Big fish from little ponds: Solvay, Belgium, global markets, and family firms

Ben Tipton, The University of Sydney

Kenneth Bertrams, Nicolas Coupain and Ernst Homburg Solvay: History of a Multinational Family Firm, Cambridge, Cambridge University Press, 2014 (650 pp). ISBN 9781107436930 (paperback) RRP $81.99.

Christina Lubinski, Jeffrey Fear and Paloma Fernández Pérez (eds) Family Multinationals: Entrepreneurship, Governance, and Pathways to Internationalization, New York and London, Routledge, 2013 (286 pp). ISBN 9780415836715 (hard cover) RRP $208.99.

Thomas David and Gerarda Westerhuis (eds) The Power of Corporate Networks: A Comparative and Historical Perspective, New York and London, Routledge, 2014 (368 pp). ISBN 9780415729741 (hard cover) RRP $208.99.

Keetie E. Sluyterman (ed.) Varieties of Capitalism and Business History: The Dutch Case, New York and London, Routledge, 2015 (246 pp). ISBN 9781138784932 (hard cover) RRP $220.99.

We are accustomed to the idea that single families control a number of our largest firms. In Australia the Murdochs in media, the Lowys in retail and Gina Rinehart and her estranged children in the resources sector occupy us in the business, social, and occasionally the sports sections of our daily news. In the United States, successive generations have followed the Du Ponts, the Fords, and the Koch family, for example, in the chemical, automotive and petroleum industries.

However, beyond the enjoyment of reading and watching the activities of the extremely rich, family firms also raise serious questions, about entrepreneurship, about firm governance, about varieties of capitalist systems and about the functioning of markets. Regarding entrepreneurship, Max Weber argued that capitalism and Protestantism shared underlying principles, particularly the notion of a ‘calling’ (Beruf) (Weber 1905). Widely criticised, the notion has nevertheless persisted as a ‘cultural’ explanation of Britain’s early industrial revolution, the greater wealth of Protestant Northwest Europe compared to Catholic Southern Europe, and the domination of Europe and the United States over the rest of the world (for example Landes 1999; Redding, Bond & Witt 2014). Peter Hall and David Soskice, in contrast, concentrate on institutions rather than culture. They divide capitalism itself into two main varieties. In ‘liberal market economies’ such as Britain and the United States, governments, employers, and workers are organised separately and stand generally in an adversarial relationship to each other, and markets operate freely. In ‘co-ordinated market economies’ such as Germany and the Nordic countries, the three groups collaborate to control markets (Hall & Soskice 2001).

Within all capitalist economies, said Alfred Chandler, successful firms grow beyond the capabilities of the founding families. Ownership passes to dispersed shareholders, and control falls into the hands of professional managers (Chandler 1962). And in market economies, according to Nobel laureate economist Eugene Fama, the share prices of firms reflect all available information, and investors react quickly to changes in share prices (Fama 1970). By extension, therefore, the professional managers who run those publicly held firms will act in the interests of shareholders, because if they do not, shareholders will exit, sell their shares, and as the share price drops the managers will face the threat of losing their jobs. A further extension holds that we all benefit when firms function efficiently, and therefore despite criticism Fama’s ‘efficient market hypothesis’ has served as an important argument in favour of deregulation of financial systems and reliance on market forces (see Fox 2009).

Solvay is the history of a family firm headquartered in Belgium, for a long time the world’s leading producer of sodium carbonate. At first glance therefore, the book might seem to count at least four strikes against it before opening. Sodium carbonate might not seem the sexiest substance in the world. And, with respect, Belgium might not seem the sexiest country. Further, in theory the firm should not exist in its present form, still controlled by the original founding family. Finally, the official company history, the celebration of a firm’s 50th, 100th, or as in Solvay’s case 150th anniversary, includes some of the most tedious and tendentious works ever published.

Sodium carbonate might not seem the sexiest substance in the world.

However, happily, that first glance is deceptive. Solvay is fascinating for its success alone. Founded in 1863 by brothers Ernest and Alfred with the support of a group of wealthy silent partners, Solvay did not appoint a non-family member to its board until a public listing in 1963, and did not appoint a non-family member as CEO until 1998. In 2014 the approximately 2,500 descendants of the brothers and original investors together owned over 50 per cent of a firm with 26,000 employees working at 119 sites in 52 countries, and total assets of €17.89 billion. In addition this history rises well above the average for its genre. We see the past century and a half through the eyes of Solvay’s governing board. We see the firm’s internal development through that 150 years. We also see the progress of scientific and technological change through some refreshingly clear exposition. The result is a big book, leisurely in pace, a story in the grand manner. If you enjoyed Thomas Mann’s Buddenbrooks, but wish that family firm had survived, you will enjoy Solvay. Take it along on your next holiday and read it by the pool.

Of course, however well done, Solvay remains official history, a selective view of the past, painted in the brightest possible colours. This is also corporate history; the minutes of the governing board or gérance frame the story. Solvay prides itself on being a family company, and for most of the firm’s 150 years the gérance has consisted of small numbers of men, the founders, their sons and sons-in-law, and their sons and sons-in-law in turn. You may not approve of their actions, but the authors show both the motives and the methods of the successive generations as they attempted to steer the firm through the dangers that threatened their interests.

