From East to West – How Succession Varies by Culture

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I was on a transatlantic flight from Lisbon to New York, when I began a conversation with my co-passenger. He was a friendly, elderly man and the owner of a large ship repair company in Vancouver. He had gone with a team to deal with a problem with a client’s ship, now docked in Italy.

Our conversation revealed how he had started the company 35 years ago, and how he had toiled to build it into the sizable enterprise it had become. Now he was 76 years old and looking forward to a calmer time after his retirement.

“Are your children in the business?” I asked him. “Yes,” he said. “One of my two sons, John, has been working in the business for the last six years. He has shaped up well. My other son is a journalist and does not want to be a part of what I do, which is just as well.”

“So you are lucky to have John to take over your business,” I ventured. He was silent for some time. “Let’s see. I have asked him to pay me the market valuation of the company less 20% in four equal annual installments- because he is my son. If he can do it, then the company is his. If he can’t then I have other offers. I cannot make it any easier for him. I do not want to give it to him free on a platter, because he will never know or understand the value of the business and the sacrifices I have made to bring it to this level. He would not be able to go on with it.”

The impact of culture on succession

This conversation with my co-passenger was but one of many factors that made me realise that there were often radically different views on succession planning in family businesses of the East and the West. It goes to show that we are all products of our environment: In the East, we generally start a business and grow it so that it will provide for our children and our children’s children – and hopefully many generations after them. It may or may not happen. But it is an ambition. There is also the hope that the next generation will improve on what has been done and that the family name gains more and more recognition over the generations. Successful examples are Cardin and Canali, Ford and Boehringer, Tata and Birla.

In Eastern society, we often feel compelled to build for our progeny. Naturally, the extent of this ambition varies from family to family and even more so from individual to individual.

The idea of creating a legacy may manifest itself differently in the West where sometimes it does not include the family dimension at all but rather centers around the individual: Many entrepreneurs build companies to fulfill a passion and achieve a goal. Having built a company, big or small they may one day decide to sell the company they have created and retire. Their children may get a legacy in money and other assets but they will not necessarily inherit or manage the company. Again this is not necessarily the general rule and there are family businesses in the West that have proven just as much commitment to creating a legacy to be handed down to their family as their Eastern peers.

I thought about the rational, logical statement of my co-passeneger and juxtaposed it with the emotional, familial attitudes to succession I have witnessed in the East. Each side approaches the succession dilemma in their own way. There can be no absolute judgement; We are all subject to our nature and our nurture. Where we were born, and how we were brought up, will always play a role.

Ultimately, it all comes down to the family.