LVMH’s Bernard Arnault, Zara’s Amancio Ortega, Stefan Quandt of BMW, the Bettencourt family (L’Oréal), the Kamprad family (Ikea)... These are just a few of the individuals and families in Europe whose high net worth is intertwined with the transnational corporations they or their families founded. How have these people managed to become so incredibly rich? And how have they managed to stay that way despite the numerous financial crises? Tax optimisation, lack of transparency, profit hoarding, family ties and political complicity are just a few of the ways in which the foul play of transnational corporations has resulted in a surge of ultra high net worth individuals, and vice versa.
“Worldwide inequality has risen sharply since 1980,” stated a report on global inequality published in 2018 and written by several authors including French economist Thomas Piketty, author of the now well-known book Capital in the Twenty-First Century. The rich are thus getting richer, and an increasingly amount of wealth is leaving the hands of communities and being forfeited to private owners. This trend, unprecedented in over half a century, is illustrated by the fact that, according to the Bloomberg business channel, the thirteen wealthiest individuals in France made money much faster than their counterparts in other parts of the world .
The private wealth of Bernard Arnault and his family has thus soared to more than 90 billion euros. The net worth of Zara CEO Amancio Ortega has climbed to 60 billion euros. And the heirs of Liliane Bettencourt also have reason to celebrate, with 45 billion euros to their name. The wealthiest Europeans include also the owners of Chanel (the Wertheimer brothers), the owners of Hermès (the Dumas family) as well as the German owners of the low-cost supermarkets Aldi and Lidl, the Austrian owner of Red Bull, Dietrich Mateschitz, and the Mulliez family, owners of the French Auchan group.
The two branches of the Italian family that built the Ferrero empire and the Nutella brand also occupy a leading position as does the owner of the Italian luxury brand Luxottica (Leonardo Del Vecchio) and the Swedish owners of H&M (Stefan Persson) and Ikea (Ingvar Kamprad). In Germany, the family that owns BMW, as well as the lesser-known family behind the Schaeffler company, also feature among the continent’s wealthiest. How have they managed to hoard all these billions, and continue to do so despite a string of worldwide financial crises?
Rule number 1: Keep it in the family (and preferably be a man)
The biggest fortunes in Europe are built – and are passed on – by ensuring the company or flagship group stays strictly within the family. This is the rule that French billionaires stick to. The Bettencourt family, whose proximity to important political circles has made headlines on a number of occasions, is a case in point. Liliane Bettencourt died in 2017, but her daughter Françoise Bettencourt Meyers took over as head of L’Oréal. The granddaughter of the company’s founder Eugène Schueller is now the chairwoman of the family holding company Téthys, the L’Oréal supervisory board and the investment subsidiary Téthys Invest. Françoise Bettencourt’s husband Jean-Pierre Meyers is vice-chairman of the company’s board of directors and sits on a number of its boards. Their son Jean-Victor Meyers, only just in his thirties, joined L’Oréal’s supervisory board in 2012.
Bernard Arnault’s children Antoine and Delphine are paid generously for their directorial positions at LVMH: more than a million euros respectively. At Hermès, the net worth of its owner Axel Dumas is estimated at more than fourty billion euros. His descendants still hold the reins, with the family owning more than 65% of the company’s capital. Axel Dumas, at the head of the family, is a direct descendant of founder Émile-Maurice Hermès. At least seven other family members sit on the supervisory board.
The Mulliez, the man behind the Auchan group and a dozen other brands, has no less than 32 billion euros to his name. The family is of such key importance to the company that the Mulliez Family Association – an economic interest group that includes only family members – owns the entire group. The Bollorés also like to keep business in the family with Vincent Bolloré presiding over the company, and his children in charge of a handful of subsidiaries. Yannick Bolloré is the CEO of communications group Havas, Cyrille manages the transport and logistics division, strongly present in Africa. Sébastien sits on the board of several subsidiaries, and Marie, the baby, heads the subsidiary Blue Solutions and manages the car-sharing service Autolib.