The following sections outline Solvay’s history and its Belgian context, and look at the remaining books under review where they intersect with Solvay’s story. Many believe globalisation is pushing co-ordinated market economies towards the liberal market economy model. This would mean that more firms would evolve along Chandler’s path, and also that they would be subject to the discipline of Fama’s efficient markets. However, the evidence presented by Christina Lubinski, Jeffrey Fear, and Paloma Fernández Pérez indicates that family firms are far more important globally than theory predicts. Family firms dominate in all countries in terms of numbers, because all small and most medium sized firms are family firms, but in addition families also control most of the large firms in a long list of countries. Solvay is not exceptional. Most large firms in Belgium are controlled by small circles of shareholders, and along with Belgium, ‘hardly any’ of the largest firms in Austria, Argentina, Germany, Greece, Israel, Hong Kong, and Portugal have widely held ownership. In fact, dispersed ownership is the norm for large companies only in Japan, the United Kingdom, and the United States. These are very large economies, of course, but even in the United States 33.6 per cent of Standard and Poor’s top 500 firms are family businesses (Lubinski, Fear & Fernández Pérez, pp. 2–3).

The history of Solvay suggests in addition that firms, and possibly family firms in particular, do not necessarily behave in the manner that theory predicts. Firms are not independent, but embedded in surrounding social structures. As the cases presented by Thomas David and Gerarda Westerhuis show, they are frequently organised into networks. The networks in turn are embedded in national business systems. National systems differ; in particular Belgium and the neighbouring Netherlands appear quite distinct (Sluyterman, p. 42; David & Westerhuis, p. 5). Further, systems change. The chapters edited by Keetie Sluyterman summarise the results of a decade-long project, previously available only in seven volumes published in Dutch. As they show, from the late nineteenth to the early 21st century, the Dutch business system shifted, from a ‘liberal’ to a ‘co-ordinated’ and then back again towards a liberal market economy. Over the same period, the density of Dutch corporate networks first increased and then fell. This last pattern repeats across all of David and Westerhuis’ case countries, a rise in network density from the early to mid-twentieth century, and then a decline. However, and this is the point, closer analysis reveals that the pattern of national networks has varied both across countries and over time, and that they have not changed either to the same degree, or in response to the same causes. There appears therefore to be no overarching force imposing uniformity on individual firms, whether globalisation, markets, or internal pressures. The final section draws some of these strands together and suggests some of the general issues that arise from ownership concentrated in hands not responsible or responsive to any forces beyond family connections.


As it happens sodium carbonate, or soda ash, is a good deal sexier than might be thought. If you operate in the glass, paper, soap, or textile industries, among others, it is a critical intermediate product. It acts as a flux for silica, lowering the melting point required to form glass. It forms the bleach used for paper and textiles, as well as industrial and domestic cleaning products. In the cotton industry it neutralises the acid needed for de-linting cottonseed, and in dyeing it ensures proper chemical bonding of the dye with the fibres. Mineral deposits occur, but not everywhere, and along the seacoast it can be extracted from kelp using sea water. As industrialisation progressed in the nineteenth century demand increased beyond these sources of supply. By mid-century most soda ash in Europe was produced by the process patented by Nicolas Leblanc in 1791. Leblanc producers boiled sodium chloride (salt) in sulphuric acid to yield sodium sulphate and hydrogen chloride gas, mixed the sodium sulphate with crushed limestone (calcium carbonate) and coal, and then burned the mixture. The sodium carbonate was extracted from the ashes with water, and then collected by allowing the water to evaporate. The process is inelegant and wasteful, and the clouds of hydrochloric acid and leftover mounds of calcium sulphide became major sources of pollution.

Solvay’s genius lay in transforming the theoretical possibility into industrial scale practice.

Ernest Solvay aimed to employ a different set of chemical reactions, using ammonia to convert salt and limestone into sodium carbonate directly. The Solvay process takes place in a hollow tower. At the bottom, limestone is heated to release carbon dioxide. At the top, a concentrated solution of salt and ammonia is poured into the tower. As the carbon dioxide bubbles up through it, sodium bicarbonate precipitates. The sodium bicarbonate is then converted to sodium carbonate by heating it, releasing water and carbon dioxide. Meanwhile, the ammonia is regenerated from the ammonium chloride by-product by treating it with the lime (calcium hydroxide) left over from carbon dioxide generation. Because the Solvay process recycles its ammonia, it consumes only salt and limestone, and produces calcium chloride as its only waste product. This made it, potentially, substantially more economical than the Leblanc process.

The theory was well known; Solvay’s genius lay in transforming the theoretical possibility into industrial scale practice. Several years, repeated consultations with professors of chemistry and engineering, and a lot of the silent partners’ money, disappeared in repeated attempts. For example, the pipes that connected vats set in parallel on the ground tended to block, meaning the entire plant needed to shut down while the blockage was cleared. The famous tower was a late insight, as were the internal buffers required to regulate the precipitation. The tower was expensive, and there remained issues with the mixture, delivery, and in particular recovery of the ammonia. Unable to patent the chemical reaction itself, Solvay instead relied on a thicket of deliberately vague patents on aspects of the surrounding equipment and processes. The all-important details, and the very low costs of production that Solvay eventually achieved, remained closely guarded secrets, not even shared, for instance, with the silent partners whose support had made success possible.


