FAAC: governance from on high

Generational transition, as we all know, is a very delicate moment in the history of family-run firms, more complicated still if the leader of the company leaves no heirs. But what if company ownership, instead of being transferred to a physical person, is handed over to a centuries-old institution? And if the mission of this institution is anything but pursuing profits in a capitalistic sense? It becomes a challenge of biblical proportions.

The question isn’t a purely hypothetical one – It’s what actually happened recently at FAAC. This “pocket-sized multinational” was founded in Bologna in 1965 by Giuseppe Manini, a brilliant entrepreneur. His brainchild was to pool the know-how of his city’s industrial district – from mechanics to electro-mechanics to hydraulics – to create a new product: a hydraulic-powered mechanism to open and close gates remotely. From that moment on the company never stopped growing, in Italy and later internationally, gradually expanding into related product lines such as automated traffic/parking bollards and automatic turnstiles.

The sudden death of Giuseppe Manini in 1991 was the first major turning point in the history of FAAC. With the passing of the founder/entrepreneur, whose genius was matched only by his penchant for micromanagement, the company needed to rethink the relationship between ownership and management. FAAC’s new president, Michelangelo Manini (Giuseppe’s son) seemed to be well-aware of this. He decided to adopt a strategic approach leading toward increasing internationalization; as for the decision-making process and ordinary operations, these he delegated more and more to the company’s competent, expert management team. This managerialization of FAAC intensified in the early 2000s, to the point where by the end of the decade, corporate governance resembled a public company more than a family firm.

But the true test of the solidity of the company’s internal structure was still to come. In 2012 Michelangelo Manini died without leaving any direct heirs. In his will, he bequeathed all his wealth – estimated at 1.7 billion euro, including a majority share (66%) in FAAC – to a single beneficiary: the Archdiocese of Bologna. This startling decision led to a bitter legal battle in a court case brought by Manini’s relatives. While awaiting a final ruling, Manini’s assets were frozen, and the legal custodian named by the court wasted no time in clashing with company management. Even the Bologna Archdiocese itself at times seemed to struggle to come to a consensus on whether or not the Church should really own a multinational company, founded and functioning according to the tenets of capitalism. Yet Cardinal Carlo Caffarra appeared determined to proceed, going so far as to appoint a representative to the Board of Directors. In the meantime, the executive management team at FAAC made sure the business continued running smoothly, and actually achieved consistently positive results, despite the lack of a clear direction from ownership and a global context marred by the after-effects of the economic crisis.

It took two years to resolve the situation. In the end, the Curia not only reacquired full control of the majority shares bequeathed by Manini, but upped the ante by buying the remaining 34% from the French Group Somfy. At this point, with the Archdiocese holding 100% of the share capital, the entire governance of the company was completely restructured. A trust was established to hold the bare ownership, the shares and voting rights of the company. The Archdiocese for its part was the sole beneficiary and usufructuary of the trust, and maintained the right of veto on certain key decisions. This solution made it possible to create a clear separation between ownership and management, while preserving the link between the company and the community. What’s more, this was a way to reconcile corporate needs with regard to investments and profits with the social values of the church.

As for this last point in particular, the strategy was clear: profits must be maximized, in keeping a with capitalist approach, but they would be rechanneled into investments in the company (acquisitions yes, but also research and development, while paying special attention to the needs of FAAC employees). Instead the Archdiocese’s dividends would be used to fund social projects via the Catholic charity Caritas to benefit families, schools, and the labor market.

Caffarra was succeeded in October 2015 by Matteo Maria Zuppi. According to the new Archbishop of Bologna, the governance of FAAC had to follow the path paved years before by Adriano Olivetti: developing a strong corporate welfare system in-house, in the spirit of implementing innovative forms of corporate social responsibility. At the same time, recognizing the need to navigate the oceans of global competition, the top management team would remain at the helm of the company. And recent results, from 2015 till today, seem to confirm this strategic course charted by the archbishop.

• When family firms don’t prepare for generational transitions, this can create confusion and uncertainty at the top, and potentially generate extremely negative fallout on the life of the company. But a competent and knowledgeable top management team can ensure the organization runs efficiently and turns a profit even in these times of transition.
  
  

• While evolving from startup to multinational, growth must always go hand in hand with a continual re-evaluation of the organizational structure and the governance framework. What’s more, the company must become more and more open to skills and perspectives from outside ownership for the necessary managerial competencies.
  
  

• When governance has a solid design, with a clear separation between ownership and management, this can help attenuate, to some extent, the conflict between an owner institution that is not profit-orientated (such as the Catholic Church) and the need to comply with the rules of capitalistic competition in an increasingly global context.