SWEDEN is a progressive place. Women participate fully in the workforce. Companies are transparent, generally uncorrupt and often globally minded. Enthusiasm for technology helps Stockholm flourish as a lively startup centre for gaming, music and fintech firms. Business leaders earnestly talk of the benefits of going green, caring for workers and being ethical. In politics, Sweden is egalitarian, redistributing wealth through high taxes. So it is a puzzle that Swedish capitalism appears so strikingly unequal, with a small number of individuals owning and running large chunks of the economy.

Credit Suisse, in its annual report on global wealth in October, pointed to findings that the richest 1% of Swedish households control 24% of the population’s total wealth, making it only a bit less unequal than India (25.7%). In contrast, Spain’s 1% control 16.5% of the wealth, and Japan’s only 4.3%. As in many countries, family-controlled businesses are the norm in Sweden. But as Randall Morck of the University of Alberta in Canada has noted, Sweden is an extreme case among rich countries in that one particular family, the Wallenbergs, holds such sway in business.

The foundations were laid for the dynasty’s fortunes 160 years ago when André Oscar Wallenberg, the globe-trotting son of a Lutheran bishop, returned from America with a book on how to set up a bank, and founded Skandinaviska Enskilda Banken (SEB). The bank flourished, and began buying chunks of distressed industrial firms, leading the family to set up a holding company, Investor, 100 years ago.

At the height of the Wallenbergs’ pre-eminence, in the 1970s, their various firms together employed 40% of Sweden’s industrial workforce and represented 40% of the total worth of the Stockholm stockmarket. Like most modern manufacturers, the industrial firms in their portfolio, including ABB and Atlas Copco (engineering), AstraZeneca (drugs) and Electrolux (appliances), are no longer huge employers. But Investor, plus SEB and the other listed firms in Investor’s portfolio, still account for about a third of the stockmarket’s value. And they generally do better than the rest: in the past decade, Investor’s shares have doubled, whereas the OMX Stockholm 30 Index rose by just 40%.

Swedes often talk about the collection of companies as Wallenbergsfaren, “the Wallenberg sphere”, and to its smaller local rivals as “systems”. One of the largest systems is Industrivarden, whose portfolio includes Handelsbanken and the maker of Volvo Trucks. It has passed through several hands down the years, including those of Ingvar Kamprad, the founder of the IKEA furniture stores; its leading investor nowadays is Fredrik Lundberg, the son of a construction magnate. The Wallenbergs and Industrivarden both have large stakes in Ericsson, a maker of telecoms equipment.

Many Wallenberg firms have roots in the 19th century, before Investor was founded. But they have generally flourished under the active ownership and close managerial oversight of the family. The sphere is now overseen by a genial triad of middle-aged men, two brothers and a cousin: Jacob, Peter and Marcus Wallenberg (pictured, next page). A transition to a sixth generation of the family is looming, with the next set of leaders to be drawn from a pool of around 30 relatives in their 30s or younger. A hitherto male-dominated empire is then likely to have some Wallenberg women right at the top. Already, Caroline Ankarcrona, younger sister to Marcus Wallenberg and in her late 40s, has been running the main family foundation, KAW, for four years.

“Sphere” is one way of describing the Wallenberg holdings. A more pointed term (literally as well as figuratively) is the one Mr Morck uses: a pyramid. The Wallenbergs are thought to have combined personal wealth of just $1 billion or so, but they control, or have strong influence over, businesses worth hundreds of times as much.

They do so through a number of foundations. KAW, the largest, is named after two ancestors who provided the largest endowment, 99 years ago. KAW has 50.1% of voting rights in Investor, chaired by Jacob Wallenberg. It in turn holds stakes—and often outsized voting rights—in their main, listed firms, at which family members often take leadership roles. (Through a division called Patricia Industries, Investor holds majority stakes in financial, telecoms and other firms, and is also a founder-investor in a private-equity fund, EQT.)

Fear of tunnelling

These successive layers let the Wallenbergs multiply their clout. Investor has beaten the Stockholm market handsomely, but its listed businesses often trade at a discount to their global peers, points out Thomas Zellweger, who directs a centre studying business families in St Gallen, Switzerland. Outside investors may be discounting the shares out of fear of “tunnelling”, in which a controlling family uses one firm to prop up another—though Mr Morck notes that there is scant evidence of this.