Like sodium carbonate, Belgium is also a good deal sexier than might be thought. (Humes 2014 provides a good introduction, starting with Caesar and the three sorts of Gauls). The Treaty of Vienna in 1815 established a United Kingdom of the Netherlands, but in 1830 a revolt in Brussels against the Dutch king led to the division of the country. After several years of fighting, Belgian independence was recognised by the Treaty of London of 1839. It suited Great Britain to prevent any powerful country from controlling the shores of the English Channel, and to enjoy passage along the rivers and canals of Western Europe, but also not to encourage the spread of potentially destabilising democratic movements. Therefore the main treaty famously bound Belgium to everlasting neutrality, but also provided for free trade along those key waterways, while a further treaty confirmed Leopold I as king of the new nation. From the German dukedom of Saxe-Coburg-Saalfeld, Leopold was a British citizen previously married to Princess Charlotte of Wales, who would have succeeded to the English throne had she not died of complications following a stillbirth. Prince Albert, later husband of Princess Victoria, was Leopold’s nephew. Had either Charlotte or her baby survived, Victoria would have remained merely Princess, and we would now refer to the nineteenth and early twentieth centuries using a different set of adjectives.

Leopold I often receives credit for the Belgian government’s decision to construct an integrated railway system, and therefore for Belgium’s early industrialisation. However, Belgium did not live happily ever after. Importantly, the country was divided, French speaking Catholic Wallonia in the South, and Dutch speaking Protestant Flanders in the North. The North suffered terribly from failed harvests in the late 1840s. The 1839 treaties made Belgium a relatively open economy, but the Dutch did not finally lift the tolls that hampered Antwerp’s development as an ocean port until 1863. In 1869 the railways came into play again. The government blocked the sale of private lines to French investors, and French emperor Napoleon III considered invading Belgium in retaliation but was distracted by the crisis leading to the outbreak of war with Prussia in 1870 (Humes 2014, chs 10–11).

Nicolas Coupain places the Solvays in this background. Belgium as it happens reverses Max Weber’s valences. In Belgium the Catholic South led industrialisation, while the Protestant North remained agricultural and relatively backward. Blessed with an established textile industry, accessible coal reserves, and those early railway connections, Southern Belgium ranked as the world’s second most advanced industrial region after Northwest England in the middle decades of the nineteenth century. French became the language of the elite, of government, and of Brussels the capital. Dutch sank to second class status, and the Flamands into a bitter resentment that could and sometimes did break out into open hostility. Belgium was not alone. Across the border in Germany it was the contemporary conflict between Catholics and Protestants that led Weber, a Protestant, to search for an explanation of alleged Catholic backwardness (Tipton 2003, pp. 231–232).

The Solvays belonged to a group of wealthy families connected by marriage and business interests. Commercial farmers with investments in textiles and mining, they recognised the potential of his idea. Coupain notes their thoroughly bourgeois values, and he emphasises, in addition to their Catholic background, that although Ernest lacked formal educational qualifications and was not personally wealthy, he was not the untutored, isolated entrepreneurial genius of legend. He maintained continual contact with leading scientists and drew on the resources of the circle of families, now linked by a detailed contract specifying ownership, obligations, and very specific provisions for the sharing of eventual profits.

Schumpeter believed that one of their key motives driving entrepreneurs was the ambition to found a dynasty.

Joseph Schumpeter, the foundational theorist of entrepreneurship, believed that one of their key motives driving entrepreneurs was the ambition to found a dynasty (Schumpeter 1950). Christina Lubinski notes the dreams of Solvay’s contemporary, electrical and telegraphic inventor Werner Siemens, to have his family emulate the banking family Rothschilds or the legendary fifteenth and sixteenth century Fuggers, ‘to bring worldwide power and prestige not only to me but also to my offspring’. Siemens did not appoint a non-family member to the powerful chairmanship of its supervisory board until 1981. However, family relations do not always flow smoothly. Werner struggled for years to bring his two brothers to share his vision (Lubinski, Fear & Fernández Pérez, p. 45, 47, 48). Andrew Popp emphasises that the emotional bonds connecting members of a family may not pull in the same direction. ‘Family and familialism’, he concludes from his British case study, ‘were no simple boon to the ambitions of the nascent multinational. Nor were they a mere ‘resource’ on which the firm could unproblematically draw’ (Lubinski, Fear & Fernández Pérez, p. 207).

Ernest Solvay desperately wanted to pass the entire firm on to his children. He read Buddenbrooks and worried about the family’s ability to reproduce itself and retain control. A passing reference to the Solvays’ marriage strategies (Coupain, p. 132) suggests both the problem and the solution, but Coupain provides no details. We do learn that the silent partners enjoyed the high dividends paid, but resisted ongoing attempts by the brothers to increase their personal share in the business. A decade of rancorous dispute led to a revision of the original statutes, and the creation of the structures that have persisted in part to the present. Solvay had only two non-family directors before 1967, but one of the rules governing the gérance is the mandatory retirement age of sixty-five, a feature that sets Solvay apart both from most Asian groups and from many large Western firms where the founders and their children continue to exercise control until disability or death remove them from the scene. The authors could have made more of this. Solvay’s own internal rules forced a continual search for competent successors, and prevented aging leaders from holding on to power beyond their time.

