met with particular resistance, especially by some family firms. One company secretary, explained:

One of the recommendations of the code, is to create a nomination committee for executive directors which is not viable for many firms. Never the Chairman and/or CEO will want to delegate this to a committee. It is too important.

Portuguese family business groups place tremendous value on these committees, as they typically offer “long-term careers and prospects” to their managerial talent. Senior management in these firms are often composed with individuals who have made their way up inside the company over the course of 20 or more years. There is typically a lot of interchangeability with promising talent rotating throughout different departments and business units; It is key that talent also gets to sit on subsidiary boards. This is strategically used to create deep trust and loyalty, foster the values and principles that form the company culture, but also as a way of managing business performance. As a family affiliated director put it:

Obviously the secret is also in how the companies themselves are able to identify those good managers. Those that have proven themselves technically. But then the manager gets to a level where he/she has demonstrated all that is required. Then it is more about qualitative variables such as character, shared values and behaviours.

As CEO of large construction company explained: “[the development of managerial talent] is a mechanism to generate trust” throughout the company, and is in itself a fundamental instrument of governance that goes deep into the organisation. The alignment with and accountability of the executive are realised through the nominations and/or remuneration committees (some companies have them joined up).

For some people, the two or three layers below the CEO and top team are critical components of governance and are no doubt critical do develop the culture of resilience that can be immensely valuable in a crisis. A Portuguese financial services company explained how this was a critical element for the company to recover from the 2008 Global Financial Crisis and a succession of governance challenges:

…I must tell you that [the organisation] only survived everything that it has been through because there was, in its second and third lines, a preservation culture very cohesive of what each one of us understood was the common organisation.

Culture Eats Compliance for Breakfast

Time and again we have seen that compliance with codes of good governance is no guarantee that sound corporate governance exists. One needs only to recall the Carillion scandal in the UK. The company had 71% of independent directors on the board and its corporate governance report signed for by the Chairman proudly exhibited 100% compliance with the demanding UK Corporate Governance Code.  A culture of complacency and lack of challenge and rigour crept in and no amount of compliance saved the company from going under.

Of course, it is important to have a good compliance function – Investors and regulators love it and they need to have a level of assurance. Compliance may also detect some procedural mistakes. But nothing beats having the right culture, via the development of strong managerial talent throughout the business aligned with clear principles and values, and sharing the success of the business. Peter Drucker is credited with the much-debated expression “Culture eats strategy for breakfast”, and I have no doubts that compliance is also on the menu.

In 2018 the UK Corporate Governance Code has included the oversight of corporate culture as a key responsibility of the board of directors. For many directors, this is understood as another “task” to do within their governance responsibilities. It is not. It is a completely new way to look into the governance challenge – it is about ensuring that the human side of governance is properly recognised not just at the very top, but critically throughout different layers of the organisation. In this sense, governance is no longer a construct at the top that depicts the relations between executives, the board and shareholders. It is rather something that permeates the very mindset of management throughout the company. In other words, it is the recognition of the relationship between corporate governance and organisational development. 

Successful family firms have learned how to develop and sustain a winning culture that is in itself an organic governance mechanism. They do this through outstanding managerial talent development that emanates right from board leadership. The nomination and/or remuneration committees are given a critical strategic importance, have a wide remit and are staffed with people who know the business extremely well, notwithstanding the presence of independent members in some cases.

Key questions for boards to consider:

  • How much time does your board spend on compliance versus people topics?
  • Who sets the tone for values, principles and behaviour?
  • Is the oversight of company culture a key board agenda item?
  • How strategically important are the nominations and/or remunerations committee ?
  • What practices are in place to strategically develop managerial talent?
Felipe Morais


Dr Filipe Morais is a Lecturer in Governance and Reputation at Henley Business School, University of Reading, UK and the Chairman of Risk Insights Independent Ratings Committee for South Africa

Filipe regularly produces impactful research commissioned by a variety of private, public and third sector organisations in the UK, US, Portugal and other European countries. He is the co-author of the books “The Independent Director in Society” and the forthcoming “Handbook of Corporate Governance and ESG”, and numerous other book chapters, articles, reports and case studies.

Dr Filipe is the Programme Director for Henley’s MSc in Management for Future Leaders, for corporate clients that include Lloyds Banking Group, Cabinet Office, UK Ministry of Justice, the NHS, Post Office, and other large employers. He teaches corporate governance, corporate responsibility and ethics and strategic management topics in various programmes in and outside Henley, including INSEAD, Porto Business School, Universita Degli Studi di Padova and Lisbon Law School.

Filipe is also Advisory Board Member to the practitioner-based Governance Magazine (UK) and sits on the International Editorial Board of California Management Review and on the editorial board of the Journal of Business Governance and Ethics.

He advises companies on a range of board governance and strategic leadership topics. 

Outside academia, Filipe worked for over 10 years in increasingly senior HR and general management positions for the automotive, semiconductor, health and higher education industries in the UK and Portugal.