More than half of Dutch family businesses lack a dividend policy

Only 46% of large Dutch family businesses have a dividend policy in place. This is according to research by Nyenrode Business University, RSM and Van Lanschot Kempen among 130 family businesses. This means a majority (54%) of family businesses are missing opportunities in terms of transparency, continuity and family harmony. According to the researchers, the absence of clear agreements points to an obvious need for further professionalisation within family business governance.

Lack of structure increases risks

Family businesses with multiple owners are more likely to have a dividend policy (51%) than companies with just one owner (30%). Nevertheless, more than half of companies still make dividend decisions without fixed rules. Almost half (45%) of companies with a dividend policy base distributions on a fixed percentage of profit, compared to just 6% of companies without a policy. "The absence of a dividend policy can lead to ambiguity, disappointment and even conflicts," says Prof. Dr Marta Berent-Braun, Van Lanschot Kempen Professor of Family Business and Ownership Dynamics at Nyenrode. "Professionalisation is essential to safeguard both business continuity and family harmony."

Investment needs before family interests

Almost nine in ten family businesses (88%) prioritise the company's investment needs over the owners' personal income. Only 3% are unwilling to reduce dividends to enable future investments. This underscores the long-term vision of family businesses. "Family businesses don't think in quarterly results, but in generations," says Prof. Dr Roberto Flören, RSM Professor of Family Business and Business Transfer at Nyenrode. "They have patient capital at their disposal and opt for the long term, even if this means the family temporarily receives less."

Dividends frequently distributed

81% of family businesses paid out dividends at least once in the past three years, with 45% doing so in all three years. The main drivers are moving wealth outside the company's risk sphere (58%) and tax considerations (46%). Companies with multiple owners more often cite obligations to shareholders (37% vs 12% for single-owner companies).

Mark Buitenhuis, Managing Director Private Banking Dutch Regions at Van Lanschot Kempen: "We recognise from practice that establishing a dividend policy is becoming increasingly important in family business wealth planning. A dividend policy provides transparency and contributes to stability and continuity within a family, across generations too."

Why no dividend?

Despite frequent distributions, one in five family businesses deliberately chooses not to pay dividends. The main reasons are financing investments from own resources (48%) and strengthening the equity position for creditors or external financiers (34%). Additionally, 26% say the owners don't need the dividend.

Notably, 33% of companies consider their solvency too high. Over 17% deliberately pay dividends to reduce solvency. A majority of family businesses (57%) prefer not to attract external financing, and 54% would rather finance through their own holding company instead of via a bank. For 65% of companies, dividend policy or distribution has no impact on their use of external financing.

Laura Bles-Temme, Co-Managing Partner RSM: "In many cases, not paying dividends is actually a deliberate choice: investing in the future, building a strong foundation and remaining independent. This demonstrates the unique strength and long-term vision of family businesses."

Governance makes the difference

Good governance proves decisive. Family businesses with a Supervisory Board or Advisory Board are almost twice as likely to have a dividend policy (68%) as companies without (32%). In most cases (70%), the family owners themselves draft the policy, often together with the management board (40%) and/or a STAK board (38%).

Flören urges family businesses to establish a professional dividend policy. Not only to prevent conflicts, but also to strengthen governance and financial structure.

For more details, please refer to the full Dutch press release: “Meer dan helft familiebedrijven mist dividendbeleid.”