Solvay strove to act as a family firm with regard to its employees as well. New plants often needed to be located in remote rural areas, near the necessary raw materials. Solvay addressed the resulting problems by recruiting workers from local agricultural villages, training them, paying them generously, and holding them by building housing estates with churches, schools, hospitals, and recreational facilities. From an early date Solvay also funded relatively advanced retirement schemes. The family was not a democracy, and the firm intended its carefully calculated generosity to pay dividends. Labour relations appear comparatively peaceful, in most countries and over most decades, but Solvay opposed unions wherever it could. The firm also held senior managers and technical staff by the threat of losing their benefits, and by a five-year non-competition clause in their contracts.


A large, fascinating, but inconclusive literature debates the reasons for firms to become multinational, and the means they employ to do so. Membership in a network of similar firms gives access to information and encourages imitation (Oehme & Bort 2015). For individual firms, however, strategies can range from Siemens dispatching his brothers to London and St Petersburg virtually from the outset, to Greek food manufacturer Haitoglou, which only began cautiously ‘exploring’ foreign markets through connections with the Greek diaspora after six decades (Lubinski, Fear & Fernández Pérez, p. 1). Jacques van Gerwin and Ferry de Goey find a large and increasing variety of types of entrepreneurs and enterprises across samples from the United States, Great Britain, Germany, and the Netherlands from the early twentieth to the early 21st century (Sluyterman, p. 93), and this parallels the wide variety of forces, motivations, and emotions influencing family firms generally (Lubinski, Fear & Fernández Pérez, pp. 34–35).

Market access certainly plays a role. Siemens sold its specialised telegraph equipment primarily to government agencies, and so was ‘born global’ (Lubinski, Fear & Fernández Pérez, p. 41). Solvay differed; its product was a commodity, in the sense that customers for sodium carbonate are interested only in reliable supplies at the lowest price. The Solvay brothers aimed from the first to expand outside their small Belgian pond. They experimented with their foreign subsidiaries, as systematically as they had with their production processes. Coupain points out correctly that the so-called era of free trade before the First World War was nothing of the kind, but rather was a period of high and rising tariffs, quotas, selective subsidies, government monopolies, and cartels. Almost all governments restricted access to salt supplies, for instance. In France, Solvay’s subsidiary was wholly owned, although registered independently and therefore arguably French, but elsewhere Solvay generally opted for joint ventures with well-connected local partners who could negotiate effectively with government officials and who enjoyed friendly relations with both customers and rivals.

In addition, rather than drive competitors out of business by exploiting its very low production costs, Solvay preferred wherever possible to join or to establish cartel agreements that divided the market, restricted output, and held prices at high levels. Membership in cartels brought the added benefit of presenting Solvay as a reputable member of the local industry rather than a destructive foreign intruder. Relations were not always smooth; business groups are not necessarily harmonious, any more than families. Disputes could and frequently did end in court, and on balance, Solvay seems an uncomfortable and rather litigious partner.

In Britain, Germany and the United States, Solvay’s subsidiaries became large firms in their own right.

However separate they may have been in legal form, the foreign subsidiaries remained under the close control of Solvay’s head office. Each plant reported in detail, and, crucially, each plant reported on any changes or adjustments made, and the results. The head office dispatched engineers to examine changes, ordered trials of the changes in other plants, digested the resulting reports, and then disseminated the new information to all the other plants. Solvay, says Coupain, was a company of engineers, and the institutionalised habit of research and internal communication remained a key feature and a crucial source of strength. In addition, its research capabilities gave Solvay the ability to exploit Alfred Chandler’s economies of scope, the development of products in areas parallel to the firm’s primary interests (Chandler 1990). In fact Solvay did not in general pursue business outside its main soda ash concern. To do so would have angered its customers and collaborators. Rather, Solvay held those capabilities in reserve, products that the firm could develop, and because of the very wide profit margin in soda ash, products that could then be sold in local markets for truly ruinous prices. Subsidised by soda ash profits, Solvay would survive, but the potential losses in those other lines could mean injury and possible bankruptcy for firms that might be tempted to overstep the cartel arrangements or otherwise act counter to Solvay’s interests.


Kenneth Bertrams picks up the story in 1914 with the outbreak of the First World War, and carries forward to 1950. Infamously, Germany’s leaders ignored the 1839 treaties and invaded Belgium, hoping to outflank the French army. They failed, and they also failed to provide for the Belgians. The Solvays threw their personal fortune behind the international relief effort led by future US President Herbert Hoover. Plants in areas controlled by Germany and Austria continued to operate, and at war’s end angry Belgian mobs pursued accused collaborators, but their contribution to the relief effort helped Solvay escape. While German firms such as Siemens lost both foreign plants and patents (Lubinski, Fear & Fernández Pérez, p. 51), Belgium’s position as a small casualty of German aggression allowed the Solvays to present themselves as victims. Nevertheless the gérance needed to exercise their considerable range of contacts to avoid Siemens’ fate, particularly in France where longstanding competitors were keen to denounce them.

