Family businesses - a scientific study

Tilburg University and PwC have joined forces in the Tilburg Institute for Family Business (TIFB). Geert Vervaeke (Tilburg University) and Diederik van Dommelen (PwC) explain.

Tilburg Institute for Family Business

Since September 2016, Tilburg University and PwC have joined forces in the Tilburg Institute for Family Business (TIFB). The aim is to strengthen knowledge generation about that group of companies, which are responsible for more than half the Netherlands’ gross national product. Why is interdisciplinary research and education about family businesses important? Geert Vervaeke (Tilburg University) and Diederik van Dommelen (PwC) explain.

Diederik van Dommelen (PwC) and Geert Vervaeke (Tilburg University)

"Our university has always been known for wanting not only to clarify phenomena but also to make the insights useful in actual practice."

Geert Vervaeke Tilburg University

Empirically-based research

The combination of PwC and Tilburg University has its origins in the personal background of Diederik van Dommelen, as a PwC partner responsible for the tax consultancy practice for private companies. He explains that PwC had long wanted to foster empirically-based research into family businesses. “I studied in Tilburg myself, and I attended lectures by the tax law professors Peter Essers and Inge van Vijfeijken. When I discussed our wishes with them, it soon become clear that they would like to collaborate. I got to know Geert Vervaeke (dean of the legal faculty of which the TIFB is part) after the first exploratory talks.”

Geert Vervaeke: "We think that Diederik did the right thing when he brought his plan to us in Tilburg. Our university has always been known for wanting not only to clarify phenomena but also to make the insights useful in actual practice. The university’s motto is ‘Understanding Society’, and I like to add ‘…so as to Advance Society’. Moreover, the province of North Brabant is also home to many prominent family businesses. Our vision isn’t just provincial, but that setting is very important for the TIFB to flourish.”

Sociological and psychological aspects

Geert Vervaeke adds: “Anyone who says that a family business is primarily a tax or legal construction is seriously out of touch with reality. The dynamics of a family business also have important sociological and psychological aspects that distinguish it from a non-family business, but so far those aspects have received little attention from researchers.”

Diederik van Dommelen says that in the case of family businesses the tax specialist, accountant, or lawyer often initially assumes the role of trusted adviser. “The greater the level of trust, the more questions come up that then require other expertise. As a trusted advisor, PwC has always linked up the various items on the ‘owner’s agenda’. But with scientific research we want to further strengthen the basis for our services, which are now largely based on practical experience.”

“Anyone who says that a family business is primarily a tax or legal construction is seriously out of touch with reality."

Geert Vervaeke Tilburg University

Diederik van Dommelen, as a PwC partner responsible for the tax consultancy practice for private companies.

PhD research on the UBO register

As an example, Diederik van Dommelen cites the UBO register, which must be in place in the Netherlands by 2020 as part of the EU’s anti-money laundering directive. That register lists the ultimate beneficial owners (“UBOs”) of legal entities.

He explains: “There’s a clash here between transparency and wish that wealthy individuals have for privacy so as to limit their vulnerability. There’s is something to be said for both positions. In our advice to family businesses and in our contacts with politicians about implementation of the UBO register, we attempt to put forward a balanced case in which those conflicting interests have been weighed up. That’s why I’m particularly pleased that the TIFB has started a PhD research project involving assessment of the UBO legislation in the light of the right to privacy.”

Investigating the dynamics of family businesses

Another PhD research project deals with the impact of stress events within the family on the company. For example, what consequences does the unexpected death of the director/major shareholder have and how can a family business be prepared for it? The special dynamics of family businesses, in which family relationships and ownership are interwoven, can give rise to all kinds of sociological research.

Vervaeke: “Can we objectify relationships between family members and their effects on the business in order to arrive at a diagnostic framework? And what are the aspects for which we can compare potential CEOs from inside and outside the family so as to predict their success? There are still an enormous number of insights to be gained in this area that will enable family businesses and their advisors to move forward.”

"There are still an enormous number of insights to be gained in this area that will enable family businesses and their advisors to move forward.”

Geert Vervaeke Tilburg University

Geert Vervaeke, dean of the legal faculty of which the TIFB is part.

