Sun Hung Kai Properties, the scandal-engulfed property developer, has more than 35,000 employees. But it appears that no one other than third-generation members of the founder's family can be relied upon to extricate SHKP from the problems created by the second-generation family members.
It remains to be seen whether bribery charges will be upheld against the two Kwok brothers who run the company. But they have now appointed their youngish sons as alternate directors and done so with the claim that this will ensure the company's future.
SHKP's founder passed control of his company to his three sons in 1990. By 2008, they had fallen out. The eldest son, Walter Kwok Ping-sheung, was ejected from the management. Events suggest that family management is not always the best recipe for running Hong Kong's public companies.
The key word here is 'public'. It is really no one else's business who controls private corporations. But once the decision has been taken to solicit outside shareholders, companies need to justify their choice of management with criteria that goes beyond family association.
SHKP is hardly the only Hong Kong company to retain a rigid family-management model. Succession to junior family members, following the example of SHKP, has already occurred or will soon be happening for the sons of the founding families of the New World conglomerate, the Bank of East Asia, and Hopewell Holdings.
There is little doubt that the same practice will be followed at Li Ka-shing's Cheung Kong group, and indeed, every other major conglomerate where the founder's family retains control.
The process is not always smooth, as has been seen at the gambling and property empire of Stanley Ho Hung-sun, where family strife riotously spilled over into the public domain.
The real problem of family succession in public companies is that it works so poorly for shareholders. Joseph Fan, a finance professor at the Chinese University, surveyed the consequences for family succession in 250 Hong Kong, Singapore and Taiwanese firms from the 1980s to the early 2000s. He found that, on average, it resulted in a tremendous destruction of shareholder value.
Hong Kong, has the third highest percentage of family-owned listed companies in Asia (behind Indonesia and Malaysia). The consequences of this are not pretty, according to a 2009 study by three academics: Bikki Jaggi, Sidney Leung and Ferdinand Gul.
The authors focus on the lack of independent monitoring of the management in family-run companies. Fan found that this translates into more modest earnings. In other words, the concept of independent management oversight, common in overseas listed companies, is not just a matter of ensuring compliance with regulations but goes to the heart of how a company performs.
Most Hong Kong companies are relatively new in comparison to better established companies in the industrialised world. These established companies started out with family-run managements but moved away from this model as its limitations became apparent.
It is possible that the same evolution will occur in Hong Kong. But the evidence is not reassuring. One of Hong Kong's oldest listed companies, the Bank of East Asia, is now into its fourth generation of family management. Not a single other prominent listed company has given any indication that management control is to be ceded to non-family members.
This must impact on the people working for these companies, who know that however hard they work and however brilliant they are they will never secure the top job.
So these companies are deprived of talent that could help them grow. Look around Hong Kong and it soon becomes clear that some of the more interesting newer companies are run by former staff of family controlled conglomerates. Their talent could have been retained.
Meanwhile, over at SHKP, the bosses have resorted to cliche to assure staff members that everything will be all right with the new family members on board. 'The only thing to fear is fear itself,' they wrote in a memo to staff. It does not look that way from the outside.