Succession planning far from child's play
Tabloid dramas serve as a reminder that squabbles can wreak havoc with a family business if the handover to the next generation is badly managed
Cliff Sun Kai-lit has seen a lot of family companies fail. He wants to make sure his survives.
Mindful of the adage about family wealth being squandered by the third generation, he encouraged his sons to first experience the rough and tumble of the business world outside the familiar comforts of their family firm.
Suitably worldly, his two eldest sons have now joined their father producing and marketing the household appliances their firm Kinox is famous for.
How to prepare the next generation to lead the family firm is one of the most pressing challenges facing Hong Kong businesses. As the post-war crop of corporate patriarchs start dying off, executing a successful transition is a delicate process fraught with risk as families negotiate over control and equity distribution without succumbing to internecine squabbles.
While data on local family-owned firms is incomplete, the "Asian Family Businesses Report" by Credit Suisse says that in 2010 family businesses made up 62 per cent of Hong Kong-listed companies with a market capitalisation of more than US$50 million. The report defines a company as family-run if an individual or family holds at least 20 per cent of cash-flow rights.
Anecdotally speaking, the burden of inheritance weighs heavily on local family firms.
"In Chinese culture, they always like to run firms in the family. If you look at Western family firms, they often have a strong tendency to corporatise the firm and issue a shareholding system from the very beginning," says Nicholas Ho Lik-chi, a second-generation manager at Ho & Partners Architects.