Family capitalism is not just a French trend. The German company Henkel, which manages a number of brands including Persil laundry powder, and a dozen other household and cosmetic products, has been a family business since it was founded in 1876. It owns more than 60% of the capital. The Schaeffler family goes a step further, owning 100% of its industrial technology company. The net worth of Georg Schaeffler is estimated to be in the ballpark of 13 billion euros.
Being an heir or not, you would have, in terms of probability, more chances of becoming a billionaire if your are a man. There are some women billionaires in Europe. But among the 11 richest European billionaires, only 3 are women: heiresses of wealthy families such as Susanne Klatten, Françoise Bettencourt-Meyers, and Charlene de Carvalho-Heineken.
Rule number 2: Cash in as many dividends as you can
Dividends are the share of profits paid out to a company’s shareholders. In a big corporation, these increase every year and now represent astronomical amounts. This is money that is not being reinvested or being used to pay those making the company’s capital gain, in other words, the workers. At fast fashion retailer Zara, 63% of profits were thus paid out to shareholders in 2017, two thirds of whom are members of the billionaire Ortega family. Amancio Ortega himself received more than one billion euros in dividends in 2018 and in 2017.
Similarly, in 2016, LVMH paid out 45% of its profits to its shareholders (and 41% in 2017) – a total of more than two billion euros, up 500 million from 2012. Nearly a billion euros went directly to Bernard Arnault and his family. The shareholders of BMW were paid out “the biggest dividend in the company’s history” in 2016, as its annual report boasts, to the tune of 2.3 billion euros. The Quandt-Klatten family (the brothers and sisters of Stefan Quandt with a net worth of more than 16 billion euros, and Susanne Klatten with a tidy 18 billion to her name), which owns 46% of the company’s capital, thus pocketed just over a billion euros in dividends in 2016. And the same amount again in 2017 and 2018.
Rule number 3: Creativity is key in legal matters
French retail giant Auchan is the veritable kingdom of the Mulliez family whose net worth comes to some 32 billion euros. At its throne sits Gérard Mulliez. The family owns a handful of other companies including Pimkie and Décathlon. But as the company is not listed on the stock exchange, it is not required to publish its financial results. Nor does the Association Familiale Mulliez (Mulliez Family Association), the holding company that owns all these companies. There is another outcome to this original way of running a company (which must lead to some interesting dinner conversations): in the event of a dismissal in one of the companies owned by the Association, the “company” completely dodges its redeployment obligations! Auchan’s trade unions have made repeated attempts to illustrate that behind the association lies a “de facto” company, but to no avail. “Employment positions and human resources would have to be managed at the level of the Association; if the latter was recognized as a company, it would of course be possible to redeploy employees, given how big the group is. There might not even be any need to lay people off at all!” explains Guy Laplatine, CFDT union representative at Auchan. “But the Mulliez family know how to look after themselves.” The result is that more than 200 employees from Pimkie stores are soon to be made redundant and have little chance of being redeployed in the Auchan group even though it employs 80,000 people in France and over 300,000 worldwide.
Rule number 4: Steer clear of transparency
Europe’s two leading low-cost retail chains – Aldi, owned by the Albrecht family (Karl and Theo with a net worth of 36 billion euros), and Lidl, owned by Dieter Schwarz, who has clocked up 17 billion euros – are alike in that they both follow the same “zero transparency” strategy. “The Schwarz group is a medley of companies, foundations and businesses, and resembles a ‘black box’ shrouded in mystery,” remarks German trade union Verdi. “The main companies are those of the Schwarz KG group (where the voting rights are) and the Dieter Schwarz Foundation (where the shares are). And then there is the Schwarz holding company. The central governing power is the group of Schwarz companies, the holding company that controls everything else,” explains the trade union.
The corporate structure of the Swedish furniture heavyweight Ikea is no less convoluted. The company’s founder Ingvar Kamprad died last January at the age of 91. He was one of Europe’s richest individuals, and his wealth will most likely be passed down to his family. Before his death, Ingvar Kamprad also built a Hydra-esque conglomeration of holding companies, firms and foundations around his furniture stores based in the Netherlands, Luxembourg and Liechtenstein. “In 1982, Ingvar Kamprad divided Ikea into two legally distinct groups: the Inter Ikea Group, which now operates as a Luxembourg-based holding company, and the Inter Ikea holding company, which was placed under the ownership of the Interogo Foundation, established in Liechtenstein in 1989,” stated a report by the European Greens in 2016. “And then there is the Ikea group, attached to the Dutch company, INGKA Holding, which Kamprad placed under the ownership of the Dutch foundation, Stichting INGKA.”
