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Bill Gates is no longer the world's richest man. After 13 consecutive years at the top of the Forbes list, this month investment guru Warren Buffet has bumped Gates out of the top spot. Gates' fortune is now ranked third, behind Mexican telecom tycoon Carlos Slim Helú. What do billionaires such as these do with their fortunes anyway? How do they handle their private wealth and continue to run their businesses successfully at the same time? In this edition of IESE Insight, we take a never-before-seen look at how some of the most affluent families in Europe, America and Asia manage their treasures. A groundbreaking new study by IESE and the Wharton Global Family Alliance reveals that the world's richest are increasingly placing their trust in Single Family Offices (SFOs) to manage their fortunes and protect their family's assets and investments for generations to come. In this rare glimpse at the goings-on of these typically discreet organizations, the study reveals that SFOs sometimes focus too narrowly on private investment at the expense of other functions such as educating the family members and philanthropy, both of which are necessary for the long-term survival of the business. Equally vital is corporate social responsibility (CSR), a subject of another pioneering study. A survey of executives who head CSR departments in Spain attempts to define the fast-evolving set of duties they are increasingly being asked to perform as this new field constantly develops. As the authors explain, these professionals are being given a tall order: convince the rest of the organization of the need to sacrifice present efficiency in favor of future profits over the long term. No easy task, as anyone who's ever had to value an asset knows, that one must go beyond mere present yield. This is set out in a study by finance professor Pedro Saffi, who warns entrepreneurs that assets with greater liquidity do not produce high yields. This is echoed by Prof. Pablo Fernández in his book 201 errores en valoraciones de empresas (201 Mistakes in Company Valuations), which highlights how some analysts fall into the trap of equating the value of a company with what it would sell for at that moment, regardless of what price it might fetch in the future. Our resident expert offers some good advice that applies beyond the valuation of companies: use common sense and capitalize on your experience. We don't know whether such advice will make you one of the world's richest, but it's sure to keep money in the bank.
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Finance |
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Office Secrets of the World's Wealthiest Families Revealed |
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| Raphael Amit, Heinrich Liechtenstein, Mª Julia Prats, Todd Millay, Laird P. Pendleton |
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Single Family Offices (SFOs) - a modern version of the Roman major domus or chief steward of the household - are professional organizations that manage the personal fortunes and lives of the world's wealthiest families. Since SFOs focus on private affairs, little is known about them, particularly about their governance, investment focus and geographic differences. The groundbreaking paper, "Single Family Offices: Private Wealth Management in the Family Context," published by IESE Business School and Wharton Global Family Alliance, fills this knowledge gap and is the most comprehensive and diverse study of SFOs to date. The survey reveals insights from Single Family Offices in Europe, the Americas and Asia that manage at least $100 million in investable assets. 
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Corporate Social Responsibility |
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CSR Managers in Front of the Mirror |
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| Antonio Argandoña, Juan Fontrodona, José Ramón Pin, Pilar García-Lombardía |
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| Campaigns against poverty, support for reconciliation, good governance measures: companies are increasingly aware of their responsibilities to the environment and society, and are attempting to address them. However, corporate social responsibility has not yet caught on in most corporate structures. Many companies do not have a specific department, and those that do only have one or two people devoted to this task. The Center for Business in Society (CBS), the International Research Center on Organizations (IRCO) and "la Caixa" Chair of Corporate Responsibility and Corporate Governance set out to discover what CSR managers were like in Spain. The study, "El perfil emergente del directivo de RSC" ("The Emerging Profile of the CSR Manager"), outlines their responsibilities and reveals how their companies manage their affairs.
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Finance |
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201 Mistakes Never To Make When Valuing a Company |
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| Pablo Fernández |
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| Imagine giving a negative value to the shares of a company with positive cash flow forecasts. While it may seem strange, this type of mistake is more common than you think. In his book, 201 errores en valoraciones de empresas (201 Mistakes in Company Valuations), IESE Prof. Pablo Fernández shows how the host of theories and methods available to analysts sometimes leads to confusing results. His aim is not to name and shame, but rather to underscore the importance of avoiding hastiness, oversimplification and formulas. With a little common sense, experience and technical know-how, analysts can avoid valuation absurdities.
