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Ideal owners: Always long-term, always impatient

Ideal owners: Always long-term, always impatient

Nordea On Your Mind in "The ideal owners" set out to determine how different ownership structures affect corporate value creation. In this interview from the report, Caroline Berg owner representative and chair of the board of Axel Johnson AB shares the family owner perspective.

Nordea On Your Mind is the flagship publication of Nordea Investment Banking’s Thematics team, which produces research for large corporate and institutional clients. The research does not contain investment advice and typically covers topics of a strategic and long-term nature, which can affect corporate financial performance.

Top decision makers at Nordea’s large clients across the Nordic region receive Nordea On Your Mind around eight times per year. The publication’s themes vary widely, and many are selected from suggestions by clients. Examples of covered topics include artificial intelligence, wage inflation, M&A, e-commerce, income inequality, ESG, cybersecurity and corporate leverage.

In the latest issue of Nordea On Your Mind, “The ideal owners“, Caroline Berg (CB), a fifth-generation family owner representative and chair of the board of Axel Johnson AB, talks to Nordea’s Johan Trocmé (JT) about the merits of family ownership. She highlights family owners’ ability to have a clear long-term focus, lead credibly on values with a personal commitment, be able to connect and see eye to eye with entrepreneurs when investing in new businesses and not least have fun developing a joint view on the future direction of the business across the fourth, fifth and sixth generations of the family.

 

JT: You are a fifth-generation family owner representative and the chair of Axel Johnson AB since 2015. How would you, in your own words, briefly describe how Axel Johnson operates as an owner and exercises influence?

Caroline Berg Axel Johnson

Caroline Berg, chair of the board at Axel Johnson AB 

CB: We try to live up to our motto of being “always long-term, always impatient”. Apart from the formal governance through the boards and a close dialogue with our CEOs, we also steer our companies by building a strong cultural framework that provides direction for our businesses. Our history and our values serve as a cultural glue throughout our group.

One expression of the impatience is our 10/50 goal that emphasises change, curiosity and courage. The long-term thinking should guide us to never opt for short-term wins, at the expense of what is good for the long-term development of our companies, or what is sustainable in terms of relationships, reputation, and values. I have seen plenty of manifestations of this in the responsible way that our companies have handled the many tough decisions that they’ve faced during the past two years.

We are on track to reach the 10/50 goal after the first seven years.

JT: Could you tell us about the 10/50 goal you introduced when you became chair in 2015? How did you come up with it? How has it worked so far?

CB: The goal is pretty straightforward, meaning that in ten years, 50% of what we do should be things that we are not doing today. From the start, a strong message to our leaders has been that the majority of our new business should be coming from developing our existing businesses. Acquiring new businesses is an important complement, but the bulk of renewal is driven in our existing businesses, not by shifting our portfolio.

Going on the seventh year of the ten-year period, I’m happy to say that we’re on track to reach the goal. The progress has been achieved through a myriad of actions in our companies. Some of the main levers have been growing our e-commerce sales, expanding into new markets and investing in in-house brands, services and solutions. Another pillar has been the establishing of new business areas, such as solar energy and future food, where we want to grow with mega-trends related to planetary needs.

Axel Johnson Ab's Portfolio Companies

JT: Have you ever felt any disadvantage compared with financial institution-type owners regarding access to capital or financial strength and flexibility to pursue your desired strategic agenda?

CB: Well, one difference comes with our long-term view. We are absolutely willing to make bets and take calculated risks, but when we invest in a company, we do it with a perpetual time horizon. And that makes us a bit more focused on cash flow, compared to a fund with a three- to five-year horizon.

But in terms of strategic investments, we have not been holding back. The past years have been the most investment-intensive over Axel Johnson’s 148 years of existence, so I can’t see that being a family company has hindered us.

We put our money where our mouth is regarding values.

JT: What do you think are key strengths of family owners?

CB: As family owners, it is perhaps easier to embody long-term thinking and to credibly lead based on values. To illustrate: When we talk about being a positive force for change in society, our management and co-workers know that we are willing to put action and investments behind those words, by accelerating efforts for sustainability and inclusion in our companies or investing in Sweden’s two largest solar parks to date.

When we invest in companies, we also see that for some founders and entrepreneurs, it does build trust to know that there are owners of flesh and blood across the table, who want to develop their businesses with a long-term perspective. But I absolutely think that there is a case for diversity-of-ownerships models.

JT: Are there any potential disadvantages from being a family owner, such as succession issues, consensus building among family members or striving for meritocracy in key leadership appointments?

CB: We have had a Family Council for almost 30 years, and over the years we have developed our skills in leading a business as a family. Our values of openness, integrity and respect for each other’s differences create a strong foundation. As a family we are strongly committed to the idea of business being one of the biggest forces of positive change in society. In addition, as a family we think of business as creating new things, changing and developing. It is extremely rewarding to lead and develop a family company within this framework. The challenges that we face get highly manageable.

JT: Will Axel Johnson AB see a sixth generation run the business in the future?

CB: It is far too early to tell; each family member has to find their own path in life. The future will tell!

 

Johan Trocmé and Viktor Sonebäck

If you are a corporate client and want to access the full Nordea On Your Mind report, please contact Viktor Sonebäck.

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