Like wandering through the company’s immense furniture stores where kitchens, living rooms and bedrooms are all stuck onto one another, it’s easy to see why one might get lost in such labyrinthine arrangements. And it doesn’t end here. The Greens report also highlights that although “the Inter Ikea group has owned the stores and, since at least 2012, the Ikea brand, the Kamprad family also owns another company: the Ikano Group, which split from Ikea in 1988. The group is managed by Ingvar Kamprad’s three sons through a holding company based in Curaçao,” which also happens to be a tax haven, as are Luxembourg and Liechtenstein.
Rule number 5: Dodge the taxman
Avoiding transparency is also a way to get around the taxman, or at least take advantage of tax loopholes. Ikea is one of the companies that in 2012 refused to be investigated by the French National Assembly’s commission on tax optimization. In December 2017, the European Commission also opened an investigation into the company’s advantageous tax arrangements in the Netherlands. Since the early eighties the company has operated under a franchising model: “All the Ikea stores in the world pay a fee of 3% of their turnover to Inter Ikea Systems, a subsidiary of Inter Ikea established in the Netherlands,” explained the European Commission in a statement. Revenue from these subsidiaries should therefore be taxed in the Netherlands. However, added the Commission, “two anticipated tax rulings granted by the Dutch tax authorities in 2006 and 2011 had significantly reduced the company’s taxable profits.” Under the first agreement, the profits were transferred to Luxembourg where they were untaxed. Then after 2011, the Dutch tax authorities allowed Ikea to shift a significant part of its profits to Liechtenstein, where, again, they were not required to pay tax. These operations are estimated to have cost the EU a billion euros in taxes between 2009 and 2014, including of tens of millions of unpaid taxes in France .
Another investigation by the European Greens criticised Zara, whose country of choice is the Netherlands when it comes to money matters. The company also stores cash in Ireland and Switzerland, saving the company and its affluent owner 585 million euros in taxes between 2011 and 2014. Another case is that of the Kering group, owned by French billionaire François Pinault (a net worth of over 29 billion euros). In March 2018, the French magazine Mediapart revealed that by stashing money in subsidiaries based in the Netherlands, Luxembourg and Switzerland, the company had evaded approximately 2.5 billion euros in taxes since 2002, “most of which should have gone to Italy as well as France and the UK.”
The Paradise Papers also shone the spotlight on French arms company Dassault and its subsidiaries based on the Isle of Man, a well-known tax haven. It appears that the subsidiaries enabled the company to avoid paying VAT on private jets. “Between the years 2008 and 2012, Dassault Aviation set up seven financial leasing companies on the Isle of Man to meet the financing needs of its clients during the financial crisis,“ the group countered in a statement. Several months earlier the big boss Serge Dassault who passed away on May 28th 2018 at the age of 93, was deemed ineligible to assume a political office for five years and fined two million euros for hiding tens of millions of euros from the tax authorities over a fifteen-year period.
Rule number 6: Treat your workers badly
In early March 2018, Zara workers in the Basque town of Gipuzkoa took action against the poor working conditions they are subjected to. With part-time contracts of 15-25 hours a week, Zara employees in Spain, for the most part women, are struggling to make ends meet. Because working for a billionaire doesn’t mean you get paid a decent salary. Far from it. Whether it be Zara, H&M, Ikea, Aldi or Lidl, the working conditions in these firms feature among the worst out there. “Aldi offers its workers mainly part-time contracts; it’s rare that a cashier manages to get a thirty-eight-hour a week salary,” stated the German trade union Verdi.
Ikea, on the other hand, has taken to spying on its employees. “Ikea France has indeed set up a ‘large-scale system’ to spy on applicants and on certain employees,” stated the French newspaper Le Monde in spring 2018. The system involves checking police records, an illegal procedure. Early in 2018, French prosecutors requested that Ikea France and fifteen individuals including two of the company’s former CEOs, appear before a criminal court. And yet Ikea promises its future employees that “working with us is not just fun; it’s also rewarding. The workplace is a relaxed and human place.”
