Bernard Arnault is taking advantage of a remodeling of his management leadership to test a possible succession plan. The LVMH mogul promoted Pietro Beccari to head the iconic Louis Vuitton division on Tuesday and put his eldest daughter, Delphine, at the helm of Christian Dior Couture. Placing her at the helm of what analysts say is the company’s second-biggest brand could test her aptitude to run the 387 billion-euro luxury giant when her father retires. The market received the news well, with a 2.5% rise in the session.
Rich tycoons tend to have many offspring, often with different partners. Arnault has five children, the same as Mediaset founder Silvio Berlusconi and one fewer than media mogul Rupert Murdoch.
Sibling feuds can complicate plans to successfully sustain a large company into the next generation. Furthermore, they are not always willing or able to run large companies with the same skill as their parent.
Arnault seems determined to keep the management of the largest listed company in Europe within the family. All of his children have positions in the conglomerate, including brands such as Tiffany jeweler and TAG Heuer watchmaker. In addition, they jointly own the holding company that controls LVMH.
Delphine, 47, who has spent time working at Louis Vuitton and Dior, now has the opportunity to prove that she is above her brothers. However, it will be difficult to repeat Beccari’s success. The former boss tripled Dior’s sales, to 6.6 billion euros – around 8% of the estimated group total for this year – in less than five years, while doubling the brand’s operating profit margin to 38 %, according to Citi analysts.
Now Beccari will become CEO of Louis Vuitton, LVMH’s biggest brand, which Citi analysts estimate had revenue of about $22 billion in 2022.
Also, with Arnault showing no sign of retiring, his younger sons may have time to gain the experience they need to compete for the top job. Last year, the 73-year-old magnate raised the retirement age of LVMH’s chief executive to 80. He might as well do it again.
However, the best way to avoid potential family disputes is to choose a single heir to run the company, while creating a structure that ensures the financial spoils are shared by the entire family.
This is how Italian dynasties like the Agnellis and the Benettons have ensured that corporate prosperity endures for more than a generation. It would also be the smartest way for Arnault to approach his succession dilemma.
The authors are columnists for Reuters Breakingviews. Opinions are yours. The translation, by Carlos Gómez Abajo, is the responsibility of Five days