Belgium mirrored the difficulties of interwar Europe (Humes 2014, ch. 12). The division between Catholic French and Protestant Dutch speakers continued, intensified by the Germans’ imposition of Dutch as the language of instruction in Flemish schools. Intransigent parties on both left and right disrupted normal public life, and waves of strikes accompanied the postwar depression and the greater depression of the 1930s. In the neighbouring Netherlands, these decades saw the emergence of the collaborative framework linking workers and employers that constitutes one of the defining characteristics of Hall and Soskice’s co-ordinated market economies. Erik Nijhof and Annette van den Berg find similar ideas under discussion in Belgium during the 1930s, but conclude that the highly politicised stance of Belgium’s socialist unions made collaboration difficult or impossible (Sluyterman, p. 13, pp. 23–27, 37–38). Bertrams mentions Belgium’s political upheaval only in passing (Bertrams, p. 281), and in contrast to Coupain’s treatment of the pre-1914 period, labour relations and social welfare initiatives receive little notice. As head of Solvay’s Personnel Department, Louis Solvay sponsored a series of studies that envisaged a classless but authoritarian society where leisure time would be spent by male workers in sports, gardening, and reading groups, and the problem of female unemployment solved by confining women to the home. Two further reports circulated to the industrialists’ federation in 1943 did play a role in the drafting of the 1944 ‘social compact’ report that Bertrams says ‘served as blueprint for the postwar social agenda in Belgium’ (Bertrams, p. 285). However, other board members thought Louis’ further ideas for revision of the Belgian constitution inappropriate, and he was sidelined until his retirement in 1947.

Louis Solvay’s efforts aside, the gérance devoted their energies primarily to the aftershocks of a failed attempt to establish a large financial arm and to the firm’s foreign interests. Where overproduction threatened, as in chlorine, Solvay led or participated in international cartel agreements. In the successor states in Central and Eastern Europe, as it had before 1914 Solvay again presented itself as a partner of local firms, and as before curried favour with influential government figures. In Italy Solvay appointed well connected Fascist Party members to senior management posts. In Spain Solvay fought strikes by Republican workers, and came to terms with Franco following his victory in the civil war. Under the pre-war Nazi regime in Germany Solvay adopted the slogans, swastika signs, and male posturing the government required, and as Germany expanded, Solvay manœuvred to have subsidiaries in occupied territories classified as Aryan. Jewish employees were singled out and transferred.

To the north, more in conformity with Chandler’s prediction, listed Dutch firms passed from the control of founding families, while new legislation attempted to defend the interests of shareholders against entrenched managers (Sluyterman, pp. 58–60). This was also the period of the rise and spread of interlocking board memberships in the Netherlands, as it appears to have been internationally (David & Westerhuis, pp. 12–15, 91–93). Solvay remained private and the gérance remained under the control of older members. Not board seats but agreements to control output, set prices and divide the world into exclusive areas remained Solvay’s preferred mode of contact with other firms. But, in accord with another of Chandler’s (1962) theses, the firm’s internal administration divided along both functional and geographical lines. The new structures did not always fit comfortably. Bertrams details the struggles between divisions, and considers that the continued focus on technical refinements in its traditional areas forced Solvay into expensive and risky catch-up strategies, and also delayed diversification into new areas.

In Britain, Germany and the United States, Solvay’s subsidiaries became large firms in their own right. Their energetic and ambitious leaders aimed for independence, and the resulting legal manœuvres extended over years. The gérance enjoyed the advice of American lawyer and future Secretary of State John Foster Dulles, and of Hermann Abs, head of the Deutsche Bank under Hitler and then again following the Second World War, but failed to retain control of their creations, and then failed to prevent them being absorbed into even larger firms, Imperial Chemical Industries (ICI) in Britain, IG Farben in Germany, and Allied Chemical in the United States. Solvay remained a major shareholder in each, but without the all-important control.

Solvay’s environmental record appears less bad than some of its competitors.

In 1940 the Germans again invaded Belgium, and as before proved incompetent administrators, although the Nazi regime was more rapacious and far more vicious in its pursuit of Jews and resistors. Catholic supporters of the fascist Rexist Party and Protestant Flemish separatists collaborated with the Nazis, but receive no mention from Bertrams. René Boël, a son-in-law who joined the gérance in 1931, proved adept in negotiating Solvay’s US interests, again with advice from Dulles. During the war Solvay’s North American assets were shielded by a trust located in Canada. Boël advised the Belgian government in exile, worked with the United Nations Relief and Rehabilitation Administration, and represented Belgium at Bretton Woods, but found time for voyages to Brazil to negotiate, along with ICI and DuPont, agreements with the government of dictator Getúlio Vargas—and advanced $100,000 from his own private fortune to seal the deal when the US trustees including Dulles hesitated out of concern about the policies of antitrust authorities and the army. Boël also continued prewar discussions with ICI to divide world markets, ICI to take all British colonies, Solvay all Belgian colonies, and South America to be shared. This is the only reference to Belgium’s disgraceful colonial history (see Acherson 1963; Nzanjala-Ntalaja 2002); it appears Solvay had no involvement in Belgium’s overseas possessions, but predictably did not wish to allow any other firm to enter.

