Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Lego Family Built a Toy Empire With a Foundation Ownership Model
Transcript
- Lucas: When we think of family businesses that have lasted multiple generations, Lego is one of those rare cases where the family actually got stronger with each transition — and the key is a foundation ownership structure. Luna: But it wasn't always smooth sailing. I remember reading about a near-bankruptcy in the early 2000s. How did they go from that to one of the most valuable toy brands in the world? Lucas: That crisis was a real turning point. But the foundation model is what allowed them to survive it. The family set up a structure where they don't own the company directly; instead, Kirkbi — the family holding company — controls about three-quarters of the shares, and the Lego Foundation owns the rest. Luna: And that foundation isn't just a shell. Its mission is to fund children's education through play. So it aligns the company's long-term purpose with the family's values. Lucas: Exactly. And honestly, if you find these kinds of governance insights valuable, we keep this show ad-free because of listeners who chip in. If today's episode moved your thinking about family business, that link is buy me a coffee dot com slash fexingo. It really does help us keep doing this. Luna: It's the smallest ask, and it makes a big difference for us. So back to Lego — to understand how that structure came about, we have to go back to the beginning. Lucas: Right. It all starts in Billund, a small Danish village, with a carpenter named Ole Kirk Christiansen. In 1932, he lost his wife and his business in the same year. He started making wooden toys to keep afloat. Luna: And the name Lego comes from the Danish phrase 'leg godt,' meaning 'play well.' He didn't even plan on plastic at first. Lucas: No, he bought a plastic injection molding machine in 1947, which was a huge leap for a small toy maker. His son Godtfred saw the potential in the interlocking brick design and patented it in 1958. That brick is the foundation of everything. Luna: So Godtfred was the one who really turned a carpentry hobby into a global system. But the family still owned everything outright at that point. When did the foundation come in? Lucas: That happened under the third generation. Godtfred's son, Kjeld Kirk Kristiansen, took over in the late 1970s. He expanded aggressively — theme parks, new product lines — but by the early 2000s, the company was bleeding cash. Luna: I read that in 2003, Lego was losing about one point three million Danish kroner per day. The family realized they couldn't just keep doing what they'd always done. Lucas: That's right. They brought in an outside CEO, Jorgen Vig Knudstorp, who streamlined operations. But the crucial move was separating ownership from management. In 2004, the family restructured so that Kirkbi held the controlling stake, and the Lego Foundation got the rest. The foundation's dividends fund philanthropic work. Luna: That meant the family could focus on long-term strategy and values, while professional managers handled day-to-day decisions. It's a classic dual structure that avoids the 'founder's trap.' Lucas: Exactly. And it also insulated the company from short-term pressures. Because the foundation and Kirkbi aren't looking to sell or maximize quarterly profits. They're thinking in 50-year increments. Luna: Plus, it prevents ownership squabbles. The shares are locked in those entities, so individual family members can't sell their stake. That keeps the company private and unified. Lucas: Right. Kjeld's children — Thomas, Agnete, and Sofie — all sit on the boards of Kirkbi and the foundation, but they don't own the shares personally. The wealth is concentrated, and the governance is robust. Luna: It's almost like a Scandinavian version of the Wallenberg model, but with a more philanthropic twist. The foundation's mission is literally to bring play to children worldwide. Lucas: And it works. Since the restructuring, Lego has grown into the world's largest toy company by revenue. They've also invested heavily in sustainability — plant-based bricks, recycling programs — which aligns with the family's long-term view. Luna: But it's not just about the structure. The culture is also passed down. The family story of resilience, the 'only the best is good enough' motto from Ole Kirk — that still drives innovation. Lucas: Absolutely. Kjeld once said that the foundation ensures Lego will never be sold or go public. That kind of commitment is rare in family business. Most families eventually cash out or lose control. Luna: So what can other family businesses learn from Lego? I think the biggest lesson is to separate ownership from management early, and to use a foundation or holding company to pool the shares. Lucas: And don't wait until a crisis. Lego set up Kirkbi and the foundation during the turnaround, but many families do it too late. By then, factions have formed or the company is already in distress. Luna: Another lesson: choose the right non-family CEO. Jorgen Vig Knudstorp was an insider who understood the culture but had the authority to make tough calls. Not every family is willing to hand over the reins. Lucas: Right. And even after Knudstorp stepped down, the family remained involved. Kjeld's son Thomas now chairs the board of Kirkbi. So there's continuity, but not control from the C-suite. Luna: It's a delicate balance. But Lego proves that with the right governance, a family business can scale globally without losing its soul. Lucas: And that's the core of what we explore on this show — how families design structures that let them think beyond their own lifetimes. Lego's foundation model is one of the best examples I know. Luna: So if you're running a family business and wondering how to preserve your legacy for the next generation, look at Billund. They've been doing it for nearly a century. Lucas: And with a foundation ownership model, they're set for at least another century. Thanks for listening to Family Business Stories with Fexingo. Luna: We'll be back next time with another story of succession, legacy, and resilience.