Shareholders may also fear a controlling family pursuing its private obsessions, while neglecting the business: an early Wallenberg, for instance, campaigned assiduously for a single global currency, based on gold and the French franc. They may also worry that the next generation of Wallenberg bosses are chosen for internal family reasons rather than on merit. The Wallenbergs have managed their successions well over the years, but there is no guarantee this will always be so.

The Wallenberg empire might in theory be threatened if, as in other countries, there were moves towards curbing the use of the dual-class shares that let the family exercise such sway over its firms. In Ericsson, for example, Investor has just 5.3% of total stock, but controls 21.5% of votes. In Electrolux, Investor has 15.5% of the stock, but 30% of voting rights. Family firms often use such dual shares (The Economist Group, largely owned by European business families, uses them too), but prevalence does not mean popularity. However, the family has long enjoyed good political connections: for all its support for free trade and open markets abroad, until the 1990s it had decades of help from protectionist policies that kept foreign predators at bay.

That the KAW and other foundations get the Wallenbergs’ share of profits helps shield them from Sweden’s top income-tax rate, of 62%. The foundations’ beneficence also helps shield them from criticism: the KAW, for instance, makes $250m of grants a year, notably to fund basic research and education.

Nordic, not Anglo-Saxon

Discuss their set-up with the Wallenbergs and they say “Anglo-Saxons”, schooled in British and American ideas that companies are best owned by masses of small investors (or pension funds), are wilfully blind to the benefits of family-dominated firms. The family argues that ownership models need not be “black and white”, that theirs has proved it can deliver a “nice track record” for more than a century-and-a-half. Well-run family firms can ensure modern virtues—transparency, professional management, clear communication, agility—as easily as those Anglo-Saxons.

Tour the headquarters of Ericsson, and its CEO, Hans Vestberg, offers a similar argument: a stolid company, founded in 1876 (and part-owned by the Wallenbergs since 1950), can be nimble, even ruthless. Ericsson frittered away the strong position it once had as a maker of mobile handsets. But Mr Vestberg talks optimistically of how it will prosper from the coming launch of fifth-generation (5G) wireless telecoms and the “internet of things”. Ericsson, with a $5 billion annual research-and-development budget, files 4,000 patents a year, he says. In less than two years it has hired 30,000 staff, but also let go 28,000, to make possible a shift from a company that sells products to one more focused on services.

Gunnar Wetterberg, author of a book on the Wallenberg family, argues that having most of its wealth locked up in the foundations best explains its long-term success: family feuds are discouraged when no relative can dream of running off to Bahamas with all the loot. “There are no family fights,” says one Wallenberg. “No one understands how it works, but it works well.”

Other observers prefer explanations that focus on the personality and skills of a mostly self-effacing, hard-working and polyglot clan. Their spells working in the companies make them better owners. Carina Beckerman, who has just written a book on culture and leadership in Wallenberg companies, lauds two qualities that help encourage success. One is doggedness: the Wallenbergs found few firms, but they stick with existing ones, seek new markets and try ways to make them flourish. She notes that Atlas Copco had to be rescued from near-bankruptcy three times in its first 27 years, but now flourishes.

The second quality, says Ms Beckerman, is a near-obsession with getting the right managers in place: it is often the top item on the agenda whenever the Wallenberg leaders gather. They typically favour loyal insiders, not show-offs who promise dramatic change.

Not everything the family touches turns to gold. Efforts to go digital, just over a decade ago, by investing in a pair of online firms, Spray Networks and Bredbandsbolaget, had disappointing outcomes. Scania, a lorry-maker that has flourished since being bought by Volkswagen in 2000, was sold too cheaply, says Ms Beckerman.

But the sphere’s more recent efforts to expand its medical interests have been more successful—witness its investments in Sobi, which specialises in treatments for haemophilia and other rare diseases, and in Mölnlycke Health Care, which makes products for use in surgery and treating wounds. Even if its dominance of the Swedish business scene has diminished in recent decades, the Wallenberg sphere looks set to go on prospering in the hands of its sixth generation.

That makes them mere parvenus compared with the Lovenskiold family across the border in Norway: now led by its 13th generation, it claims a 360-year history and runs successful timber and furniture firms. But there may be a shared recipe for such longevity. “The majority of the really successful, long-lasting families are, like the Wallenbergs, convivial, modest, see the hard work needed and do it quietly,” says a close observer. If they were a bunch of work-shy show-offs, Swedes would surely have noticed the inequality by now.