Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Who remembers Marcel Boussac? The textile entrepreneur and racehorse magnate who financed Christian Dior was known in the 1930s as the wealthiest man in France: “rich as Boussac” the saying went. But France’s King Cotton became waywardly autocratic in his old age and his indebted company collapsed shortly before his death.
One who does remember is Bernard Arnault, now not only the richest man in France but one of those in the world, thanks to his control of LVMH. He took over Boussac’s assets in 1984 and used Dior as the foundation of his global luxury and fashion group. He also observed how some enterprises failed to outlive their founders.
The lesson was: have enough children to offer you a choice of family succession, and train them rigorously to succeed you. Alexandre Arnault was sent a wry postcard by his older brother Antoine when he was born, according to Le Monde: “Dear Alexandre, I hope your birth went well and that you are well. I advise you to start working right away, because otherwise . . . ”
The result is that Alexandre, 31, and Frédéric, 29, are now being nominated to LVMH’s board, joining Delphine, 48, and Antoine, 46. This is a formality since the family holds about 64 per cent of the voting rights, giving it comfortable control. The only one of the five children yet to be elevated to the board is Jean, 25, but that will no doubt come.
So the patriarch has the luxury of deciding which child takes over as chief executive, perhaps when he reaches 80 (he is 75 in March and LVMH extended his retirement deadline two years ago). He promised with a twinkle this week to be “here for a while yet” as LVMH disclosed record results amid a luxury industry downturn.
Arnault grew up in Roubaix, in the historic textile region of northern France, and saw heirs to family businesses squander their legacies. He raised his own to behave in the opposite way: educated at elite schools, hard working and held to high standards. Then he apprenticed them at LVMH. He says they had a choice, but I imagine they knew what he expected.
There is something of his strategy in the luxury (or, as he prefers, “high quality”) business to how he brought them up: take a fine name and nurture it over decades, ensuring that it has both surface polish and business competence. LVMH could instead appoint a professional executive to be its next CEO, but that seems unlikely: Arnault’s long, careful project is coming to fruition.
It seems to have worked pretty well, allowing for the fact that working for a family business in which you get to invite Beyoncé, Jay-Z and Pharrell Williams to your wedding, as Alexandre did in 2021, is considerably more alluring than joining, for example, a steelmaker. The Arnault clan behaves in an amiably disciplined manner, with any divisions kept under wraps.
But Arnault’s succession strategy comes with drawbacks. One is that the older he gets and the closer LVMH comes to a decision, the tenser the whole affair becomes. LVMH might be family controlled but it is also one of the world’s biggest companies, so speculation will continue, and indeed grow.
He prefers not to dwell on it, understandably given that it is at best an acknowledgment that he will one day have to relinquish power and at worst a memento mori. But a contest among siblings over inheritance has always been a compelling story, from Shakespeare plays to the HBO drama Succession.
Arnault’s rival François-Henri Pinault, chair of the French luxury group Kering, did not endure this process: he was chosen by his father François Pinault from among his siblings as the successor when he was young. He had first to gain experience in the family business to justify his elevation but there was no face-off.
If scrutiny is a nuisance to LVMH, the larger difficulty is what happens after Arnault dies. When he does, his unquestioned authority over his children will end and they will each be left with equal shareholdings and votes. They might all agree on their relative merits as business leaders, but then again, they might not.
One need not look too far for the trouble this can bring. Three of Rupert Murdoch’s children were brought up to work at News Corp and Fox but his choice of Lachlan Murdoch as his successor may not end the matter. Once the patriarch dies, there are signs that James Murdoch may try to retake some control, if his other siblings back him.
This does not prove that Arnault’s effort to ensure that LVMH lasts past the next generation is doomed to fail. In many ways, it is distinctly meritocratic to run within a billionaire family the same kind of tournament that is common among executives at public companies. It guarantees that only a grafter will take the prize.
But it would be unnatural for the children who have taken part, and formed their lives around it, to adjust easily to missing out. It will be impossible just to work anonymously in private equity, or at another company. Being an Arnault will still have privileges, but they may not be satisfying enough.