How to succeed with a family business succession

Tyson Foods’ chief financial officer admitted to investors this week. After running through its earnings, John Randall Tyson added a personal note: “I’m sure you’ve seen the news about the incident I was involved in. I’m ashamed and I want you to know that I take full responsibility for my actions.

The news was that the 32-year-old son of Tyson’s chair, and grandson of its founder, was charged with public intoxication and trespassing after a stranger was found sleeping in his bed in Arkansas. Rather than sack him – a likely fate for any non-family member – the US company has asked its directors to review his behaviour.

“Don’t forget that he’s been in this business essentially his whole life,” Tyson Chief Executive Donnie King responded when analysts asked why Tyson Jr. was in a job normally occupied by seasoned executives in the fifties. That’s true, but it’s often a qualification to be the king or queen of a top 500 US public company rather than the finance director.

Red Bull has handled its succession more wisely, appointing three executives to succeed founder Dietrich Mateschitz after his death in October, instead of his son. “I don’t believe the same company should be both an employee and a shareholder,” wrote Mark Mateschitz, who inherited his father’s 49 percent stake in the Austrian energy drink maker.

Also Read :  Car Loan Balances Vary Significantly Across the Country

That doesn’t mean Descendant will be left alone to run other jobs, including Red Bull’s Formula One team. “I will . . . express myself as I see fit and as I see fit,” he said of being a co-owner with the Yuvidhya family in Thailand. Hiring and firing others is as powerful as doing their own work.

Succession is one of the most emotionally taxing questions entrepreneurs face. As they grow older, do they sell their business to outsiders or appoint one of their sons or daughters as both heir and owner? A challenge looms for many 20th-century founders: More than 1.5 million owners of small and medium-sized family companies in Germany are close to retirement.

The struggle is evident in public companies such as Fox Corp. and News Corp. that remain family-controlled, both dominated by 91-year-old Rupert Murdoch. He has installed his son Lachlan as his potential successor after decades of family maneuvering, as earnestly satirized in the HBO drama. Succession.

Bernard Arnault also seems to favor the family joust. His five children now work at his luxury group LVMH and he has extended his mandatory retirement age to 80. It provides time for face-to-face and invites speculation about who will be his successor, which Lachlan Murdoch once called a “pain in the ass.”

Also Read :  More Investors Looking at HSA's as the New 401k - Here's Why

I can see why this kind of competition appeals to patriarchs: King Lear-like, they encourage their adult children to pledge loyalty and affection, and use it to reinforce their control. If you’ve embodied a company for many years, the idea of ​​having a hired hand with an MBA to run it after your death is a no-brainer.

The benefits for the younger generation are less clear. If many compete for advancement, it seems like a sure-fire way to ruin family gatherings. Even if there is only one child, the vexing question remains: Did this person have this chance for a name? The answer is usually no.

It cannot be denied that family planning has some advantages. Family enterprises are often more profitable and have a longer-term focus for many investors than companies run by professional executives. Having someone in charge who instinctively likes business and has grown to appreciate its purpose can be a strength.

Nor is it absurd that family members who stand to participate in companies know them from the inside. However, John Tyson has been taught a hard lesson about how public company executives should behave, and the discipline of investor scrutiny. It is healthier to be publicly shamed than to wait for an inheritance in golden youth.

Also Read :  Life Insurance Was a Saving Grace When My Husband Died Suddenly at 37

But it need not include successors managers and owners. A study of Danish companies found that family succession produces worse results than the Red Bull approach of establishing professionals who take over from the founder. As controlling investors, families hold more power to influence companies anyway.

Few heirs have realized this: John Elkann, scion of the Agnelli family that controls Ferrari and Juventus, does not run them himself but oversees them through their board and his family holding company. Marta Ortega Pérez, daughter of Inditex’s founder, became chairman of Zara’s parent group last year, but day-to-day responsibility rests with the chief executive.

It’s only natural. After years of observing how businesses operate, many of the rising generation must have noticed that there are drawbacks to being publicly responsible for everything. It is not necessary to run the entire show to become a successor.

[email protected]

Source

Leave a Reply

Your email address will not be published.

Related Articles

Back to top button