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Corporate Social Responsibility |
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How Institutional Forces Are Saving the Planet |
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| Pascual Berrone, Liliana Gelabert, Andrea Fosfuri, Luis R. Gómez-Mejía |
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| Many industries pollute even as the growing green movement pushes for innovative ways to curb contamination. The paper "Can Institutional Forces Create Competitive Advantage?" looks at 340 polluting, publicly traded companies in the U.S. and finds that when regulatory bodies and industry forces take a stand on environmental concerns, they ultimately spawn innovative responses in companies. In turn, environmental innovations satisfy the demands of stakeholders and grant legitimacy to a company. It seems that institutional forces can create competitive advantage - and help save the planet in the process.
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Finance |
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The New Conquistadors of Banking |
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| Kimio Kase, Tanguy Jacopin |
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| While the global banking system faces a crisis of confidence, Spanish banks bask in a golden era. A few decades ago, they were the most over-regulated and inefficient in Europe. Now they are among the world's most competitive and profitable. Take Santander: 20 years ago it ranked 152nd, now it is in the international top 10 in terms of market cap. In their new book, CEOs as Leaders and Strategy Designers, IESE's Kimio Kase and Tanguy Jacopin reveal the secret of Spain's success and why they liken the country's talented CEOs to Picasso and Velázquez.
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Leadership, Strategy and Change |
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Famosa: Dealing With a Global Production Strategy |
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| Alejandro Lago |
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| Famosa, a household name in the Spanish toy market, struck it rich with beloved products such as Nancy, Los Barriguitas and Nenuco, all of which have become Christmas must-haves. Now, however, the company must cut its production costs in order to compete with Asian imports. For this reason, Famosa has outsourced some of its business processes to China, a strategy that has its fair share of obstacles, according to IESE Prof. Alejandro Lago in his case study, "Famosa: Global Production Strategy."
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Organizations and People |
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What Companies Can Do To Encourage Labor Mobility |
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| José Ramón Pin, Pilar García-Lombardía, Ángela Gallifa, Lourdes Susaeta, Miguel Quintanilla |
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Roughly 70 percent of Europeans say they would not accept a job outside their country of residence and that they are satisfied with their current workplace. Such immobility makes it much harder for companies that, in their quest for more international markets, need to move their human capital to places where they have launched new business ventures. Spain, in particular, has one of the lowest mobility rates. What would make them budge? IESE's José Ramón Pin, Pilar García Lombardía, Ángela Gallifa, Miguel Quintanilla and Lourdes Susaeta suggest some practical ways that companies can encourage worker mobility, in their study "La movilidad geográfica en la empresa: un análisis para España" ("Geographic Mobility in Companies").
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Finance |
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United States: No Country for Poor Men |
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| Francesc Prior, Javier Santomá |
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| In the United States, more than eight million families are excluded from the financial system. Banking products are designed less for those who need them, more for those who can afford them. For someone earning less than $25,000 a year, even keeping a simple current account can be quite expensive, which feeds the abusive alternative financing sector. In such establishments, workers can pay interest of up to 470 percent of APR just to get advances on their paychecks. Ironically, the situation is reminiscent of some developing world countries that IESE's Francesc Prior and Javier Santomá have studied previously. Their new paper reviews the weaknesses and proposes alternatives for one of the world's richest countries.
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Leadership, Strategy and Change |
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Six Tips for Managing Salespeople |
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| Cosimo Chiesa |
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| Ever found yourself in a situation where dozens of people suddenly depended on you? Ever tried to keep tabs on a group of people who were more used to working independently? This is precisely what happens to Peter, the protagonist of IESE Prof. Cosimo Chiesa's new book, Dirigir vendedores es mucho más. Las claves del liderazgo commercial (Managing Salespeople Is Far More: The Keys of Sales Leadership). When Peter is offered a new role as sales director, he immediately seeks the advice of an old friend. Chiesa's book serves to provide plenty of sound advice on sales leadership - words of wisdom that might apply to you.
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Finance |
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Entrepreneur, Just How Liquid Are Your Assets? |
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| Pedro Saffi |
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| In tough economic times, it's harder to sell a house than a share of IBM. It's all about liquidity: the ability to trade assets quickly and cheaply at fair prices. Liquidity risk refers to the fact that the ease of trading assets varies over time. On some occasions, it can become so difficult to trade that the investor has to accept a large reduction in price to be able to sell it. In the paper "Expected Returns and Liquidity Risk," IESE finance professor Pedro Saffi studies, for the first time, the effects of jointly incorporating liquidity risk and non-tradable wealth in a single asset pricing equation. He focuses on the income of the entrepreneur and concludes that, in this economy, assets with higher liquidity command lower expected returns.
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