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Make virtues of family business everlasting: Godrej to family business heads

Adi Godrej speaks about how the family-run businesses have an edge over the public companies and also suggested ways to tackle the challenges faced

BS Reporter  |  Hyderabad 

Adi Godrej
Adi Godrej

Two prominent heads of family-owned businesses — Adi Godrej, chairman of Godrej group, and Thomas Schmidheiny, former chairman and CEO of Holcim, who continues to be the largest shareholder in the global cement behemoth — have sought to deepen the relevance and values of family driven businesses through philanthropy and corporate governance.

Speaking about the Joy of Giving at the fifth Asian Invitational Conference on Family Business, organised by the Center for Family Enterprises of Indian School of Business (ISB) here on Saturday, Schmidheiny said he was convinced that in today's world education was key to move on and that was the reason why he focuses his philanthropic activities in this sphere.

In the family he was taught to do his duty and that remained the guiding principle for him in business as well as philanthropy, Schmidheiny said. His family foundations and the he controls have been contributing to societal causes in a focussed manner, he added.

Schmidheiny, who ended his tenure as Holcim CEO in 2001 to focus on family affairs, said he would further like to expand the activities and research work at the Center for Family Enterprises. Schmidheiny is the founder and chairman of Spectrum Value Management Limited, which manages and looks after the commercial and private interests of Thomas and his family.

Adi Godrej, on the other hand, spoke about how the family-run businesses had an edge over public and also suggested ways to tackle the challenges faced by these businesses in terms of continuity.

“While family firms, both public and private, have innate strengths that give them an edge over their public counterparts, these strengths need to be meshed with unique systems to counter the effects of risks identified with family ownership, succession and the management of talent,” he said.

Godrej, who is also chairman of ISB, sought to dispel the notion that family businesses are capricious, short-lived, and are small enterprises. According to him, family-managed businesses make up more than two-thirds of the world’s companies, employing half the world's workforce and contribute to well over half the world's GDP. Also family-managed businesses account for more than 95 per cent of the registered in India as also in Latin America, the Far East and the Middle East.

While explaining the risks that potentially influence the growth and continuity of family-managed businesses over generations, he said those risks could be countered with good corporate governance principles and also by following a set of measures to manage the talent by adequately rewarding it at the helm.

A number of studies indicate that only 5 per cent of all family-managed businesses continue to create shareholder value beyond the third generation. The question that therefore presents itself is: What differentiates this 5 per cent from the rest of the pack? he asked before answering it himself. “The answer in my opinion is simply a good corporate governance system, which identifies business participants, develops management talent and demarcates roles and responsibilities of these participants linked to heir talents and capabilities,” Godrej said.

Over 25 leading speakers shared their experiences and thoughts at the two-day conference on and several overseas participants attend the sessions, according to Kavil Ramachandran, executive director of Centre for Family Enterprise. ISB also runs a management programme on and is in the processes of inducting the third batch of students. The last batch had 53 graduates, according to Ramachandran.

First Published: Sun, February 08 2015. 20:44 IST