As before, across Nazi Europe Solvay plants continued to operate through the war. Solvay employed little forced labour, but this reflected the relatively small numbers of workers and the high skill levels required rather than any special virtue (Bertrams, pp. 296–297). And as before, at war’s end Solvay called on its friends to protect itself against expropriation, or even to expand, and energetically defended itself against accusations of collaboration. The new East German government convicted several Solvay managers of war crimes, based on the connection with IG Farben, and the gérance could not prevent the nationalisation of Solvay’s assets in countries east of the iron curtain. They did not forget, however, and applied immediately for restitution when the socialist regimes collapsed in 1989.


Finally, Ernst Homburg brings Solvay’s story to 2013. Prewar technical discoveries and overseas contacts led Boël and other younger members of the gérance to advocate expansion, both geographically and into additional product lines. However, Boël deferred to his senior brother-in-law, board chairman Ernest-John Solvay, until the latter retired in 1964. Homburg titles this section ‘Making a New Start’, and clearly the firm would have been very different had the conservative Ernest-John remained in control, as he would have in, say, a Korean family chaebol group (Tipton 2007, ch. 3). His departure opened the way for diversification, first into plastics and petrochemicals, then into pharmaceuticals. The firm undertook a major expansion into the United States, and later into the Asia Pacific. A long-recognised chronic shortage of capital motivated the public listing in 1963. In typical fashion, when the gérance learned that existing Belgian company law would not allow them to list while retaining control in the family, they bypassed the Ministry of Justice and appealed to personal contacts on the separate Banking Commission, which obligingly drafted a new national company law that the Ministry of Justice received two months later.

Working with a US consultant, in the late 1960s Solvay restructured into a matrix form with responsibilities divided and reporting along three dimensions, functional, product, and national. In the 1980s, to overcome problems with internal communication and a ‘lack of entrepreneurial spirit’ among managers, came a shift to strategic business units around groups of products, following the example of General Electric, and the introduction of total quality management programs, following US interpretations of Japanese practices. In the early 1990s some divisions were designated global, some regional, some local, and some as service units. Another restructure in 2010 divided the firm again, this time into new product-based global business units. ‘Solvay’s learning capacities were to be improved, and the company was to become more Asian-like’ (Homburg, p. 553). Headquarters staff were cut, older plants closed, and the plastics division sold. From a peak of just over 49,000 in 1980 Solvay’s workforce dropped to fewer than 30,000 the early 2000s. In 2011, having decided that Solvay could not become large enough by itself to complete with the emerging pharmaceutical giants, the board sold the pharmaceutical division, half of the company, and then purchased Rhodia, a French group that had also divested its pharmaceutical business, in order to concentrate on specialty chemicals. The two transactions appear to have netted Solvay €1.1 billion (Homburg, pp. 551–557; see Gray-Black 2009, 2011).

Homburg is clear on these changes, very good on laying out the differences among the bewildering variety of products, and balanced in presenting the sometimes conflicting motives of members of the board. For your poolside reading, this is an entertaining and painless introduction to the development of the chemicals we all depend on but do not understand, and to the almost equally arcane world of corporate management. However, judged as history, this is the least satisfactory section. Resting uncritically on interviews with surviving and current board members and predictably enthusiastic stories from the company magazine, the final chapters emphasise successes. On the positive side, the inherited culture of research and collaboration across divisions appears to have facilitated the transition to the current research-based focus, but Homburg does not trace the historical connections. On the negative side, Solvay’s environmental record appears less bad than some of its competitors, but until the 1980s the firm did little unless prodded by government authorities. The public listing did not succeed as hoped, nor did some of the moves into new markets, but we learn little of Solvay’s finances, and nothing about the financial links among divisions in different countries. The matrix, TQM, and both strategic and global business units all had their moments with American consultants, but did not always bring the promised benefits (Mintzberg, Ahlstrand, & Lampel 1998). It is unclear, for instance, just which of the many Asian models Solvay’s McKinsey advisors might have had in mind (Tipton 2007; Witt & Redding 2014). A more critical reading of his material might have led Homburg to the suspicion that Solvay’s board wished to appear up to date but lacked a consistent strategic vision.

Homburg also neglects the Belgian context. The 1944 ‘social compact’ reports receive no further mention, nor does Belgian politics. The board decided to drop the matrix form in part because, although the confusion arising from multiple lines of responsibility was ‘partly compensated’ by informal networks, those networks included only French speaking staff (Homburg, pp. 495–496). When Daniel Janssen shut down the historic Couillet plant in 1993 he said, ‘This was the most painful decision of my career’ (Homburg, p. 491), but the protests and strikes by men whose fathers and grandfathers had worked for Solvay are the only mention of labour relations over the entire period. The failure to link these and other hints to background developments is unfortunate, because Solvay’s shrinking workforce reflected not only the decline of heavy industry in Western Europe generally, but more specifically the drastic decline of Wallonia. Flanders in contrast enjoyed rapid development in new light industries and services. As the Belgian economic centre of gravity shifted northward the Dutch speaking Flamands, now some 60 per cent of the population, increased in power and influence, and the position of the old French speaking elite eroded. The ongoing conflict has periodically paralysed government. Belgium’s constitution has been revised six times since 1970. The document that emerged from the most recent crisis in 2012 formalised a cumbersome and expensive system that grants both to provincial authorities and to the overlapping French, Dutch, and German speaking ‘communities’ powers that in other states are generally reserved to the national government (Humes 2014, chs 13–15).

