Family businesses are an often overlooked form of ownership. Yet they are all around us—from neighborhood mom-and-pop stores and the millions of small and midsize companies that underpin many economies to household names such as BMW, Samsung, and Wal-Mart Stores. One-third of all companies in the S&P 500 index and 40 percent of the 250 largest companies in France and Germany are defined as family businesses, meaning that a family owns a significant share and can influence important decisions, particularly the election of the chairman and CEO.

Long-term survivors usually share a meritocratic approach to management. There’s no single rule for all, however—policies depend partly on the size of the family, its values, the education of its members, and the industries in which the business competes. For example, the Australia-based investment business ROI Group, which now spans four generations of the Owens family, encourages family members to work outside the business first and gain relevant experience before seeking senior-management positions at ROI. Any appointment to them must be approved both by the owners’ board, which represents the family, and the advisory council, a group of independent business advisers who provide strategic guidance to the board.