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Running in the family

Looking for possible cooperation with the government, the Association of Responsible Family Enterprises in Hungary (FBN-H) forwarded a proposal at the end of March. In this, it said that if the government supported the establishment of new workplaces with certain tax exemptions, family enterprises in Hungary would create at least one job each until the end of next year, resulting in at least 100,000 new workplaces.

“Creating a new workplace is an investment of millions of forints, be it the state, a multinational company or an enterprise that is doing it,” said László Rudas, president of FBN-H, at a conference last week. “Such a program could significantly contribute to whitening the economy.”

The conference, titled “Family Business Bridges,” was organized by FBN-H and European Family Businesses-GEEF around two key themes: family business-friendly policies in EU member states, and succession planning and implementation in family businesses.

In order to significantly improve the chances of survival for family businesses undergoing the first generation shift from the founders to the second generation, efforts have to be made in several areas, the association said at the conference.

Such area include the need for risk mitigation by family business stakeholders (primarily owners, their families and policy makers); providing networking opportunities for family businesses, as networking may play a significant part in the regional expansion of local family business; and the support of family business-friendly amendments to public policy in joint regional efforts.

Due to the timely nature of these issues, the FBN-H proposed to launch the Family Business Bridges Central and Eastern Europe (FBN CEE) initiative. This, set up by associations of responsible medium-sized and large family businesses from the region, is a formal co-presidential cooperation forum where national association leaders provide information to each other, propose and share programs and initiatives.

Guarantee for growth

The Hungarian economy and society cannot be successful without family enterprises, said Deputy Prime Minister Zsolt Semjén, the conference’s patron. Families and family business should be supported by every legal means, he added.

“These businesses are guarantees for economic growth, to a greater extent than any other type of businesses, as they are locally bound; therefore, supporting them is a national interest,” the deputy PM noted.

As one of the changes already implemented, he mentioned the elimination of the inheritance tax. “The inheritance tax imposed a huge burden on family businesses when it came to a generation shift,” Semjén said. “Hungary needs a strong middle class, and family businesses play a key role in establishing that.”

In a reaction to the proposal by the FBN-H (dubbed Bölcsőprogram), Semjén said that the government is ready to discuss the initiative and will pay special attention to the program, “especially in the case of career starters and part-time jobs.”

László Szöllősi, deputy state secretary at the National Economy Ministry, added that although family enterprises have not received state support so far, this will change in the future as the Bölcsőprogram fits in with the government’s medium and long-term plans.

Generation gap

Family enterprises are major and sustainable contributors to the economy and society in terms of GDP, employment and innovation. It is now approaching the time for the owners of most family enterprises founded in the early 1990s to pass the baton to the next generation – but the process, according to international experience, is not always smooth.

In light of the statistics from the western world, which indicate that only one out of every three successful enterprises survives a generation shift, this carries a huge threat to the economic and social future of the region.

“The biggest problem is that most family enterprises in Hungary are led by the owner, and the culture of integrating the next generation into leadership is not so developed,” Tamás Kürti, vice president of FBN-H, pointed out.

“The majority of family business owners in Hungary are uncertain about the succession process. Strangely, in the Central and Eastern European region, the most accepted concept of business management is based on strength and charisma,” Kürti added.