What are the main problems in the inheritance of family businesses in China?

The inheritance of family business in China is facing an embarrassing problem, which is a national cultural problem, not just a system problem. The second generation of Chinese enterprises lacks morality and sense of responsibility, the decision-making power of enterprises is too concentrated in the hands of one person, and the employment system is cronyism rather than meritocracy, which has laid a curse for the decay of the second generation.

How to realize the vision of a century-old shop? Is family management the best mode of sustainable management? How to train the next generation of family and business leaders? How to inherit intangible assets such as values across generations within the family? How to set up equity in family governance and corporate governance? ..... The solution of these problems requires long-term preparation, and 10 year can only be regarded as the start time of the preparation period.

When the next generation is unable to take over the enterprise, or the successor is uncertain, poor inheritance will bring severe challenges to the operation of the family business. My research team spent four years, from 1980 to 2008, tracking 250 listed companies in Hongkong, China, Singapore and Taiwan Province Province, China. The results show that the market value of these companies has dropped from 5 years before the founding family retired to 60 yuan, with only 40 yuan left, and the next generation has not improved after taking over. This study confirms that inheritance is indeed a severe challenge for enterprises in China. Only 12 listed companies with handover experience have been investigated, and their share prices will also shrink by about 40%. Although the sample size is small, it can only be used as a reference, but one leaf can distinguish autumn.

It's not too late to plan and inherit the design from now on.

Failure to hand over key assets is the biggest inheritance challenge.

20 1 1 Stanley Ho, the gambling king of Macau, fights for property, just like a soap opera with constant scandals, with four wives and at least 17 children, fighting for a huge wealth of $3.2 billion. Hong Kong tycoons with similar difficulties are by no means a minority. Although the word "from one tree to another" is used to describe some indecent words, it appropriately describes the difficulties faced by some founders in their twilight years.

However, it is not the only or even the most important risk factor for enterprise inheritance. In fact, in our research, few enterprises have closed down because of family infighting. The most common inheritance challenge is that the key assets that enterprises rely on for profit cannot be handed over smoothly.

First, we need to define what a "family business" is. Generally speaking, "family business" means that there are many blood-related family members involved in the operation of an enterprise. A stricter definition requires these family members to control a majority stake in the enterprise. The strictest definition requires that this enterprise has been passed down for at least one generation, otherwise it is considered as a startup enterprise. Once the founder of an enterprise passes the ownership and management right to his family (in most cases, his son) when he retires, the enterprise will be recognized as a family business.

Professor Morton Bannard Sun and I have established a model, which can be used to study the optimal management right and ownership of enterprises, so as to infer the possibility of different inheritance modes of enterprises in China. The most important assets of an enterprise are often not book figures, but core values, special technology, unique creativity, leadership style and political and business relations endowed by the founding family. Generally speaking, if the entrepreneur family can inject more special assets into the enterprise, the enterprise will be more suitable for this family to operate; On the contrary, enterprises with less special assets and more standardized are more suitable for professional managers to operate. Judging whether the founding family can continue to run the enterprise and add value to the enterprise depends on whether the new generation of the family can maintain and inject new special assets.

Another decisive factor is future roadblocks, which may come from families, companies, industries, markets and institutions. These roadblocks threaten the family's control over the enterprise, forcing the family's equity to be diluted or even lose the controlling stake. For example, transformation and upgrading, if the challenge is too great, even if the children are very capable, they need the help of others to cope with so many changes. Counting these special assets and obstacles is the first step of planning and inheritance.

Professionalization is not the only way out.

Among the enterprises that decide to take the road of specialization, Midea Group is in the forefront, and its experience is worth learning. I happened to meet He Xiangjian three days before he announced his resignation as chairman of Midea Group, and the conversation was about this matter. Midea announced in 20 10 that it would increase its sales from10 billion yuan to 200 billion yuan in five years, but at the beginning of this year, it gave up this goal and turned to intensive cultivation. It used to be based on sales performance, but now we should pay attention to quality. With this major policy shift, all existing personnel compensation systems must be changed. I asked He Xiangjian, because you are the boss, entrepreneur and chairman, you can make such a big decision. If you are not the chairman, can your professional team make such a decision so quickly and effectively? He Xiangjian smiled and said he didn't know. No matter how good the mechanism is, it also needs practice. In the absence of the boss, whether your professional team can maintain the previous decision-making efficiency and make correct decisions is an important issue of corporate governance.

