SPLITTING
Right: Marcus Wallenberg, chairman of SEB, is one of Sweden’s most powerful business leaders
HEIRS The irrevocable transfer by an owner or family to a foundation is prevalent in northern Europe, especially in high inheritance tax countries such as Denmark, Norway, and Germany. Yet Nordic foundations offer more than wealth preservation. A case in point is Leo Pharma, the Danish pharmaceutical group that flourished under the ownership of the Leo Foundation. Established in 1908 as the country’s first drug business, Leo Pharma is now a leading international supplier of prescription skincare products. Its Swedish arm—half of the original company when it was divided between the founder’s two heirs in 1939—has faded. Proponents say foundations are ideal for pharmaceutical companies because employees can
Today, the Knut and Alice Wallenberg Foundation
(KAW) and other Wallenberg foundations absorb the family’s share of profits and protect them from Sweden’s top income tax rate of 62%. The foundations’ generosity also deflects criticism: KAW, for instance, disburses $202 million of grants a year to fund basic research and education. Gunnar Wetterberg, author of a book on the
Wallenberg family, argues that having most of its wealth locked up in foundations best explains the empire’s sixth-generation longevity. SEB was the origin of the family empire, he says, and
when the bank was involved in companies that went bankrupt or had other difficulties, the Wallenbergs stepped in and rebuilt them “sometimes with rather brutal measures”. “They would sack the management and replace them
with people who were prepared to do away with less profitable parts of the business,” Wetterberg explains. “They have been very active in the companies and
the beauty of the foundation is that they can pick those in each generation who are most suitable to lead and manage the empire while the others get paid off handsomely.” Long-term stability has given generations of
Wallenbergs a free hand in shaping their empire or “sphere” to which it is referred in Sweden.
PHOTOGRAPHY: PRESS ASSOCIATION, NEWS ORESUND, SEB “The family cannot do very
much about the money, but the foundations provide the Wallenbergs the power to govern their empire and sphere,” Wetterberg says. “If they had not locked it up
in foundations, it is more likely than not that the sphere would have been dispersed within two or three generations.” It wasn’t. And for good
reason, according to Dr Carina Beckerman of Stockholm School of Economics. “The family wanted to play
an important role in creating a Swedish society from the beginning,” says Beckerman, citing industrial equipment giant Atlas Copco, a Wallenberg crown jewel that began trading in 1873. “It is one of the best companies
on the Swedish Stock Market, well run and very close to how it was from the beginning.”
be left in peace to perform research and development without the disruption of reporting to the stock market every quarter. But are industrial foundations as efficient as traditional investor-owned family enterprises? Critics suggest they lack the discipline of quoted companies and their boards are self-appointed. “It depends on the company charter,” Thomsen says.
“It is usually to continue the company and act in the interests of the business. The family still has a say, but they are subservient to the overall purpose.” Subservient but still
trading, often briskly.
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