Complete independence

PwC is “feeding” the TIFB with issues facing some of its clients. Members of the Advisory Board who are involved in family businesses are also contributing ideas: Richard Jongste, Rogier van Meeuwen, Gianne Hurks, Henriëtte Westland, Ronald Goedmakers, Co de Heus, and Kommer Damen. “The Tilburg research group will then decide which issues we can work on,” says Geert Vervaeke. “Inge van Vijfeijken, our professor of tax law, will play a central role, and she coordinates the collaboration between the economics and sociology faculties. The final direction of research will be determined here in Tilburg, completely independently. Our sponsor PwC would like to see interim results, but without influencing the scientific integrity of the institute. Understandably enough, PwC would prefer not to have to wait six years for the results. Our task is therefore to ‘slice up the research like a sausage’, as we say in Flanders, and divide it into manageable chunks.”

Data, contacts and experience

In addition to ideas and money, Diederik van Dommelen explains, PwC will contribute data to the TIFB, “anonymised and to the extent permitted by the General Data Protection Regulation. For example, we are now looking to see whether we can share the anonymised database that we use as the basis for PwC’s ‘Global Family Business Survey’. We’ll also share our experience and, if desired, we can establish contacts between researchers and family businesses.”

Geert Vervaeke adds enthusiastically that “PwC’s input is for us a source that we can’t otherwise draw on. Just think of all the practical experience that Diederik and his colleagues have gained! At the moment, all that experience is in their individual heads, but we’re now attempting to fish it out of those heads as an inspiration for our research work. For us, PwC is opening up the door to what family businesses do in actual practice.”

"Attention to the position of supervisory directors within family businesses is especially important because balancing involvement and critical distance needs to be taken very seriously."

Diederik van Dommelen PwC

Teaching programme

In addition to research, the TIFB also offers a teaching programme. It has post-Master’s degree courses on business succession and supervisory directors within family businesses. Geert Vervaeke explains: “A lot of the students are members of business families, advisers, or people on their way to the position of a supervisory director. They all have strong intrinsic motivation as regards the subject.”

According to Diederik van Dommelen, attention to the position of supervisory directors within family businesses is especially important because balancing involvement and critical distance needs to be taken very seriously, especially when a supervisory director is a member of the family. “It’s not uncommon for a supervisory director to have a strong advisory voice as a confidant of the director/major shareholder. How does he or she then carry out his/her supervisory duties, which involve critically questioning whether that same director/major shareholder is doing the right things?”

Business succession facilities

When asked for a final example of an issue that will benefit from scientific research, Diederik van Dommelen mentions fiscal business succession facilities. “The government quite often questions the exemption from inheritance tax in the event of business succession. The criticism focuses mainly on a (too) large advantage compared to other inherited assets, but there’s also a budgetary perspective. Family businesses consider it relevant for the arrangements to be retained, for one thing so as to maintain a level playing field with non-family businesses, which are not required to pay inheritance tax from the enterprise’s assets every 30 years. The PhD research on this issue will help lift the discussion onto a higher plane.”

Geert Vervaeke (Tilburg University) and Diederik van Dommelen (PwC)

"Family businesses are of great importance to ‘The Netherlands Ltd’, but the challenges they face are great too. In that respect, the cooperation within the TIFB fits in seamlessly with PwC’s purpose."

Diederik van Dommelen PwC

Don't moan, just get on with it

Diederik van Dommelen concludes by saying that there is all the more need for research on family businesses because the families themselves prefer to stay out of the spotlight: “That means that the typical issues don’t always receive the attention they deserve.” Geert Vervaeke agrees: ”A business family won’t quickly contact the press to defend its interests. ‘Don’t moan, just get on with it’ – that’s the traditional attitude. So let’s make these matters the subject of scientific research.” Diederik van Dommelen adds: “In addition to being necessary from a scientific perspective, setting up the TIFB amounts to recognition of the features that make family businesses so special. They are of great importance to ‘The Netherlands Ltd’, but the challenges they face are great too. In that respect, the cooperation within the TIFB fits in seamlessly with PwC’s purpose: building trust in society and solve important problems. We are helping family businesses identify challenges and we are proposing solutions to those problems. And through research and teaching we’re also reinforcing the important socio-economic role that family businesses play in their region.”

Contact us

Diederik van Dommelen

Diederik van Dommelen

Partner, PwC Netherlands

Tel: +31 (0)88 792 39 55

Follow us