Rule number 7: Treat your workers badly (again)
In the garment industry, manufacturers rely heavily on outsourcing, employing workers in Eastern Europe, Turkey, Asia and South America. In 2011, three of Zara’s garment factories based in São Paulo, Brazil were investigated, revealing appalling working conditions, which the Brazilian Ministry of Labour compared to modern-day slavery. Dozens of workers, for the most part Bolivian and Peruvian, were working in these factories, and the investigation revealed “illegal contracts, child labour, degrading working conditions, sixteen-hour days, illegal deductions off wages, employees detained in the workplace…” detailed the NGO Reporter Brasil, which accompanied the labour inspectors. The officers freed 15 people including a fourteen-year-old from forced labour.
And sometimes employees are not even paid. In Turkey, a hundred employees working in a factory subcontracting for major garment brands including Zara are struggling just to get paid for their work.
Along with French companies Auchan and Carrefour, Zara is one of thirty-two brands that subcontracted work out to the garment factory in Rana Plaza, in Dhaka, Bangladesh. The building collapsed on the 24th of April 2013, killing 1,138 people and injuring more than 2,000. Zara made a generous contribution to the compensation fund for victims. Along with H&M, it subcontracts a massive amount of work out to garment factories in Bangladesh. But according to the NGO Clean Clothes Campaign, H&M’s subcontracting factories are still far from being safe working environments. 70% of factories still don’t have an emergency exit in the event of fire.
The Golden Rule: Play the card of political influence (and if possible become yourself a politician)
In addition to a certain complicity between politicians and the affluent, the latter also attempts to influence institutions through lobbying activities. The European Transparency Register, where major companies are required to list the number of lobbyists working in European institutions as well as the amount of money spent on lobbying, gives some idea of just how important lobbying is to companies. Ikea spends more than 500,000 euros a year on lobbying in Brussels where it employs seven people entirely focussed on defending its interests in matters such as corporate taxation, data protection and the labour law. And it is not the only one to take lobbying so seriously. Most of the heavyweights including LVMH, L’Oreal, Lidl, H&M, Hermes and Auchan invest hundreds of thousands of euros – if not millions – in lobbying activities which promise lucrative returns .
In Germany, political parties even receive direct cash donations. In 2017, billionaire BMW owners Susanne Klatten and Stefan Quandt donated 200,000 euros to the conservative parties CDU (Angela Merkel’s party) and FDP (liberal), in addition to 100,000 euros donated to the CDU in 2016. Between 2010 and 2017, the same billionaires gave a total of more than a million euros to the CDU, more than 700,000 euros to the conservative Bavarian party (allied with the CDU) and more than 550,000 euros to the liberal party FDP. 450,000 euros was even donated to the German social democratic party SPD . It’s never a good idea to put all your (Fabergé) eggs in one basket.
But it is perhaps the Czech oligarch Andrej Babiš, (with a net worth of 3.2 billion euros) that has been more effective in gaining political influence. He increased his wealth until becoming the second richest citizen of the Czech Republic, then, in 2017, he became Prime Minister. In Hungary, the man who became the richest man of the country in 2019, Lőrinc Mészáros, is a close friend of Prime minister Viktor Orban. The pattern is similar in Western Europe. The French billionaire Serge Dassault, who passed away in 2018, was a senator from 2004 to 2017. His son Olivier Dassault has been an MP since 1988 (with a break between 1997 and 2002). The family can also count on the power of influence of its press group Le Figaro. Bernard Arnault, billionaire owner of LVMH is also involved in the media, owning French newspapers Les Echos and Le Parisien. And three other French billionaires Patrick Drahi, Xavier Niel and Vincent Bolloré (all of whom are under the ten billion mark) have also branched out to become media moguls. In Germany, the big media magnate Axel Springer, publisher of the very popular Bild Zeitung (more than 1.6 million copies sold daily) is another one with a net worth of more than four billion euros. If you want something done, do it yourself, right?
Rachel Knaebel, Observatoire des multinationales