How the richest man in Asia plans the future

“They want to avoid this,” Boes said. “On top of that you have the pandemic, which has made people really start to think about what they really want.”

Customer inquiries on family succession and governance issues in the Asia-Pacific region have doubled compared to before the COVID-19 attack, he said, when families in the region typically procrastinated on the matter.

“Culturally, it’s not something people are comfortable talking about,” Boes said. “The younger generation doesn’t want to talk about it. Now people are getting ready and getting ready.

Although Ambani has not publicly disclosed any plans to step down from his responsibilities as president and CEO of Reliance, his children are becoming increasingly visible. Speaking to shareholders in June, Ambani gave the first indication that his offspring – twins Akash and Isha, 30, and Anant, 26 – will play an important role at Reliance.

“I have no doubt that the next generation of leaders at Reliance, led by Isha, Akash and Anant, will further enrich this precious legacy,” he said. The mogul is drawn to how the family behind Walmart handled the transfer of control following the death of founder Sam Walton in 1992, people familiar with his thinking have said.

Wealthy dynasties like the heirs to the fashion empire Hermes of the Dumas family, or the Johnsons of consumer goods giant SC Johnson & Son, have sought to keep those close to them in day-to-day control of their businesses. But the legendary Waltons – the richest family in the world – have retained only board-level oversight, outsourcing the management of the U.S. retail giant to managers since 1988, when David Glass succeeded Sam Walton as CEO.

Sam Walton created the Walton Empire, represented here by his son Rob, wife Helen and son John Walton in 2001.Credit:PA

Rob Walton, Sam’s oldest son, and his nephew Steuart Walton serve on the Walmart board of directors, and Greg Penner, Sam’s grandson, became president of the Bentonville, Arkansas-based company in 2015. Although this led to criticism of the interests of the clan was high above other shareholders, most extended family members focus their energies outside of Walmart, on other businesses or in areas such as sustainable investing and philanthropy.

The Walton family model reflects an unusual foreknowledge on the part of founder Sam, who built the now-global giant from a handful of “five-and-dime” stores. He began planning his succession in 1953 – almost 40 years before his death – bequeathing 80% of the family business to his four children: Alice, Rob, Jim and John. This minimized inheritance taxes and helped the family retain control even as the company became the world’s largest retailer.

The Waltons currently own about 47% of Walmart through Walton Enterprises and other family trusts, according to data compiled by Bloomberg. This means they continue to maintain their grip, according to Nelson Lichtenstein, author of “The Retail Revolution: How Wal-Mart Created a Brave New World of BusinessAnd director of the Center for the Study of Work, Labor and Democracy at the University of California at Santa Barbara.

“The fact that the family owns almost 50 percent of the business means the executives they hire know where the real power lies,” Lichtenstein said.

Walmart disagreed with Lichtenstein’s interpretation, saying the retailer was committed to maintaining a mostly independent board of directors. He “believes that this independence ensures strong oversight, independent views and promotes the overall effectiveness of the board,” said a spokesperson for Walmart.

“What Ambani does is quite rare. Normally, these patriarchs hang on to everything until the last minute. He became wise because he learned from his family’s past mistakes that they don’t want to repeat.

Winnie Qian Peng, director of the Tanoto Center for Asian Family Business and Entrepreneurship Studies at Hong Kong University of Science and Technology.

A role model who keeps the family central but delegates management has an obvious appeal to someone like Ambani, given her history.

Founded in 1973 as a trading house by Mukesh’s father Dhirajlal Hirachand Ambani, the Reliance empire was plunged into limbo in 2002 when the patriarch, known universally as Dhirubhai, passed away without a will. This sparked a years-long battle for control between Mukesh and his younger brother Anil, 62, both of whom were involved in the business at the time.

Initially, the siblings worked with Mukesh as chairman and vice chairman of Anil of Reliance, then already India’s largest company with plans to expand beyond what had become his. energy niche. But relations grew strained, with each believing the other was making decisions without enough consultation: Mukesh was upset when Anil one day announced a power generation project without discussing it, while Anil was furious when his brother restructured the entities that ran the family’s Reliance shares without his input.

Anil Ambani started working in the family business after his father died, but fell out with his brother Mukesh before reconciling in recent years.

