Soriano: A founder’s harmful side (Part 2)

·3 min read

“I’m the company and the company is me!”

An oft repeated refrain by founders described by eminent psychologist Peter Davis as “Proprietors” in his well-written article, Three Types of Founders and Their Dark Sides. These founders are the legendary characters of family business and they remain at the center of all major decisions. The children are controlled like everyone else. To them, father is an all-powerful figure, almost God-like. Sons are expected to enter the business as a matter of loyalty; they are given little choice. The role of daughters is to marry, raise children, and be looked after. The children’s behavior depends a lot on the relationship between father and mother.

If the mother accepts the father’s behavior uncritically, the children will probably choose not to fight, in order to survive; they may become passive and submissive. When they join the business, they may keep their distance from the founder, generally seeking positions in some far-flung company operation.

Davis raises another important insight: “If the mother is independent and resists the father’s controlling behavior, the kids are going to learn to fight back. This may produce a pattern in which the children lead a rebellion against the father’s authority, and may eventually be fired for it. Not infrequently, the business is destroyed in the wake of the battles between powerful egos.”

In Asia, one of the best examples of a founder (proprietor) is sir Run Run Shaw, media tycoon and chairman of listed firm Television Broadcasts Ltd. or TVB. He waited until he was 103 years old to announce his retirement, handing his position to his 79-year-old wife Mona Fong. Shaw passed away at 106 years old. Many questioned the new successor as she was not young enough to lead the group.

Family firms are more likely than other businesses to be emotionally wounded when an unexpected and triggering event like sudden death, incapacity and misconduct happens. And in a special report on family companies by The Economist, it highlighted a research that “studied more than 5,000 family companies worldwide to see how vulnerable they were to health shocks among family members and they found that the unexpected death of a chief executive officer/founder/key business leader could reduce performance by up to 30 percent and the death of a spouse or child by 10 percent.”

“All companies are subject to risks, but family companies, because of their very nature, can more easily succumb to a series of mistakes. The succession process is a key issue that the family company must confront. It is a long process that requires planning and collaboration with outside advisors. A well-prepared succession requires the intensive training of one or several different successors. It also requires you to establish conditions that will regulate relationships between shareholders, managers and corporate personnel in the future.” (Prof. Josep Tàpies)

As in family businesses the world over, the most pervasive conflict has to do with succession. It is because these great visionaries have been useless at succession planning. And according to my former family business professor at NUS, Dr. Yupana Wiwattanakantang when asked about these founders, she remarked, “Holding on to power until they have one foot in the grave is almost like putting a curse on someone.” When one individual dominates a business that others cannot share in power, responsibility, and feelings of ownership, succession is a virtual impossibility.

The pandemic has tested many family enterprises. Some have thrived, but many were compromised due to internal conflict, resisting technological change and globalization. Therefore, family businesses, rooting themselves with a defined purpose and early succession planning, can prove to be clear models for success.

In the end, companies can survive for hundreds of years, but their founders cannot.

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