Governance

Succession and the single child

Photo by Niyom Tangsiripaisarn/iStock / Getty Images
Photo by Niyom Tangsiripaisarn/iStock / Getty Images

Things just keep on getting worse for Heather Cho, the Korean Air nut rage executive, who has been in jail for over a week and has been charged with endangering the safety of the flight she was on. Spoiled children are a big problem for all family businesses, and other examples have been rife in recent days.

The British press reported that a Romanian mogul’s son told staff at the family firm that they would not get pay-rises because he wanted a Bugatti. (He was, incidentally, expelled from school for cheating in his exams.)

Another was tragic. The fatal shooting of hedge fund founder, allegedly by his son, reportedly followed an argument about cuts to the 30-year-old’s allowance.

What can be done about the problem of entitled next gens going off the rails? Perhaps the best place to look for advice is to China, where the problem is more intense than anywhere else. The single-child policy has created a generation of wealthy youngsters, and vast numbers of businesses founded in the 90s are transitioning to the next generation. Added together, this is a recipe for next gen troubles.

So how can parents boost the chances that their children become responsible family business stewards? Kevin Au, an associate professor at the Department of Management and Director of the Centre for Family Business at CUHK Business School, has studied the subject. “It could be harmful for entire companies and families if parents force their children to take over the family business,” he says. “They need to understand the real reasons why second generations are not willing to take over their parents’ firms.”

It is this understanding that is the real problem, because communication between parents and children in Chinese family businesses is often poor, says professor Au. Almost all family companies in China are in the first generation, and their founders have tended to concentrate their energies on work at the expense of home-life, so don’t have great relationships with their children.

Of course, that is a common story the world over. But the gap between parents and children is intensified by the fact the youngsters are growing up in a very different world than the one their parents did – a world of Weibo, Alibaba and, quite often, foreign travel – so have very different values.

What is to be done? Firstly, parents have to take time to teach their children about the family company. “Only when they share the same feelings as the first generation towards the family business will they be willing to take up the helm and lead the companies,” says professor Au. Parents have to be patient, and learn to communicate with their children. They also have to understand what the next generation want from their careers.  What that is, often, is to be entrepreneurial.

One solution is to create an entrepreneurial platform within the core business, as happened at Dalian Wanda Group, China’s largest commercial property company. Founder Wang Jianlin funded his son Wang Sicong to start a small private equity fund and a gaming company.

 

Entrepreneurial skills, like taking responsibility for your decisions, picking your battles and seeing the big picture are all useful for future CEOs or owners. If only Heather Cho had learned some of those things, she might still be chomping macadamia nuts, rather than slurping prison gruel. 

Subscribe

You will need a Premium Plus Subscription to access this database.

Exclusive news, analysis and research on global family enterprise and private investment offices.

Access to the most comprehensive fully interactive database on global family offices, principal investment offices, and family enterprises.

Check Deal Data, Senior Staff, and New Analysis on more than 500 family/principal investment and holding groups

Already have an account? Login

Subscribe

You need at least a Premium Subscription to read this article.

The most comprehensive information service on the global family enterprise world, featuring exclusive news, analysis, research and data on global family enterprises, family offices, and private investment offices.

Premium

£ 299

Annually

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
Subscribe now

Premium Plus

£ 399

Annually

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

Subscribe Now

Already have an account? Login

Subscribe

Exclusive news, analysis and research on global family enterprise and private investment offices.

Membership

Free

  • Exclusive reports, analysis and commentary
Sign up

Premium

£ 299

Annually

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
Subscribe now

Premium Plus

£ 399

Annually

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

Subscribe Now

Already have an account? Login