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Conflict boils as dad decides who gets firm
By Xu Wenwen |
November 9, 2010, Tuesday
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Print Edition
Print Edition
WHEN it comes to succession in tightly held family businesses, we're in for a rough ride and a lot of tragicomedies in the next five to 10 years as competing interests try to seize the reins.
"Following the transition and change-over between senior and junior entrepreneurs in one company, there are a lot of family contradictions and conflicts," said Chen Ling, director of the Family Enterprise Institute of Zhejiang University City College, and vice dean of the school of management of Zhejiang University.
"Biased parents, brothers grabbing the post of successor (many rich Chinese violated the one-child policy to have more heirs); brothers' jealous wives and competing family branches are all factors in what could be tumultuous," he said.
"In the next five to 10 years, there will be a great number of tragicomedies of family enterprises' shifts and transitions," he said.
Zhejiang Province is famous for its wealthy family businesses, so the province is a microcosm of the pressures on family enterprises around the country as the old generation retires - or refuses to - to the dismay of some heirs.
After the reform and opening-up 30 years ago, many people worked hard to build a business and amass wealth. But many of their children lack the same drive, patience and resilience that their father's had.
In fact, many of these heirs, born with silver spoons in their mouths, are known as the "affluent second generation." They have wallowed in wealth and many lack the inclination to work. Some are known as black sheep and bullies and regarded with considerable public resentment, if not hatred in a nation of widening wealth gaps.
In fact, being called a "rich second generation" can be something of an insult, typically referring to heirs who are spoiled, lazy, arrogant and of bad character.
Take the case of 20-year-old Hu Bin, driving a speeding Mitsubishi sports car hitting and fatally injuring a 25-year-old man in a pedestrian street crossing last May in Hangzhou. He fled the scene. It was widely reported that Hu's father paid compensation to the victim's family: case closed.
In fact, these rich young people are under a lot of pressure. Much of the public hates them, while their parents expect them to take over the family business.
Though her father's company's assets are around 580 million yuan (US$87million), 26-year-old Chen Qiong doesn't admit she's an "affluent second generation" because it would be humiliating.
Her father, who runs a real estate company in Xiaoshan, Hangzhou, expected his daughter, who just got an MBA in England, to take over the business. It fell through.
After getting her MBA, Chen did have a short internship in her father's company, but found she didn't like real estate - she didn't consider it a "proper career" for women. Then her father offered her another choice, financing - she wasn't interested.
Now Chen works in the marking department of a bank in Hangzhou; her younger brother has just started college.
"My father is ready to continue running the business on his own for the next 15 years," said Chen.
"Who knows if my brother will take over the business or if my father will hire a professional manager in 15 years?" she said.
The same questions arise in many family businesses, and because of China's one-child family planning policy, the problem is severe in families with only one daughter and no son to carry on the tradition.
Since a daughter marries into her husband's family and becomes its new family members, many fathers wouldn't transfer their whole business to her, since her husband might control it.
There's a pervasive view, with some exceptions, that Chinese women are deficient in leadership, decision making and management skills, compared with men.
Thus, the old entrepreneur might decide to hire a professional male manager.
"Following the transition and change-over between senior and junior entrepreneurs in one company, there are a lot of family contradictions and conflicts," said Chen Ling, director of the Family Enterprise Institute of Zhejiang University City College, and vice dean of the school of management of Zhejiang University.
"Biased parents, brothers grabbing the post of successor (many rich Chinese violated the one-child policy to have more heirs); brothers' jealous wives and competing family branches are all factors in what could be tumultuous," he said.
"In the next five to 10 years, there will be a great number of tragicomedies of family enterprises' shifts and transitions," he said.
Zhejiang Province is famous for its wealthy family businesses, so the province is a microcosm of the pressures on family enterprises around the country as the old generation retires - or refuses to - to the dismay of some heirs.
After the reform and opening-up 30 years ago, many people worked hard to build a business and amass wealth. But many of their children lack the same drive, patience and resilience that their father's had.
In fact, many of these heirs, born with silver spoons in their mouths, are known as the "affluent second generation." They have wallowed in wealth and many lack the inclination to work. Some are known as black sheep and bullies and regarded with considerable public resentment, if not hatred in a nation of widening wealth gaps.
In fact, being called a "rich second generation" can be something of an insult, typically referring to heirs who are spoiled, lazy, arrogant and of bad character.
Take the case of 20-year-old Hu Bin, driving a speeding Mitsubishi sports car hitting and fatally injuring a 25-year-old man in a pedestrian street crossing last May in Hangzhou. He fled the scene. It was widely reported that Hu's father paid compensation to the victim's family: case closed.
In fact, these rich young people are under a lot of pressure. Much of the public hates them, while their parents expect them to take over the family business.
Though her father's company's assets are around 580 million yuan (US$87million), 26-year-old Chen Qiong doesn't admit she's an "affluent second generation" because it would be humiliating.
Her father, who runs a real estate company in Xiaoshan, Hangzhou, expected his daughter, who just got an MBA in England, to take over the business. It fell through.
After getting her MBA, Chen did have a short internship in her father's company, but found she didn't like real estate - she didn't consider it a "proper career" for women. Then her father offered her another choice, financing - she wasn't interested.
Now Chen works in the marking department of a bank in Hangzhou; her younger brother has just started college.
"My father is ready to continue running the business on his own for the next 15 years," said Chen.
"Who knows if my brother will take over the business or if my father will hire a professional manager in 15 years?" she said.
The same questions arise in many family businesses, and because of China's one-child family planning policy, the problem is severe in families with only one daughter and no son to carry on the tradition.
Since a daughter marries into her husband's family and becomes its new family members, many fathers wouldn't transfer their whole business to her, since her husband might control it.
There's a pervasive view, with some exceptions, that Chinese women are deficient in leadership, decision making and management skills, compared with men.
Thus, the old entrepreneur might decide to hire a professional male manager.
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