The stakes in the analysis of both listed and family firms are high.

In his magisterial history of postwar Europe, Tony Judt argued that three factors saved Belgium from dissolution. Younger Belgians, urban, educated, and affluent, lost interest in separatist arguments; Belgium’s wealth allowed generous payments to support, for instance, unemployed workers in Wallonia; and the elaboration of the institutions of the European Union (EU) created a new framework above the level of national states (Judt 2005, pp. 712–713). The EU is a complex federation, not a unitary system, of course, and like the now radically decentralized Belgium it splashes along from crisis to crisis, but it has survived, an enlarged pond where fish of different shapes and sizes co-exist, if not happily at least at peace.

Whether Belgium is a model of Europe’s future remains to be seen. However, the upbeat tone of Homburg’s presentation notwithstanding, it seems clear that Solvay has been one of the less happy fish in the new and bigger pond. European Community officials pressed through the 1970s and 1980s to open borders and unify the EU economy, and Europe’s enlarged internal market meant that some of Solvay’s plants became too small to compete. European Community officials also pressed through the 1990s to lower protective barriers, and the opening of Europe’s markets to external competitors exposed Solvay’s remaining plants to imports from countries with lower labour costs. For Homburg, and one suspects for Solvay, these appear as random waves on the surface of the pond, rather than currents of structural change. The board regretted in retrospect that the strategic business unit structure had ‘reduced importance of the national organizations’, with ‘adverse effects on the contacts between Solvay and local politicians’ (Homburg, p. 500), but those local contacts no longer play the same role. European Community officials now enforce international environmental agreements, and they have fined Solvay and others for attempting to set prices and divide markets as they did in the past.

Other large ponds have also proved less than fully congenial, and Solvay, true to its traditions, has remained much more comfortable in smaller ponds. In Thailand, for example, contacts including army generals serving as prime minister and vice prime minister helped gain permission for a large plant, and a complex arrangement of partnerships and nominees allowed Solvay to evade the legal requirement of majority Thai ownership (on the role of the Thai state and army in the economy, see Suehiro and Yabushita 2014). In contrast, competitors in the United States were both large and aggressive, and government authorities less friendly. DuPont, another family firm founded in 1802, employed 64,000 including 10,000 scientists and had assets of US$51.5 billion in 2013 (DuPont 2014; Forbes 2015). In 2004 DuPont sold Invista, its textile fibres division, to Koch Industries, also a family firm, for US$4.2 billion. In 2008 Invista sued Rhodia for alleged violations of licensing and non-competition agreements (just-style 2008), and in 2011 DuPont increased its European presence with the purchase of Danish firm Danisco for US$6.3 billion. The US Food and Drug Administration (FDA) sanctioned Solvay for fraudulent reporting of data in clinical trials of one of its proposed drugs, and Solvay also failed to gain FDA approval for an antidepressant that would have competed with Prozac. In China, another large pond, Solvay contracted to provide technical support for Chinese soda ash firms, but then discovered that their protégés, having driven American firms out of the Chinese market, were now selling soda ash in Solvay’s European markets. In 1997 Solvay ‘concluded that all help to the Chinese soda ash industry should be stopped immediately’, and focused instead on ‘modest’ joint ventures in limited areas (Homburg, p. 478).


The stakes in the analysis of both listed and family firms are high. If markets cannot constrain their behaviour, then socially acceptable solutions rise into the realm of ‘values’ where economic theory forbids itself to tread. Frans Stokman in his preface to David and Westerhuis’ collection states bluntly that ‘dense trust networks sustain normative behaviour’, and blames the decline of networks since the 1980s, whatever the specific causes, for the ‘unethical practices’ that resulted in the financial crises of the early 21st century (David & Westerhuis, p. xvi). Mark Mizruchi, one of the contributors, has elsewhere argued that the decline of bank-centred corporate networks in the United States has led individual firms to place their interests ahead of the public good, and therefore is largely to blame for the inability of the political system to achieve consensus and meaningful action on a range of key issues (Mizruchi 2013; see Tipton 2014).

As noted above, the motives of family members vary, and so do the forms of family firms. Charles Koch has said Koch Industries, a petrochemical conglomerate founded by his father in 1940, will only go public ‘over my dead body’. He and his brother donate very large sums of money to political campaigns without complaint from shareholders, since there are no shareholders other than themselves (Fisher 2006). DuPont in contrast was in fact one of Chandler’s favourite examples of the replacement of family by professional managers (Chandler & Salsbury 2000); (Chandler’s middle name du Pont reflects his great-grandmother having been raised by the du Pont family). Charles Holliday retired as CEO in 2008 reportedly under pressure from shareholders because the share price had not risen in line with growth and profits, evidence that management does respond to market signals. The 3,500 du Pont cousins enjoy the fruits of a trust fund with assets estimated at US$14.5 billion. All are free to spend the income from their shares as they see fit, but in contrast to Koch, the managers and board members of DuPont are not, being constrained to act in the interests of the majority of shareholders. However, the transition was a slow one, and is not yet complete. The last du Pont to serve as CEO retired only in 1967, and although majority family control ended in the 1970s, the family and the trust still own substantial blocks of shares. The family continues to be represented on the board, and DuPont has continued its tradition of appointing its senior managers from within the company ‘family’. Current CEO and Chair Ellen Kullman joined DuPont in 1988, and her husband is also a senior DuPont executive (Eder & Ruth 2008).

