December 14, 2011 11:42 pm

Family ties that bind Asia Inc

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Devotion to kin is both a strength and a weakness

Sir Run Run Shaw’s retirement last week as chairman of TVB, the Hong Kong broadcast business that is one of the world’s largest producers of Chinese-language programming, was a formality.

Sir Run Run had not been managing the company for some years and the Shaw family sold its controlling stake earlier this year. But the advanced age at which he retired – Sir Run Run is 104 – was a reminder that Asian businessmen like their tenures at the helm of companies they set up to be practically infinite.

The founders of Hong Kong’s largest conglomerates, such as Li Ka-shing, chairman of Cheung Kong, and Lee Shau-kee, head of Henderson Land Development, are in their 80s. And like Queen Elizabeth, they do not look likely to step down soon. “The founders are very capable and ambitious and won’t let go,” says a consultant who has worked with some of Hong Kong’s family-owned behemoths and asked not to be named. “There’s a work hard and keep going attitude.”

Li Ka-shing has crafted one of Asia’s most compelling rags-to-riches stories to become the continent’s richest man. When I interviewed him in 1998 he struck me as perennially youthful if exhaustingly evasive. Watching the 83-year-old deploy his charm at press conferences more recently, both characteristics seem undiminished. But Mr Li has a clear succession plan in place. His eldest son, Victor, who has long worked alongside his father, will take over.

In India, meanwhile, the much trumpeted search since August 2010 for an outsider to succeed Ratan Tata ended last month with the son of the company’s largest shareholder being given the job. The long-running saga was an overcooked Bollywood melodrama – minus the drama.

The idea that Asian values represent a monolithic belief system across so many different cultures is questionable, but Asian family businesses are almost always hereditary. The idea that a professional manager might take over when a powerful tycoon retires is anathema. Just discussing succession is often seen by superstitious Asians as a bad omen. “To have explicit discussions is also seen as losing power,” explains the consultant.

Just discussing succession is often seen as a bad omen

This devotion to family is both a strength and a weakness. Many overseas Chinese businessmen rely on close-knit family networks for financing to expand quickly when bank loans are difficult to obtain. But this becomes a handicap when a business grows, is publicly listed and it is time to hand over the reins.

Writing in the South China Morning Post last month, Randel Carlock, a professor at Insead, described the leadership model of such founder-led companies as a “majority-of-one”. This means fast and quick decision-making when a company is young, but leads to problems “when a founder-entrepreneur is unwilling to move to a shared leadership model with adult children . . . which can damage both the business and the family”.

In addition, the second- or third-generation family members in Asia hardly ever have to compete for their jobs with professional managers when they do take over.

Part of the problem is that Asian conglomerates are an integral part of the political economies of countries like India and China where personal connections count. The family name helps open doors to government offices and overawe subordinates.

In both China and India, politics are dominated by influential families, so it would be surprising if their companies were radically different. In China, Xi Jinping, who is expected to take over as Communist party general secretary next year, is the son of a veteran Communist leader. Rahul Gandhi, whose grandmother Indira turned India’s Congress party into a family enterprise, is trying to build a meritocracy within it – but many of the younger Congress leaders are also the children of politicians.

The gold standard among India Inc for professional management remains Infosys Technologies. In 1981, the seven co-founders of Infosys made a pact that none of their children would be employed by the company. N.R. Narayana Murthy, who stepped down as CEO in 2002 and chairman earlier this year, was interviewed at length in November’s Harvard Business Review. How, I wondered, would Mr Murthy explain this extraordinary anomaly? He regards this achievement so matter-of-factly that he did not even mention it.

rahul.jacob@ft.com

Michael Skapinker is away

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