How is the family business passed on? How to avoid "internal friction"? The experts gave some advice

Recently, the infighting between father and son of Shuanghui has swept the screen, and the resulting family business governance problems are worth pondering. In China, about 80% of private enterprises are family-owned enterprises, and the first wave of handovers in history has arrived. How can family businesses modernize? How do inheritance nodes achieve a smooth transition? What kind of institutional construction is needed to balance the public interest?

Focusing on the above issues, on July 20, Beijing News Shell Finance invited Ren Yong, vice dean of HSBC Business School of Peking University, Xue Jing, senior partner of Beijing Dentons and deputy secretary general of the Hong Kong Family Office Association, and Wang Yang, postdoctoral fellow of the Greater Bay Area International Innovation College of Shenzhen University and executive director of the Japan Center of Shenzhen University, to discuss together.

Highlights:

1, corporate governance in the essence of a decision-making strategy, the formation of this strategy is subjective and objective reasons of the joint action, in the early stage of entrepreneurship, the founder shoulders heavy responsibilities, must be bold decision-making, but when the enterprise has developed steadily, it is necessary to listen to the clear, keep pace with the times, in order to achieve the long-term development of the enterprise.

2. In the eyes of the outside world, corporate inheritance may be a very short process, and managers can complete the transfer of power. In fact, many family businesses will start to prepare 10 years in advance when considering inheritance, and even some large enterprises will start planning when the heirs are born.

3. The founders of these family enterprises formed since the reform and opening up generally have a pioneering and enterprising spirit. In the process of decades of development of the enterprise, it will experience ups and downs, and there are high requirements for the determination of the founders, and this ability is also created through long-term accumulation. Therefore, in the family business, the founder will often be loved and followed by the majority of enterprise members, so this kind of "one word hall" is actually evolved in the process of enterprise development.

Beijing News Shell Financial Reporter: What are the characteristics of family-owned enterprises? How to understand a family business?

Ren: Family business, as the name suggests, family founding, family operation, most of which is also a form of enterprise inherited by the family. In the development of family businesses, relatively speaking, the control of enterprises is highly concentrated in the hands of families.

Xue Jing: Why are there so many family businesses in private enterprises? In my opinion, there is a natural factor. If you want to start a business, you need to take out the money to do one thing together, which requires that everyone must trust each other in order to do business together. Who is the person you trust the most? As a result, many startup founders are husband and wife or siblings starting businesses together.

Wang Yang: I have been studying family businesses in Japan, Japanese family businesses are usually small and medium-sized enterprises, they will all have family style, family training, at the same time there will be a company concept at the company level, the enterprise itself is constantly developing and innovating, but in this development process, the corporate philosophy and family training of family businesses will never change.

Beijing News Shell Financial Reporter: Should the family business be "one word" in the end?

Xue Jing: In the family business, there is a significant feature of the founder, that is, he is particularly confident, and even says that everything is under control, so he may legally reflect control. For the family business, the word ownership and voting rights, I think there is no problem, because only if your voting rights are safe, the foundation of the entire family business will exist.

We have seen many cases, because the equity is constantly diluted, the founder wants to have a word has no way, so, I think, to have control of the enterprise, from a legal point of view to achieve "one word hall" is not a bad thing, here "one word hall" is a neutral word.

However, from the perspective of corporate governance, Yiyantang is indeed being challenged. On the one hand, as time goes on, the founder gets older, and some of his decisions will be questioned by others; on the other hand, the founder may suffer challenges from the second generation and challenges from investors. At this time, it is recommended that the founder listen to the suggestions and opinions around him, think more, and then decide whether to maintain the governance situation of yiyitang.

In the early stage of entrepreneurship, the founder shoulders a heavy responsibility and must be bold in decision-making, but when the enterprise has developed steadily, it is necessary to listen to the clear and keep pace with the times to achieve the long-term development of the enterprise.

Ren Hao: The founders of these family enterprises formed since the reform and opening up generally have a pioneering and enterprising spirit. In the process of decades of development of the enterprise, it will experience ups and downs, and there are high requirements for the determination of the founders, and this ability is also created through long-term accumulation. Therefore, in the family business, the founder will often be loved and followed by the majority of enterprise members, so this kind of "one word hall" is actually evolved in the process of enterprise development.

When will this situation need to be adjusted? When the enterprise develops to a certain scale, the business becomes more and more diversified, a lot of new technologies are introduced, and the members of the enterprise are also changing normally... At this time, the older generation of entrepreneurs need to be inclusive and take the initiative to absorb new ideas to make up for their cognitive deficiencies, which will help enterprises achieve more stable and long-term development.

Wang Yang: Let me talk about the impact of the next word on the inheritance of the enterprise. One of the most common situations is that the older generation of entrepreneurs and founders, although they are older but unwilling to retire, still feel that "I want to control my power and the whole business situation of the company", resulting in the succession can not take over. The recent Shuanghui father-son infighting storm has such a situation, which will also cause a series of problems.

