By Ruma Dubey

A couple of days ago, China’s richest man, Wang Jianlin, 62, founder and chairman of Dalian Wanda Group Co, owning a $92 billion empire announced that his only son, the heir apparent to his wealth, was no interested in taking over the business. This has prompted Wang to look for a successor, most likely from a group of professional managers. His son said that, “I do not want to live a life like yours.”

A survey was done in China of 182 of the country’s top family run businesses and what they found was that 80% of the heirs were not keen on assuming the reins of their parents business.

In India, this is not happening as right from an early age, it is drummed into the child that he needs to takeover and he is groomed accordingly. Choice is not an option given. 85 of the businesses run in India are family run and over 50% of them are expected to pass on control to the next generation. Yes, Infosys was probably a pathbreaker that none of the founder’s sons/daughters were reinstated to run the Board. But Infosys type companies are very few and far in between. Companies like GMR, Dabur, Marico, Camlin and Asian Paints have got in place a professional management but this does not mean that their children will not take over – the professionals are there just to run the businesses in a sustainable manner.

The recent ugly war between Mistry and Ratan Tata has dented this faith – the perception now is that better to have a family member than risk it all by bringing in an outsider, even though he was vetted personally by Tata himself. There are murmurs in the corridors of power that Mistry’s actual ulterior motive is to take control of Tata Motors JLR unit where Tata family has less than 40% stake.

In India, we actually have a cultural problem. Even if a senior scion relinquishes power voluntarily and puts in place a "professional”, the senior leader does not let go and continues to wield some power or the other at the managerial level – after all we legally recognize the Hindu Undivided Family or HUF and allow the senior most family member to have complete control. And this is one of the biggest reasons why successions in India are always jumpy and disruptive.

In this environment of mistrust and family loyalties, once more Cipla’s head honcho, Yusuf Hamied has chalked out a new path for all to follow. Just as he shook up the world’s pharma sector by making available low-cost drugs to treat AIDS at a fraction of the cost charged by MNCs, Hamid has come up with a very unique solution.

His aim was to ensure that is family which owns less than 40% in Cipla does not lose control; given the wind of takeovers in the pharma world, this could not have come at a much better time. He made the propositions which he sent out to SEBI too and it reverted, making the proposal exempt from the Takeover Code. Hamied has proposed:

Every family member and family controlled entity would transfer their voting rights to Hamied, during his lifetime, and to his younger brother MK Hamied, in case of YK Hamied’s death or his incapacity to vote. 

In the event of death or incapacitation of both these promoters, the Hamied Family would act jointly, under the overall direction and supervision of the Hamied Family member who owned the highest number of shares.

Made a provision for a right of first refusal from the other family shareholders, in case of a proposed share sale by any family shareholder.

Mandatory for subsequent relatives who may inherit shares in the future, to agree to these terms of the family agreement by signing a deed of adherence.

In one stroke, by vesting power in one member, Hamied has tired to address various issues like fighting amongst siblings for control, some family members washing their dirty linen in public, airing family conflicts in public domain, conflicts between members on how to run the business, one family member selling his stake thus risking control further – all these things affect the performance, image and sustainability of the company.  But when all family members entrust their voting rights to one member, they are showing solidarity and this unity will bring a lot of cheer to the shareholders. Yes, it does mean taking risk of putting all power in the hands of one person but then isn’t the very same person running the show now?

Yusuf Hamied has once again given India Inc a lot of food for thought and all family run businesses in India need to pay attention. After all it is family businesses which nourish and sustains what we call India Inc.