Editorial by Dr Ali Azouz, lecturer and researcher at IAE Nantes (LEMNA), Nantes University, France
Since the death of France‘s most famous rock star, Johnny Hallyday, in December 2017, his family has become infamous. They’ve made the headlines time and again – not in celebration of Johnny Hallyday‘s music but because of the vagaries he left behind. Even if the French Elvis has left the building, his legacy lives on; but for whose benefit?
A few days after Johnny Hallyday‘s burial, an unexpected legal battle broke out. Members of the Hallyday family were contesting the right to inherit the tangible aspects of Johnny Hallyday‘s legacy, which, between royalties and record sales, is valued at tens of millions of euros. His two children from an early marriage, David and Laura Smet, refute the will of their father, which disinherits them to the sole benefit of his last wife, Lætitia.
The judicial system is left to decide if the estate of Johnny Hallyday is still subject to French inheritance laws, which do not allow children to be disinherited, because he claimed residency in the United States. As the judicial saga unfolds, the Hallydays find themselves in an unfortunate position – one that many others in less famous family businesses must also face when succession goes awry.
The Hallyday Family Business
After his marriage to Lætitia, the various companies founded by Johnny Hallyday gradually turned into a real family business. Known by some as “the shadow manager”, Lætitia Hallyday invested herself in the affairs of her husband to the point where her paternal grandmother, nicknamed Granny Rock, was entrusted with all the affairs of the Hallyday family in France. The family influence on Johnny’s professional affairs gained so much traction that it eventually excluded non-family devotees including Jean-Claude Camus, Johnny’s faithful producer, Catherine Battner and Vincent Stark, Johnny’s press officers, and Daniel Angeli, his photographer.
Notwithstanding the legal significance of Johnny Hallyday‘s country of residence, the Hallyday case has much in common with the succession faux pas that plagues many other family businesses. Johnny Hallyday‘s failure to adequately plan for the inevitable is conspicuous. Even if the Hallydays had prepared for it, however, could this family conflict have been avoided?
The Pathology of Succession Gone Awry
Only 30 per cent of family businesses survive from the first to the second generation, and academic research asserts that rivalry between successors is one of the most common reasons for failure. Often, these conflicts lead to a fractured family dynamic that renders objective decision-making impossible. Sometimes, businesses are bankrupted by the legal fees incurred.
Resources exist to help family businesses avoid these crises. Consultants, advisors and academics propose a milieu of best practices for planning managerial and ownership transfers. Perhaps the most critical dimension, however, is the founder’s capacity to realise the significance of a succession plan. In other words, the shift that happens when the founder moves from the logic of inheritance to the logic of a planned succession.
Inheritance or Planned Succession?
Inheritance, by definition, is the practice of passing on property, titles, debts, rights and obligations when an individual dies. The limits of the strictly inheritance approach, typically characterised by a “wait and see” attitude, are palpable. Founders who rely on an ad hoc inheritance model, just like Johnny Hallyday, pass on more than just their estate or business: they also leave behind their problems.
According to a recent study conducted for Deloitte by OpinionWay, despite the majority of family business leaders wishing to perpetuate the family inheritance, only 11 per cent have a formal succession plan in place. Paradoxically, one of the main reasons founders neglect the planned succession approach is the fear of family conflict that preparation could generate.
Thus, in good faith or not, sweeping succession under the metaphorical rug in the name of family harmony endangers not only the survival of the business but also that of the family. The Hallyday case reminds us how even an icon like Johnny, founder of several successful companies, can fall prey to an ill-planned succession.
Succession planning must exist at the core of long-term strategy and vision. A formalised approach to succession establishes a dialogue where the founder states and clearly explains their choices, limiting the risk of unfortunate post-succession conflict. Even if it’s a hard conversation to start, it’s better to start it sooner rather than later.