Beijing News Shell Financial Reporter: How to achieve a smooth transition of family enterprises at the inheritance node?

Wang Yang: In the eyes of the outside world, corporate inheritance may be a very short process, and managers can complete the transfer of power. In fact, many family businesses will start to prepare 10 years in advance when considering inheritance, and even some large enterprises will start planning when the heirs are born.

In the process of enterprise handover, there will be various problems, for example, when the current manager is not willing to leave office, you can have an external person (such as a lawyer or enterprise consultant) to talk to him, from the perspective of a third party to help him analyze, tell him how to choose the time point of the power transfer, in order to be more conducive to the long-term development of the enterprise.

Ren Hao: Most family businesses still give priority to children or family members to take over, but there are three problems in the inheritance process: first, some second generations are unwilling to succeed, young people have their own development interests, and the willingness to inherit the family business is not strong; second, the lack of corresponding ability and experience, even if the second generation is willing to take over, but it is difficult to be a big task for a while; the third is insufficient time preparation, lack of long-term inheritance plan, so when realizing the need for inheritance, it is relatively hasty.

Therefore, the inheritance of family business does require a long-term plan, which is consistent with the talent training plan of general enterprises, in the long-term training process, exercise the ability of the successor, establish the prestige of the successor in the enterprise, and also strengthen the willingness to inherit.

Xue Jing: First of all, we must solve the problem of attention. Some generation founders, at the inheritance node, still focus on accumulating wealth, feel that the matter of shift transfer is not urgent, and this thinking needs to be changed.

Second, there is insight. Some generations of founders realize the importance of enterprise handover, but they do not know how to operate, which requires professionals to guide him, share some success or failure cases at home and abroad, and guide him to find a suitable inheritance method for his own business.

The third is the consensus of the family, which is very complicated and does require long-term planning.

The fourth is what model you choose, whether you plan to give the management to your children, or whether the children inherit the equity, and the company's operation and management is handed over to the senior management team.

Beijing News Shell Financial Reporter: At present, what tools are needed for the inheritance of family businesses?

Ren: Judging from foreign cases, some family businesses will establish family wealth funds, and the founder's children may not be willing to take over, but they can get income through equity, and then the company is handed over to relatives who are willing to manage or more professional and more suitable people.

In the future, I think that through the setting of some financial products such as equity settings and trust funds, it will gradually be integrated with some international practices, and listed companies may have more institutional solutions to deal with this problem.

Wang Yang: First of all, we must realize one thing, that is, all enterprises need to be inherited, not limited to family businesses.

Secondly, professionals are needed, because corporate succession is also a study, and professionals are needed to tell management what this thing is, why, and how to do it.

The third tool is the tax, I think China should raise the inheritance tax very quickly, on the one hand, it is conducive to narrowing the gap between the rich and the poor, on the other hand, it will also prompt entrepreneurs to pay more attention to the inheritance of enterprises and plan in advance more actively.

The fourth tool, in addition to the family trust, the family business can operate non-profit institutions and operate museums, art galleries, etc. At the time of succession, one child inherits the business, and the other children can do some non-profit organization management, the operation of the museum, both to make social contributions, and then they do not need to come back to compete with the heirs for the right to operate and for some of the wealth we call, which can make the whole family more balanced.

Beijing News Shell Financial Reporter: What kind of system construction is needed to balance the public interest?

Xue Jing: Once a family business is listed, it will inevitably face strong supervision. At this time, if the family business still follows the previous management method of non-public companies, it may bury many hidden dangers. For listed companies, finance and operation need to be transparent, and even the actual controller's own ethics and some behaviors of family members will also affect the market value changes of listed companies.

Therefore, in order to better balance the public interest, the family business that chooses to be listed must practice internal skills and comply with the requirements of supervision, including the decision-making method of the enterprise.

Ren: After the company goes public, it changes from a non-public company to a public company, and at this time, the responsibility of the enterprise is also greater, not only responsible for the family, but also responsible for the public interest.

Therefore, enterprises need to establish a complete set of governance systems, and even have a very high moral standard, or self-restraint awareness and ability. Therefore, the family business in the listed company needs to be more cautious than the non-listed company when carrying out the inheritance.

Wang Yang: In Japan, if the listed company is controlled by a family, the operator and his entire family will pay more attention to the inheritance of the enterprise. For example, the family has several children, these children in elementary school, junior high school or even at the latest should be in high school, the family selected a child as the heir, and then, the other children will not work directly to the company.

Japanese listed companies pay more attention to the stability of the company, and other children usually do not share the company's shares, that is, they will plan the company's shares very clearly, avoiding the dispersion of shares and the dispersion of management rights caused by family disputes.

Beijing News shell financial reporter Yan Xia Xiao Wei

Edited by Chen Li Proofreader Chen Diyan

Reporter contact email: [email protected] [email protected]