Dad, I Want To Run Our Company Too

The next generation of inheritors have arrived on India's corporate scene. But arriving and being allowed to run a business are two different things. Particularly when many fathers (mostly) are not, for a variety of reasons, letting go of control

Govindraj Ethiraj
Updated: Jan 12, 2012 08:29:37 AM UTC

Over a curated chat with a prominent Mumbai-based industrialist a few weeks ago, the conversation settled on management styles of older and younger generations. I asked him the one significant difference between him and his two children who had joined the business in recent years. “They are too process driven for my liking. Maybe it’s their Ivy League education and there are merits to it. But I find it extremely frustrating,” he said, somewhat bluntly.

Not surprisingly, the industrialist who is edging towards 60 plays a strong operational role in the family-owned businesses. His retort reminded me of several conversations I’ve been having with second generation 'scions' of business houses in recent weeks. As an aside, they are generally more optimistic about the economy than their parents. That apart, what they were not so optimistic about was their own future. Their major crib - their fathers (mostly) were just not letting go.

Several media reports in recent years have profiled the smart set of inheritors. Most have studied overseas, worked across industries in global and local roles, tested profit and non-profit pursuits and then joined the family business. Their levels of engagement vary. In some cases, the inheritors have firm roles where despite age, the line of succession is clear. In others, the roles are somewhat unclear and often lie on the fringe of the firm. And almost in all cases, most first generation entrepreneurs are not letting go, at least as much as the next one would like.

A well-networked management consultant told me last week that the situation can get bizarre. He narrated the case of a daughter seeking his help to get dad’s authorisation to buy a new German car. And she sat in the same office a few cabins away! Another young man who I thought had everything going for him in his mid-sized conglomerate confessed, “I am now in my 40s and it’s only now that I’m beginning to get some control. It’s been a frustrating uphill battle.”

I looked at the NSE Nifty set of 50 companies to see how parental equations could pan out. It’s interesting. Some 23 of 50 companies are family-owned and run. These include two where ownership has recently passed on; Ranbaxy and Ambuja Cement. Ranbaxy was inherited (effectively) by Malvinder & Shivinder Singh in 2006 who in turn sold it to Japanese drug major DaiiIchi Sankyo in 2008. Incidentally, their father Parvinder Singh who ran the company till 1999 ousted his father and founder Bhai Mohan Singh in a boardroom coup.

In the remaining 21 companies, only in Reliance (all companies), Jindal, Jaypee Group, Hero Motors, Grasim, Hindalco, Mahindra & Mahindra and Bajaj Auto has control passed on to the next generation. Again there are some variations. Rahul Bajaj, 74,  has clearly indicated his desire to step back from active management but continues to be executive chairman of two-wheeler giant Bajaj Auto.

With both Reliance and Birla (Aditya Birla Group) companies, the relatively early death of the founder accelerated the succession. Reliance founder Dhirubhai Ambani would have been 80 today and AV Birla Group founder Aditya Birla would have been just 67. Which makes it likely that they would have played an active role in their organisations had they been around, more so given their fairly powerful personalities.

As a benchmark, DLF Group founder K P Singh, 81 is an active chairman. The DLF corporate website has, somewhat unusually, a separate section for him as Chairman and no overt mention of the family members who are also involved in various roles. Jaiprakash Gaur of Jaypee at 80 stepped back in 2006 handing over to son Manoj Gaur, 46, as executive chairman. Though reports on the senior Gaur suggest he still spends four to five hours daily in the group’s Noida headquarters.

Hero Motor founder Brij Mohan Lall Munjal, now 89, is believed to have handed over to his son Raman Kant Munjal but stepped back when Raman died in 1991. And he subsequently groomed Pawan Kant Munjal, 57, now Managing Director & CEO. But the senior Munjal’s presence is still felt. Like DLF’s Singh, Brij Mohan is an executive chairman of Hero Motors.

And the hands of time move on. The second generation is getting old too and now  grooming (or grappling with) the third and next generation. Pawan Munjal is 57, Anand Mahindra is 57, Mukesh Ambani is 55 and Anil Ambani is 53. All have offspring reaching the point where they would want meaty corporate roles. It would have been interesting had the patriarchs been around. Particularly Birla Group where the father would be 67 and the son 44.

In the rest of the Nifty 50, Bharti Airtel (Sunil Mittal, 55), Sun Pharma (Dilip Shanghvi, 55), Sterlite (Anil Agarwal, 58), the founders are younger still active. The next generation will evidently have to wait a bit. The Nifty 50 also excludes other interesting cases of generational transitions, like in the GMR Group, GVK Group, Videocon and the TVS Group companies.

The reason for parents not giving up the reins early (where such a feeling resides among the next generation) are manifold. The obvious one is personality. The second is that many have seen their ventures really bloom in the post liberalised era going back 15 to 20 years, which ties with their late 30s to early 50s. Giving up at this point is not simple. Moreover, they’ve had to work hard and dirty and thus feel the second generation should not get it easy. Or need to learn little more.

How will it pan out? Azim Premji is 67, still an active chairman and CEO and while his sons Rishad, 34, and Tariq, 31, are in the company but not in hard, operational roles. Tariq works with Azim Premji’s foundation and Rishad is Chief Strategy Officer running the M&A strategy and fund. Knowing Premji and having heard some of his public utterances on the subject of succession, the sons will have to work very hard to earn a core, corporate role in Wipro. Though Premji himself took over Wipro in 1966 at 21 following the sudden demise of his father. Wipro was a vegetable oil maker then.

Let me end with a quote from a lunch talk by Carlyle Group Co-Founder David Rubenstein I was present at in the US two years ago. Carlyle is the world’s largest private equity firm with $150 billion in assets. Rubenstein who had very humble beginnings is also one of those American billionaires who has pledged to donate more than half his wealth to philanthropy. He said:

“I grew up in an advantaged environment. If I wanted anything I had to work for it. Whereas my children grew up in a disadvantaged environment. They have so much money that they don’t have to work.” 

 

The thoughts and opinions shared here are of the author.

Check out our end of season subscription discounts with a Moneycontrol pro subscription absolutely free. Use code EOSO2021. Click here for details.

Post Your Comment
Required
Required, will not be published
All comments are moderated