Kwok family saga shows need for firms to set up charters
Lai See's piece on the current boardroom rumblings of Sun Hung Kai Properties ('Lee imparts a little wisdom on saga of the Kwok brothers', May 20), mentions other business-owning families in Hong Kong. The comment that it is 'lucky' that the late founder of Sun Hung Kai, Kwok Tak-seng, arranged a family trust to hold all assets, is worth more than a passing thought.
There are many structures available to families with dynastic objectives and many listed companies in Asia have family trusts. The trust provides the framework to hold the business as its ownership glides seamlessly from the founder to the next generation and beyond.
However, this is only part of the story. It does not mean the family will know what to do with the controlling interest in the future.
Hong Kong today has good examples of transfers to the second generation, but what if we move forward another generation or two, or for other families where succession is not so clear, or in a large family where most family members cannot expect to play an active part in the business?
For these cases, there need to be agreed principles of how control over the business is used for its long-term benefit and for the family as a whole.
Family charters - often used elsewhere with longer histories of dynastically wealthy families - might be an answer.
Where developed, these represent the software which sits alongside the trust (as the hardware) and empowers its operation for the family.
In the future, families governed effectively by charters have more chance of resolving differences behind closed doors than families which are not.
Charters might not always work of course: people, as they say, are only human. But they are worth considering and just look at the alternatives. You could see differences aired in the more transparent boardroom of one of the family's public companies, or worst of all in court where a result is imposed to deal with the immediate issue, but where a family will not get any resolution in their long-term interests.
Jonathan Hubbard, Tai Tam