When the adopted son takes the business

Kapaleeshwar Temple, Chennai/photo: John Hill
Kapaleeshwar Temple, Chennai/photo: John Hill

The phenomenon of adopted sons running family businesses is mostly associated with Japan, where the tradition of bringing sons-in-law into the company is common. For generations, firms such as Suzuki have been bringing using so-called mukoyoshis. However, things don’t always go so well with adopted incomers, as a recent family business feud in India demonstrates.

The feud involves the control of Chennai-based conglomerate the Chettinad Group. Founded more than 100 years ago and controlled by descendants of its founder Annamalai Chettiar, the group is one of south India’s biggest businesses with interests ranging from cement to education, and has revenues of around $1.5 billion annually.

Under the third generation led by MAM Ramaswamy management of the business gradually passed over to MAMR Muthiah, who was adopted by Ramaswamy and his wife Sigapi Achi – who had no biological children – in 1995.

Muthiah has proven an astute businessman – maybe too astute for the original family owners. Having taken over the group as managing director in 2000, Muthiah has since built up a sizable shareholding in the business after inheriting a chunk of the group when his adopted mother died.

All appeared to be going along swimmingly between the family owners and Muthiah until a board meeting last September saw Ramaswamy ousted of chairman of the group’s lucrative cement arm. An outsider was appointed in his place and Ramaswamy was made chairman emeritus. The changes appeared to be at least influenced by Muthiah.

Although that might have been the origins of the fall-out, things really deteriorated between the two earlier this month, when Ramaswamy publicly disowned his son and starting legal proceedings to annul the adoption. Ramaswamy has also cut him out of all inheritance and set up charitable trusts to ensure money only goes to blood relatives.

At a recent press conference, Ramaswamy said: “I have disowned him and do not wish to call him my son”, adding: “He does not understand the principles upon which this family was built upon. The family motto is Strive, Save and Serve. But for him, the buck stops at Save.”

In an interview with India’s Business Standard website, Muthiah, who is based in Singapore for much of the year, downplayed the tensions “Personally, I am not against my father,” he said. “He has done so much for me. But to save the business and in the interest of employees, shareholders and other stakeholders, sometimes you have to make tough calls.”

It doesn’t look like Ramaswamy, 83 will let go quietly – and he appears to have patched up relations between other members of the extended family in his bid to thwart his son. But numerous business people interviewed in the Indian media say that he should step down and allow Muthiah to get on with managing the business.

What lies behind the feud? It is unlikely to be money – Forbes estimated that Ramaswamy was worth $600 million in 2012. As so often ever with family businesses, emotion appears to be the driving force.