The Irresistible Power of Marriage. At Home and in a Company

FAMILY BUSINESSES LED BY HUSBAND AND WIFE PERFORM BETTER THAN THOSE WITH DIFFERENT LEADERSHIP POSITIONS. THIS WAS DEMONSTRATED BY A BOCCONI STUDY THAT LASTED 12 YEARS

by Mario Daniele Amore, Dept. of Management and Technology

Married couples make a formidable team when appointed to the top of a family business. An analysis of Italian family firms along 12 years, conducted with Danny Miller, Isabelle Le Breton-Miller and Guido Corbetta, shows that firms led by married couples (as co-CEOs or CEO and Executive Chairman) outperform all the family and non-family combinations of leadership, including lone founders, multiple founders, father/son, mother/daughter, brothers, sisters and cousins or in-laws. The firms led by married couples in our sample recorded returns on asset one percentage point higher than the average of around 5.3%, which represents a 19% improvement on the rest.
 
Exploring the dynamics behind this result, we show that firm performance improves when firms appoint a couple to the top position, but that finding reverses when firms abandon such a leadership model. Moreover, leadership by couples works especially well when the firm operates in industries that are knowledge-intensive and industries where networks and social capital are crucial for success.
 
What explains the superior performance ability of family firms led by married couples? Our argument is that the alignment of long-run interests and incentives by married leaders can make the firm more resilient to turbulent times and improve its ability to nurture a corporate culture of healthy relationships with stakeholders. In line with these conjectures, we show that firms led by married couples are better able to invest during periods of uncertainty. Moreover, they benefit from lower labor costs in parallel with a lower risk of layoffs in the wave of industry shocks.
 
Whether families can promote or obstacle firm performance is a crucial question given the predominance of family firms in the corporate landscape. A general implication of our study is that the presence of alignment devices that make shared decision-making more harmonious within the family while also spurring long-run incentives are crucial for family firms to prosper.
 
Understanding whether family members are more successful than professionals in running the business has been fiercely debated by academics and policy-makers. On the one hand, family leaders tend to have aligned interests with those of the owners, which minimize the occurrence of conflicts between shareholders and managers. On the other hand, family leaders may be drawn from smaller talent pools as compared to the entire managerial labor market. Family leadership by multiple family members may broaden the set of skills and competencies at the apex of the company, but at the same time paves the way for conflicts, e.g. as siblings compete for rent and power for their separate family branches.
 
We argue that leadership by couples can alleviate the disadvantages of family leadership while benefiting from common interests and incentives to manage for the long-run. A more skeptical view could suggest that marriage ties at the top of the company will provide a transmission channel through which family conflicts may feedback into the firm’s decision-making. But indeed, multiple leadership by couples mirrors the fact that two partners have discovered important aspects of compatibility and have made the freely elected commitment to share both their lives and careers. Leadership by couples may thus feature benefits in terms of common understanding, better coordination and greater information sharing. Moreover, the interests of married couples are often well-aligned and should thus display a lower risk of conflicts as compared to other forms of leadership. Finally, married couples can benefit from skill complementarity and bring to the business a broader set of experiences and network relationships. Our results highlight the material relevance of these advantages for the financial performance of family firms.