Anil Ambani started working in the family business after his father died, but fell out with his brother Mukesh before reconciling in recent years.Credit:Bloomberg

At one point, Anil refused to sign Reliance’s financial statements, citing what he called inadequate disclosures, and the directors of a subsidiary he ran resigned to show their loyalty.

At the root of it all was a dispute over the fundamental nature of the brothers’ relationship. As the elder, Mukesh saw himself as the natural boss, while Anil saw himself as an equal partner. This struggle eventually snowballed into a sort of Ambani civil war and three years after Dhirubhai’s death, their mother, Kokilaben, was forced to intervene.

In a 2005 settlement negotiated by Kokilaben, the brothers divided the assets of Reliance. While Anil handled telecommunications, asset management, entertainment, and power generation, Mukesh retained control of the refining, petrochemicals, oil and gas, and textiles businesses.

It’s a “classic case of estate mismanagement,” said Kavil Ramachandran, director of the Thomas Schmidheiny Center for Family Enterprise at the Indian School of Business. “After going through a bitter process with his brother, Mukesh Ambani would certainly not like the play to be replayed in his family branch.”

The heirs of Ambani will seize an empire very different from the one their father inherited as part of family relaxation.

During his two decades at the helm, Ambani transformed Reliance. Owner of the largest crude refining complex in the world, the conglomerate’s diversification has accelerated over the past five years, disrupting India’s mobile communications landscape and taking Amazon.com Inc. – and Walmart – into the nation’s nascent online sales space. Since 2016, Reliance’s market value has more than quadrupled, making it the most valuable company in India.

This year the focus has been on building the group’s green energy flank, a strategic shift for one of the world’s biggest fossil fuel billionaires. As the traditional energy industry faces a toll and climate change concerns are at the forefront of investors, this seems like another game of the future for Ambani, who became a grandfather in December. Ambani recently abandoned a two-year plan to sell a 20% stake in its petroleum and chemical unit to Saudi Arabian Oil Co., a sign of shifting priorities. He also restructured the business to consolidate family control, said one of those familiar with Ambani planning. The clan’s stake in the listed branch of Reliance rose to 50.6% from 47.27% in March 2019, according to company documents.

Reliance could over time become a holding company for three underlying businesses – energy, retail and digital – which will likely be listed separately in the future, the people said. The children and Nita would have equal shares in the holding, giving them the same level of influence over listed entities, according to some people.

Such a configuration would probably avoid any uncertainty over control which could lead to internal squabbles. And the family will likely have more of a say in running Reliance than the Waltons at Walmart, some people have said.

“In Indian companies, controlling shareholders hold considerable voting powers which can be used to appoint or remove board members,” said VK Unni, professor at the Indian Institute of Management in Calcutta.

As he seeks to anchor Reliance’s transformation, how Ambani handles the transfer of operational and strategic direction will be closely watched, not just in India.

More than a third of Asian family empires are owned by first-generation founders, according to Credit Suisse, and over the next decade nearly 100 of these companies will seek to transfer control and wealth, often to heirs who may have been educated abroad and have been exposed to Western business models. The tycoons who have already handed over the reins have taken various paths, from the traditional – the Li and Cheng families of Hong Kong handed over the leadership to the eldest sons – at least, with Teresita Sy-Coson, the eldest child and daughter of the late Filipino billionaire Henry Sy, heads a family council that oversees the Southeast Asian country’s largest publicly traded company in terms of market value, ranging from real estate to banking.

Loading

Hong Kong billionaire Lee Man Tat broke precedence when he formed a family council that gave his wife and their five children a say in the more than 100-year-old Lee Kum Kee empire, which covers real estate condiments. Lee passed away in July, leaving his children to run the conglomerate with a family constitution in place.

It is clear that the children of Ambani are already prepared for greater significance. The twins were central to the company’s shift to retail and tech, including talks with Facebook, now Meta Platforms, which secured a $ 5.7 billion investment from the media giant. social networks in the Jio platforms of Reliance, Ambani’s e-commerce vessel. ambitions. Anant is director of Jio Platforms, the petroleum and chemical business, as well as the renewable energy units of Reliance.

“What Ambani does is quite rare,” Peng told the Tanoto Center in Hong Kong, referring to his forward planning. “Normally these patriarchs hang on to everything until the last minute. He became wise because he learned from his family’s past mistakes that they don’t want to repeat.

Bloomberg

Source link