The Solvay family swims somewhere between, publicly listed, but owning some 80 per cent of the shares in the holding company that in turn owns 30 per cent of Solvay’s shares, and themselves owning another 25 per cent directly.

Political systems are subjected to pressures that distort policy to benefit the few at the expense of the many.

A typical career of a family member goes as follows: first he, or (recently) she, would be appointed at young age to the supervisory board of the Mutuelle Solvay [the family financial arm dating from the 1920s]; then, after some years of experience, he or she would advance to the board of directors of Solvac [the holding company]. From that board, finally, family members on the board of Solvay are recruited (Homburg, p. 533).

Seats are allocated according to a point score, with points distributed depending on each family’s shareholding, presumably more or less the same as the original allocation at the listing in 1967, when the descendants of Ernest received 30.0 per cent, and of Alfred 17.5, with others ranging down to 2.0 per cent (Homburg, p. 394, Table 17.2). A board member is assigned to manage relations with the families, and in 2007 Janssen assured Homburg that this ‘is conducted very discreetly, very humanely, very friendly’ (Homburg, p. 533).

Since the 1980s Solvay has raised its dividend whenever possible, never lowered it, and spread payments throughout the year, all popular policies with the families. At the same time, said board member Alois Michelson, ‘If you are born with the shares in your cradle, you are more tolerant of losses’. Janssen reflected that ‘Many of them are wealthy for more than hundred years’, and in addition to their Solvay shares, ‘They own forests and farms’ that produce income only after many years. ‘The culture is not going for quick money. They are long term oriented’, and he concluded that ‘Most of them keep their Solvay shares, that they received from their parents and that they will give to their children’ (Homburg, pp. 533–534). That is, the majority of shareholders are not sensitive to changes in the price of their shares. As seen above, however, they are sensitive to the company’s independence. ‘The company still is a family firm, which sets limits on its indebtedness’ (Homburg, p. 563). Thus, the sale of the pharmaceuticals division and the following purchase of Rhodia may or may not have been the best strategic decisions, but were taken to prevent Solvay falling under outside control.

Currently Solvay Interox Pty Ltd Australia produces hydrogen peroxide and related materials in suburban Sydney and imports a very long list of products, including soda ash (Solway 2015). Attractive photos illustrate Solvay’s 2008 commitment to ‘sustainable development’ as a ‘key concept’ for plans leading to the firm’s 175th anniversary in 2038 (Homburg, pp. 551–552). The signals are mixed, however. Among featured products listed under the heading ‘Consumer Goods & Health Care’ is the range of cellulose acetates that ‘serves the cigarette filters market’. Both ‘Agro, Feed & Food’ and ‘Energy & Environment’, highlight guar derivatives. A recent development, not mentioned by Homburg, guar or cluster bean is a legume grown mainly in India and Pakistan, and like soda ash has a seemingly limitless number of applications. The gum is water soluble and can be used to change the viscosity of fluids in baked goods, cheese, ice cream, and fried food products, in animal and fish feed, in the paper and textile industries, in mining for ore flotation, and in explosives. The recent surge in demand, however, results in particular from its use in the hydraulic fracturing (fracking) extraction of oil and shale gas.

To conclude, Solvay’s history certainly qualifies as a long-running success story, but it also suggests that, at any point in time, family members are unlikely to be swayed by altruistic arguments that their firms should respond to the needs and desires of others, whether workers, shareholders, other firms, or the more amorphously defined publics that suffer from externalities such as environmental degradation. But neither are their actions simply responses to market pressures. Overwhelmingly their primary motive is not economic rationality, but to protect the family’s perceived interests, at the expense of stakeholders and the broader public if necessary, and even at the expense of reduced profitability. This means, given the importance of such firms, that in contrast to Fama’s assumptions, financial markets do not function efficiently, economic output is lower than its potential, and political systems are subjected to pressures that distort policy to benefit the few at the expense of the many.


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Frank B. (Ben) Tipton is Professor Emeritus of International Business in the University of Sydney School of Business. He has written eight books and some 50 articles. His current research considers the provision of access to information technology in ASEAN, and his current writing includes the Kyle Dancer crime novels set in Melbourne. He was educated at Stanford, where he studied with historians Gordon Craig and David Harris, and at Harvard, where he studied with economic historian David Landes and Nobel Prize winning economist Simon Kuznets. He is a non-smoker and lives part of the time in the environmentally sensitive Blue Mountains outside Sydney, where he enjoys daytime bush views and opposes fracking, and part of the time in Melbourne, where he enjoys night time city views and supports Collingwood.