However, what needs to be corrected is that professionalization is not necessarily the way that family businesses should go. Beauty is highly standardized, and the founder's mentality is also very open, so it is more suitable for professionalism. However, some industries are difficult to regulate, such as rent-seeking gambling, such as Stanley Ho's gambling, and it is difficult to be professional, so it is necessary to rely on family management to train family successors. In order to cultivate their own political and business connections, it is very necessary for such entrepreneurs to introduce some interests to their children as soon as possible.

Another example is Zong, Wahaha Group has not set up a deputy general manager so far, and everything is under the overall command of Zong. It's hard to imagine that if he didn't live in Wahaha, he would have today's scale, and it's hard to imagine that if his daughter took over in the future, she would adopt the same leadership style as him. Daughters will certainly bring some new advantages, but they must also have some disadvantages. How can we make up for it? I think it is necessary to hire a professional manager and organize a better board of directors to assist her. It is really difficult to make up for the political and business relationship that the father has and the daughter lacks, so it may be necessary to carry out enterprise transformation on the basis of the father and parents, adjust the business direction, and let the advantages of the successors come into play.

Can the western inheritance system be applied in China?

There is no doubt that the culture of China enterprises is very different from that of European and American enterprises. The existing research on the inheritance of family business is mostly aimed at Europe and America, but there is little discussion on how to inherit the enterprises in emerging markets, especially in China, and what role the founding family should play. The success of Chinatown in western countries is due to its own cultural advantages, so can the research on the inheritance of western family businesses be flexibly applied to domestic enterprises? The answer is yes, but cultural harmony is the most important thing.

Like how to make a decision? How to reconcile differences of opinion? The general system in the west is that when a family population increases, a family Committee is set up, and family affairs are decided by this Committee. If this system is introduced into China's family business, direct quotation is definitely not acceptable, because China people never decide things according to the voting system, otherwise no son will kneel down and ask his father to promise such a thing, if his father only has one vote. When the founder was still alive, he had the aura of an entrepreneur and the authority of his parents, and everything could be reconciled. But the real problem of China is that after the entrepreneur retires or even dies, it is easy to say that he only has one son. What if there are brothers and sisters, even if the husband and wife may disagree? Is it necessary to introduce the voting system? Should couples also vote? According to the tradition of China, should the eldest son inherit the authority of his father, or vote according to the western system, with the minority obeying the majority? At least in my opinion, no family business in China has made a decision entirely by voting.

But voting is always an effective solution. Personally, I feel that making decisions must have a system and must be reconciled. It can't be completely traditional, nor can it be completely western. If there must be a family decision-making mechanism, it is necessary to improve the existing voting system. The way to improve it may be that the largest shareholder of this family can have one more vote, while the first generation is still alive, the second generation of the family can elect one person to the board of directors, or one more vote, or the eldest son of this family can have one more vote, and so on. These methods are used to realize the voting system in China culture. However, I also see that some practices are to leave the decision-making power to the family Committee for everyone to vote. The major shareholder may have the veto power, but the veto power can only be used once, or conversely, the major shareholder can make decisions, but the committee has the veto power. As for how to do it in the end, it depends on how much the most powerful big shareholder or long house in this family is willing to lower their power and posture. As low as they are willing to press, the system will be implemented according to that lower limit.

If this decision-making mechanism is decided to be implemented, it will take at least two years of adjustment and practice, and it must be able to run smoothly while entrepreneurs are still alive. So far, I haven't seen any successful cases. Of course, in addition, there are some experiences that can be directly used. The domestic family enterprises that are using these methods are still in the practical stage, and it is too early to mature.

On the other hand, how to protect and inherit the family's unique intangible assets to the greatest extent can be adjusted by learning from western experience. For example, the establishment of family charter as a family code of conduct, the establishment of family committees, so that family members, whether shareholders or not, can participate in family affairs, organize family activities, and strengthen family concepts. There are many options for what kind of projects to do. The key depends on whether such things can strengthen family values and make future generations more moved and willing to respond to this family relationship. This is the best reward for the whole family.

Step by step can succeed in succession.

The son of a president is not necessarily a president, and the son of an entrepreneur is not born to do business. There must be a gradual process for children to enter the family business. Many entrepreneurs put their children who have just returned from abroad in the second place at once, or give them very important things to do at once. A large number of succession studies have proved that such behavior is very dangerous.

