This paper investigates the influence of family control on the quality of labor relations. Using French workplace-level data, we find that family firms experience less frequent and less intense labor conflicts. Moreover, family involvement tends to offset the negative effect of labor disputes on corporate performance. We examine whether specific family patterns are conducive to better labor relations. We distinguish active from passive family control, eponymous from non-eponymous family businesses, and break down family firms into founder-controlled and descendant-controlled companies. It appears that the benefits of family control are not attributable to a given type of family firm. These findings suggest that peaceful labor relationships are a peculiar attribute that families generally bring to corporations and extend our understanding of the “family effect” on organizational performance.
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Among the best known studies are La Porta et al. (1999), Claessens et al. (2000), and Faccio and Lang (2002), which respectively examine samples of 540 listed companies from 27 countries, 2980 listed corporations from nine Asian countries, and 5232 European public firms in 13 countries. They document a strong prevalence of family ownership (30.0, 38.3 and 44.3 %, respectively).
According to Fossum (2005, p. 1), “labor relations is the set of processes and activities that unions and employers develop and use to clarify, manage, reduce, and resolve conflicts between employees and their representatives while accommodating the various goals of each.”
The socioemotional attachment may emerge from an early socialization process and involvement in the business. For example, Françoise Bettencourt-Meyers, the granddaughter of Eugène Schueller (L’Oréal’s founder), remembers that she attended many events taking place in L’Oréal’s plants during her childhood (M le magazine du Monde, Friday, March 9th, 2012).
As emphasized by Gelfand et al. (2007), a key aspect of the paternalistic relationship is that (family) leaders guide professional and personal lives of subordinates and in exchange expect loyalty. Among the most striking examples of paternalism is Schneider Electric, a French manufacturer of equipment for electrical distribution, industrial control and automation. In 1836, the Schneider brothers took over two steel foundries located in Le Creusot and immediately established employee programs to create a community for the plant employees’ families. Several health and welfare associations were set up for the workers, and a dedicated school was opened in 1856. A recent report on Schneider’s corporate history (see “Schneider Electric, 170 years of history”, http://www.schneider-electric.com/) mentions that “In 1872, […] half of [Le Creusot’s population] worked directly for Schneider. The plant offered stable employment and a firm yet paternalistic atmosphere that attracted entire families, generation after generation.” As of December 31, 2014, Schneider Electric ranked 11th among the largest French firms by market capitalization.
See: http://travail-emploi.gouv.fr/. We are grateful to DARES for providing the REPONSE survey dataset.
The survey is conducted among a sample of workplaces in the private and semi-public sectors (excluding agriculture and administration). As emphasized in a detailed presentation of the survey (see: http://travail-emploi.gouv.fr/), the sample is nationally representative in terms of workplaces’ size and business sectors. The surveyed workplaces are randomly drawn from a national directory. It should also be noted that the surveyed workplaces are distributed throughout the French territory.
Diane is a database published by Bureau Van Dijk that provides a broad coverage of French companies.
We were not able to collect ownership and governance variables for private firms.
These statistics are available upon request.
Conflicts index is an integer variable (that lies between 0 and 8) that could be estimated with an ordered probit regression. As a robustness check, we estimate such a model and find similar results. For the sake of simplicity, we report standard OLS estimations.
The power distance “indicates the extent to which a society accepts the fact that power in institutions and organizations is distributed unequally.” In countries with small power distance, superiors (subordinates) consider subordinates (superiors) to be “people like me” (Hofstede 1980b, pp. 45–46).
Complete tables are available from the authors.
Works councils is estimated via a negative binomial regression. When estimating models with dependent discrete variables, some authors use Poisson regressions. However, it is not suited to our data since statistical tests suggest that the number of works council meetings is overly dispersed.
We rely on the rankings provided by the Financial Times (“The World’s Most Respected Companies”), Great Place to Work For Institute, Journal du Net and TNS Sofres. 81 (out of 390) unique listed companies in our sample are ranked among such best companies to work for.
In France, the disclosure threshold is 5 %. To the extent that the majority of the sample workplaces are affiliated to French listed firms, we rely on this threshold to define a blockholder.
The works council receives a financial endowment which represents at least 0.2 % of the gross wage bill, but the figure is substantially larger for some companies. See Appendix 3 for further details.
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We thank Khaled Abdou, Mary Brooksbank, Patricia Charléty, François Degeorge, Leila Elgaaïed-Gambier, Zsuzsanna Fluck, Edith Ginglinger, Fabian Gouret, Luzi Hail, Issam Hallak, Jayant Kale, Hubert de La Bruslerie, William Megginson, Magali Noël-Linnemer, Patrick Sentis, and participants at the 2010 Midwest Finance Association conference, the 2010 Financial Management Association meetings (Hamburg and New-York), the 2010 European Financial Management Association conference, Les Rencontres des Chaires FBF (Paris, 2011), the 2013 Conférence Internationale de Gouvernance, and the 2013 conference of the Multinational Finance Society for comments and discussions. This research has been conducted as part of the project Labex MME-DII (ANR11-LBX-0023-01). The financial support of the Fédération Bancaire Française Chair in Corporate Finance is gratefully acknowledged. This paper’s findings, interpretations, and conclusions are entirely those of the authors and do not represent the views of the Fédération Bancaire Française.
Appendix 1: Structure of Matched Workplace-Controlling Firm Dataset
This appendix presents the structure of the dataset. Each workplace is affiliated to a public firm via a unique and time-invariant identifier, the Système d’Identification du Répertoire des ENtreprises (SIREN) code. We require that the public company holds at least 95 % of the subsidiary to which the workplace belongs.
Appendix 2: Variable Definitions
See Table 8.
Appendix 3: Institutional Background
This appendix briefly describes the French legal framework for labor relations. Labor relations in France are governed by labor laws (Code du travail) and collective agreements (conventions collectives) in each industry.
In France, the right to strike was recognized in the preamble to the Constitution of October 27, 1946. There is little State regulation of private sector strike activity in France. The right to strike is an individual right and not a union prerogative: strikes by a minority of employees (at least two) without advance notice are lawful if they concern demands of professional order (e.g., wage or job cuts). The employment contract of the strikers is suspended for the duration of the conflict. Then, strike days may be partially or fully paid. In practice, such a payment often becomes a separate demand and a major element during negotiations to end the strike.
Works councils have been mandatory in France since 1945 for companies with more than 50 employees. These institutions are collegiate bodies composed of employees, trade union representatives, and the senior manager of the company who chairs the council. The works council meets at least once a month when the firm employs more than 150 workers (once every two months otherwise). The council has information and consultation rights on working hours and conditions (for instance, introduction of new technology, compensation, training, and employment), redundancies for economic reasons and protected employee layoffs. The council is kept informed about the economic and financial performance of the firm. It should be noted that works councils are in charge of social and cultural activities (trips, Christmas parties, etc.) in which the employees, their families, and the retirees of the company take part (see for instance the Michelin’s works council website on http://www.cemichelin.fr/ for a description of such activities). The works council is financed by a subsidy from the company which amounts to at least 0.2 percent of the gross wage bill.
Worker representation is a basic principle of French labor law. Hence, labor representatives (union delegates, members of the works council) as well as pregnant women benefit from specific protection. An employer wishing to terminate the contract of a protected employee must obtain the permission from the works council and employment authorities.
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Belot, F., Waxin, T. Labor Conflicts in French Workplaces: Does (the Type of) Family Control Matter?. J Bus Ethics 146, 591–617 (2017). https://doi.org/10.1007/s10551-015-2937-1
- Family firms
- Family management
- Family generations
- Labor relations