Business dynasties


Family wealth won’t pass through more than three generations, goes a Chinese saying. The adage still rings true when it comes to Asian businesses. The region’s family-owned businesses are likely to fail when it comes to handing over the business to the next generation.

The failure often occurs as more relatives and other stake holders join the company, making the decision, making process complex, states the ABN Amro private banking and INSEAD study. By the time the third generation has taken the helm, the problem tend to accumulate and magnify, adds the survey.

Some other reasons for the failure are the tendency to put off succession and wealth till the last minute, or it being postponed indefinitely. Sibling rivalry, abilities of women being discounted for the sake of tradition and disharmony between the business and goals of the individual also often contribute to the misery.

The qualitative survey was conducted among 33 high net worth (HNW) families in Asia and 25% respondents were Indian. The annual turnover of family businesses represented in the survey was distributed evenly among brackets of $5 to $25 million, $25 to $50 million, $100 to $250 million, and greater than $250 million.

The survey also covers sibling rivalry, something the Indian reader would be able to relate to quickly. Disagreements between family members are seldom about corporate strategic issues, but are founded in sibling rivalry arising from unfinished business when they were children. One South Asian family in the survey reported as epic family split, with two brothers holding irreconcilable views on the future strategy of the business they inherited from their parents.

Two survey respondents also pointed to recent illness or death in the family as a trigger to involving other family members more closely in the management of the business. “The grandmother’s death last year was a turnaround for the family. My father began to worry about the future of the family and took steps to involve other family members in the business and wealth management,’ one respondent said.

Women continue to be consigned to the background. Around 45% of the survey’s 33 respondents stated that women were not involved in the business. This is despite greatly improved access to education that women across Asia have in the past few decades. The expectations of women are beginning to change, as daughters gain influence in managing family businesses and wealth.

The advent of the new generation has paved the way for broader participation of women especially daughters, in running the family business and in selected aspects of wealth transfer, such as managing charitable trusts and facilitating succession.

To summarize,

* Reasons for failure of Asian businesses range from putting off succession plans, the inclusion of relatives in the business and the abilities of women being discounted.

* The advent of the new generation has paved the way for broader participation of women, especially daughters.

* Women are also being looked at for running aspects of wealth transfer, such as managing charitable trusts and facilitating succession.

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