There are many forms of succession: one is not only a major shareholder, but also a manager; The other is to be a responsible major shareholder and delegate the management right to professional managers. These are all things that need to be cultivated. To be a responsible major shareholder, we must have a sense of responsibility, and family interests take precedence over personal interests. If you want to manage, if you are airborne, why do you want to sit in the highest position? Because you are the boss's son? How to prove your ability?

Whether to take over the father's career and whether the child has the ability to do even one thing well is actually more important. Many entrepreneurs let their children invest outside with their family's money without the approval of the enterprise. If they fail, there will be no punishment. If they succeed, they blindly think that their children are very capable, but in fact they may just be lucky. But luck is always good and bad. When it is easy to make money, children have more freedom, but if the situation is not very good and they are not interested in their father's manufacturing enterprises, the way out becomes a problem. At present, most entrepreneurs send their children abroad to study, thinking that even if they are trained, it is actually far from enough, because even if you learn the latest business knowledge in class and learn the advanced family management in the West, there will be many tests and tests on whether you can be competent in the future. There are two solid ways to do this: first, starting from the warehouse to move boxes, you don't have to stay at the grassroots level for more than ten years, but you have to go through the family business. In a relatively successful situation, you usually have to work in the company for 15 years before you take over, but there are few successful examples of investing in large-scale or starting so-called large enterprises as soon as you graduate; The other is to work in an enterprise outside the family first, not to start your own business, but to help others start their own businesses. If entrepreneurs have the confidence to invest their children's money to start a business, they need a stricter external examination and approval system. You can't take as much money as you want just because you are my son, but treat him as a non-child. If you want to take money from me, what are your requirements? You should carefully check your detailed investment plan from the inside out. Just like a bank, if you want to lend you money, you must first investigate your wealth and ability very clearly.

There are still relatively few successors trained from the bottom up for a long time. But what we really need is this kind of training.

"Empty" and "nothing" are the true love for children.

The less material wealth is divided, the more spiritual wealth is divided. Whether in the east or the west, if the first generation of the family creates great wealth, it will not only be beneficial to society, but also hopefully take care of future generations. Therefore, wealth management in the west is to use some systems, such as family trust, to give future generations the opportunity to become the beneficiaries of the trust, and the income obtained by the trust through asset management can be distributed to future generations in proportion. When introducing these systems, no matter how our legal system is, we must first carry out cultural harmony. China people have a strong desire to benefit future generations, but China culture has always taught us to have the concepts of "emptiness" and "nothingness". If you really want to be nice to your child, you can't give him too much. If he gets a lot of money, he will lose his fighting spirit, creativity and fighting spirit, and lose the entrepreneurial values that the first generation needs to pass on to future generations. It seems contradictory that you should take care of his life and sacrifice his fighting spirit.

But in Buddhism and Taoism, it has long been said: give your child an empty cup, because empty is the beginning of filling with water. You give him a full glass, and it will only get less and less, not more and more. Don't give children such an idea. Anyway, I will inherit your wealth, so I will squat down next to your money pile and wait for the money to be divided. Can he inherit your family business in the future? He can only inherit your money and spend it instead of trying to inherit your values and business wisdom. He can only be a black sheep.

So we can introduce the western wealth inheritance system, but we must understand that its weakness lies in cultivating a group of dependent heirs. We should make up for it with the advantages of China culture and traditions that we may have forgotten for a long time: when you have nothing, it is the beginning of success. When you have everything, you may not increase, but decrease. This is also one of the ways of yin and yang.

Another important problem is that domestic entrepreneurs are too busy, have a nouveau riche mentality, and feel good about themselves after success, so they relax their requirements for their own behavior. Not only do you spend less time with your children, but you can't be a role model for your children. Divorce and extramarital affairs will have a deep shadow on your child's growth. Or sent abroad to study since childhood, regardless of children, the money supply is excessive, indirectly teaching children as if material interests are everything. I often tell entrepreneurs that you should ask yourself how many times a week you go home for dinner. It is important to lead by example. When Wang Yongqing was alive, although there were many children, he still cared about them as much as possible. He asked the children studying abroad to write home every week and report their expenses and things in detail. Wang Yongqing's intangible wealth has been handed down by his children. Under the influence of her thrifty father all her life, her daughter Wang Xuehong now uses a notepad with less than 5 yuan, and drives a Toyota Camry that has not been changed for many years, but it has helped her create the glory of VIA and HTC, and created a rich second-generation entrepreneurial legend that has attracted worldwide attention. It can be seen that "it is just and not ordered; It applies not only to corporate governance, but also to family governance.