All in the family
Until it is not
The Signal and The Intersection are taking a break until January 3, 2022. However, we will not leave you without your daily fix. This week we will bring you special editions of The Signal with a selection of stories based on themes that dominated 2021. Today’s is on family businesses. Happy holidays to all our readers.
Family businesses contribute half of the world’s GDP and account for two-thirds of global employment. Several of them have grown into large public corporations and made members of the founding families fabulously wealthy. Many are second, third or fourth-generation owners.
It is difficult to preserve and grow great wealth. It is even more difficult to divide and pass it on to the right inheritors. The pandemic has accelerated succession planning by many families. Long-reigning leaders are hiring professionals to draw up plans. Lawyers are at work where couples are separating.
In some cases family members have landed in court or are slugging it out in boardrooms for control of companies. And in one case that The Signal has followed closely, an ageing patriarch is fighting to regain control of the business empire he built.
The View From Antilla
The world’s 10th richest man, Mukesh Ambani, is reportedly putting together a succession plan. The 64-year-old Ambani and his wife Nita Ambani have three children and a $208 billion empire to manage. He is said to be planning to move the family’s holdings into a trust-like structure with all the family members owning stakes while the oil-to-retail conglomerate is run by professional managers.
Here’s what we wrote in The Signal when the news broke.
When great wealth is handed down to another generation, it becomes a case study. Many Asian families are keeping eyes peeled on the Ambani family to draw lessons and watch out for mistakes. Mukesh’s father, Dhirubhai Ambani, died without a plan in place. Within a couple of years of his passing, Mukesh and his younger brother Anil were locked in a feud that ultimately led to the giant business being carved up.
One of the cleanest succession plans in India was put in place by OP Jindal, who wrote it out in his will 20 days before his death in a chopper crash. The plan envisioned creating four different holding companies in which all his children and their mother Savitri Jindal had ownership but different levels of control. That meant each had a part of the empire to manage independently but the value created in the whole flowed to everyone. If one did well, the others benefited too. If one faltered, the others were hedged.
One For All And All For One
“All the houses belong to everybody; all the cars belong to everybody. There is no ‘this is mine and this is yours’. All the children belong to everyone. We have kept one kitty. Everyone works as a duty. There are no wills,” Srichand Hinduja reportedly said in an interview to Financial Times in 1994.
The London-based Hindujas are the Queen’s neighbours and have long been an influential presence in British society and politics. Even more remarkable was the extraordinary unity of the family with the four brothers working in tandem to grow their transcontinental businesses. That has begun to unravel. The oldest, Srichand Hinduja, is afflicted with dementia and his daughters have reportedly moved court to annul an accord signed by the brothers in 2014 that asserted that “the assets held by one brother belong to all and that each will appoint the others as their executors”, Forbes India magazine reported. Trouble began a year later and now the family is in court.
The Gates Protocol
Bill Gates is a pioneering businessman who not only built one of the most enduring companies but a unique model of philanthropy. And Bill and Melinda Gates were one of the most powerful couples in the world. Yet, as reports revealed, he had feet of clay. Melinda French Gates decided to seek a divorce after reportedly discovering an unsavoury side of her husband of 27 years. Bill Gates allegedly made sexual advances to employees at his company and philanthropic foundation. His ties to Jeffrey Epstein, who was accused of sex trafficking, too made it to the headlines.
The couple officially split in August this year and Bill Gates posted on his blog how 2021 was “a year of great personal sadness” for him. He said he had officially become an “empty nester”.
Then there is the small matter of slicing up a vast fortune. Just how much the couple own is mind-boggling. Among other things, 268,984 acres of land.
A Canadian Disconnect
Canada is not known for huge corporate scandals. And so, when a feud broke out in the Rogers family, which controls the country’s biggest mobile phone operator and is worth an estimated $10 billion, it was riveting news not only in Canada but also elsewhere.
The saga began when Edward Rogers, chairman of the company and the family trust, began undermining the company’s CEO, Joe Natale, and eventually tried to sack him. It triggered a family feud with Edward on one side and the rest of the family on the other. For almost two weeks, no one knew who controlled one of Canada’s biggest publicly traded companies, wrote Bloomberg Businessweek. All the dirty linen is being washed in public.
A Tycoon Fights For His Empire
One of the biggest media deals in India was consummated last week when Sony Pictures India and Zee Entertainment decided to merge. It was something of a win for Subhash Chandra, the 71-year-old billionaire chairman of the Essel Group. Chandra had been fighting an intense battle with Atlanta-based Invesco Developing Markets Fund, which holds 18% in Zee and is its biggest shareholder, to retain his sway over the company.
The Chandra family’s shareholding in the company had reduced to under 4% after he pledged the shares to pay down debt of other group entities.
Meanwhile, Invesco put on its activist hat saying the Goenka family was enriching itself at the company’s cost and sought the ouster of Chandra’s son Punit Goenka as CEO. It also wanted to overhaul the board and get a new owner and was tilting towards Reliance Industries for a buyout. Chandra hit back by opening talks with Sony. He has now managed to fortify the family’s interest. The deal with Sony allows the family to claw back its lost share from the open market and also let’s Punit Goenka stay as CEO.
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