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| Bhupesh Bhandari: The business of family |
| Bhupesh Bhandari / New Delhi Jul 17, 2009, 00:15 IST |
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There is a businessman in Delhi, soft-spoken, deeply religious and courteous to a fault. He has a steady business, his employees speak well of him and his public image is spotless. But talk to him about his extended family and the politeness begins to melt, his nostrils flare and expletives begin to flow.
Some time back, he bought a bungalow which belonged to his elder brother. The first thing he did was to dig out all the earth from the compound and replace it with fresh earth. He wanted nothing that was touched by his sibling. He even suspected the brother had tried black magic on him.
This, mind you, is not a stray incident. Instances like this are not unknown in the country’s corporate landscape. Families like Birla, Ambani, Modi, Shriram, Bajaj, Nanda, Dalmia, Chhabria and Thapar have all split in the past. Some parted ways amicably, others after some no-holds-barred fighting in full view of the public. The bitterness that gets generated in family feuds is unbelievable. Brothers at each other’s throat, uncle pitted against nephew, father and son in an open slugfest — there is nothing we haven’t seen.
One question that has remained unanswered is how much time, money and energy is lost in these eruptions? Family members take their eyes off business whenever a fight breaks out and senior managers try to figure out whose side to take. It is not uncommon to see business suffer when promoters fight. This is something that researchers in business schools ought to study. How much wealth have shareholders lost when promoters are embroiled in a dispute?
There is also a growing realisation that it is only the promoters who can provide a long-term vision to the company. Professionals may manage the show efficiently. But the strategic thrust can come from the promoters alone. They cannot afford to lose sight of it. But how do you keep the situation from getting out of hand? It is, after all, in the nature of families, in business or otherwise, to drift apart after a generation or two.
The news is that various models are being tried out in the country to avoid splits. It is early to say if these will succeed, but it is worth recounting some of them here.
The Burmans of Delhi have been in business for four generations. There are too many Burmans and one flagship: Dabur India. Of course, the company is large and has enough verticals to accommodate all of them. But the family has decided that no member will be involved in the management of the company, though the chairman and vice-chairman will be Burmans. These two posts will be rotated within the four branches of the Burmans by the family council; and there will never be more than four family nominees on the 12-member board.
More important, no family member is allowed to pursue his interests with Dabur funds. All their new businesses are thus privately funded and have nothing to do with Dabur, be it Amit Burman’s foray into restaurants, automobile dealerships and healthcare or Mohit Burman’s investment in insurance. Amit Burman did run Dabur Foods, a subsidiary of Dabur, till recently. But that company has since been merged with the parent and the business is now looked after by a team of professional executives.
Brothers Malvinder and Shivinder made a huge fortune when they sold their stake in Ranbaxy to Daiichi Sankyo of Japan for over Rs 9,000 crore. The Singh family has seen its share of bitterness in the past. Bhai Manjit Singh and Analjit Singh for many years complained that they were shortchanged when the brothers split in the early 1990s and Ranbaxy went to their elder brother, Parvinder Singh. A few years later, there was an awkward boardroom battle in which Parvinder Singh worsted his father, Bhai Mohan Singh. Malvinder and Shivinder own the family business equally — Fortis Healthcare and Religare — in order to avoid any conflict over ownership.
Arun Bharat Ram of SRF has written a family constitution which regulates the family’s affairs. It offers equal opportunities for sons and daughters in the family. Bharat Ram’s daughter, Deeksha who is married into the Kalyani family of Bharat Forge, has opted out of it, though. Thus, it applies to Bharat Ram’s two sons, Ashish and Kartik.
The constitution says that the two will receive the same money from the company. This is to ensure that the two and their wives don’t bicker over money. It specifies who can join the family business or how to opt out of it, what happens if somebody dies etc. On their part, the two brothers have taken over functions at SRF rather than businesses so that there is no conflict. Thus, while Ashish looks after operations and finance, Kartik takes care of human resources, total quality management and corporate communications. RM Rajgopal, a former CEO of SRF, works as a counselor to the family. All members meet once in two months to take stock of the situation.
Brothers Ajay, Vikram and Ajit Shriram of DCM Shriram Consolidated, another faction of the erstwhile DCM family, go on annual retreats with a relationship expert to sort out all inter-personal issues once a year. They have lunch together in office everyday so that senior executives don’t attempt to play one against the other. They are, incidentally, the most profitable arm of the old DCM family.
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