AdvertisementHow Asia’s richest man is planning for the future

How Asia’s richest man is planning for the future

“They want to avoid that,” Bose said. On top of that, there’s the pandemic, which has made people really start thinking about what they really want. “

He said that customer inquiries about family succession and governance issues in the Asia Pacific region had been compounded by the onslaught of COVID-19, when families in the region usually stalled on the issue.

“Culturally, it’s not something people feel comfortable talking about,” Boes said. The younger generation does not want to put it up. Now, people are getting ready and preparing.”

While Ambani has not publicly revealed any plans to step down from his responsibilities as Reliance’s chairman and general manager, his children have become more apparent. Speaking to shareholders in June, Ambani gave the first indication that his offspring – twins Akash and Isha, 30, and Anant, 26 – would play important roles at Reliance.

“I have absolutely no doubt that the next generation of leaders at Reliance, led by Isha, Akash and Anant, will serve to enrich this precious legacy,” he said. Pole is drawn to the way the family behind Walmart managed the transfer of control after its founder Sam Walton died in 1992, people familiar with his thinking said.

Wealthy dynasties such as the heirs to the Dumas fashion empire Hermes, or the Johnson family of consumer product giant SC Johnson & Son, sought to keep relatives in day-to-day control of their businesses. But the storied Waltons family – the world’s richest family – has retained only oversight at the board level, outsourcing the management of the US retail giant to directors since 1988, when David Glass took over as CEO from Sam Walton.

The Walton Empire pictured here is Sam Walton’s son Rob, his wife Helen, and his son John Walton, in 2001.attributed to him:AP

Rob Walton, Sam’s eldest son, and nephew Stuart Walton are members of the Walmart board of directors, and Sam’s grandson Greg Benner became president of Bentonville, Arkansas in 2015. While this led to criticism of the interests of the clan above other shareholders, most of the family was concentrated It extends its energies outside Walmart, to other businesses or into areas such as sustainable investing and philanthropy.

The Walton family model reflects the extraordinary insight on the part of founder Sam, who built the now global giant out of a few “five and dime” stores. Preparation for succession began in 1953 – some 40 years before his death – by passing 80 percent of the family’s business to his four children: Alice, Rob, Jim and John. This reduced property taxes and helped the family retain control even as the company grew into the world’s largest retailer.

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

“The fact that the family owns nearly 50 percent of the company means that the managers who hire them know where the real strength lies,” Lichtenstein said.

Walmart disagreed with Liechtenstein’s explanation, saying the retailer was committed to maintaining an independent, majority board. A Walmart spokesperson said the company “believes this independence ensures strong oversight and independent perspective and enhances the overall effectiveness of the board.”

What Ambani does is very rare. These parents usually stick to it all until the last minute. He has become wise because he has learned from his family’s previous mistakes that they do not want to repeat.”

Winnie Qianping is director of the Tanuto Center for Asian Family Business Studies and Entrepreneurship at the Hong Kong University of Science and Technology.

A model that keeps the family central but managing delegates has a clear appeal to someone like Ambani, given its history.

Founded in 1973 as a trading house by Mukesh Dhirajal’s father Hirachand Ambani, Reliance’s empire plunged into uncertainty in 2002 when the patriarch, known universally as Dhirubhai, died without a will. That sparked a years-long battle for control between Mukesh and his younger brother Anil, 62, who were in business at the time.

Initially, the siblings worked with Mukesh as President and Vice President of Anil for Reliance, which was already the most important company in India with plans to expand beyond what had become its energy field. But relations soured, as both believed the other was making decisions without adequate consultation: Mukesh was upset when Anil once announced a power generation project without discussing it, while Anil was angered when his brother restructured the entities that managed the family’s Reliance shares without discussion. his input.

Anil Ambani started the family business after his father's death but fell out with his brother Mukesh before reconciling in recent years.

Anil Ambani started the family business after his father’s death but fell out with his brother Mukesh before reconciling in recent years.attributed to him:Bloomberg

At one point, Anil refused to sign Reliance’s financial statements, citing what he said were insufficient disclosures, and directors at a subsidiary he was managing quit to show their loyalty.

The basis of it all was a dispute over the fundamental nature of the two brothers’ relationship. As an elder, Mukesh saw himself as the natural chief, while Anil considered himself an equal partner. This conflict eventually escalated into a kind of civil war in Ambani, and three years after Dhirubhai’s death, their mother, Kokilaben, was forced to intervene.

In a 2005 settlement mediated by Kokilaben, the brothers divided up Reliance’s assets. While Anil took over the telecoms, asset management, entertainment and power generation businesses, Mukesh retained control of the refining, petrochemical, oil and gas and textiles operations.

It’s a “classic case of mismanagement of succession,” said Kavil Ramachandran, head of the Thomas Schmidhini Center for Family Enterprise at the Indian School of Business. “Having gone through a bitter process with his brother, Mukesh Ambani certainly does not want to re-enact the play in his family branch.”

The heirs of the Ambani would take on an empire completely different from that which their father had inherited as part of the dynastic accord.

Within his two decades in office, Ambani transformed Reliance. Owner of the world’s largest crude oil refining complex, the diversification giant has increased dramatically over the past five years, transforming India’s mobile telecom landscape and the acquisition of Amazon.com Inc. — and Walmart — in the country’s emerging electronic retail space. Since 2016, Reliance’s market capitalization 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 suite, a strategic turnaround for one of the world’s largest fossil fuel billionaires. With the traditional energy industry facing calculus and concerns about climate change coming to the fore for investors, this appears to be another play on the future by Ambani, who got serious in December. Ambani recently canceled a two-year-old plan to sell 20 percent of his stake in his oil and chemical unit to the Saudi Arabian Oil Company, in a sign of his shifting priorities. A person familiar with Ambani’s planning said he was also restructuring the company to consolidate control over the family. The clan’s stake in the listed arm of Reliance rose to 50.6 percent from 47.27 percent in March 2019, according to company filings.

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

Such a setup is likely to prevent any uncertainty about control that might lead to infighting. Some people said the family was more likely to have a say in running Reliance than the Waltons do at Walmart.

“In Indian companies, controlling shareholders have significant voting powers that can be used to appoint or remove directors,” said VK Unni, a professor at the Indian Institute of Management in Calcutta.

As he seeks to solidify Reliance’s transformation, the way in which Ambani manages to deliver operational and strategic direction will be closely monitored – not just in India.

More than a third of family empires in Asia are owned by first-generation founders, according to Credit Suisse, and over the next decade, roughly 100 of these companies will look to transfer control and wealth, often to heirs who may have been educated abroad and exposed to Western business models. The money tycoons handing the reins of affairs already took a range of ways, from the traditional—the Li and Qing families in Hong Kong passed management to the eldest sons—to the less, with Teresita C-Coson, the eldest child and daughter of the late. Filipino billionaire, Henry C., leads a family council that oversees the Southeast Asian nation’s largest listed company by market value, spanning from real estate to banks.

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

It’s clear that Ambani’s kids are already being groomed to make them stand out even more. The twins have played pivotal roles in the company’s shift toward retail and technology, including talks with Facebook, Now Meta Platforms, which secured a $5.7 billion investment by the social media giant in Reliance’s Jio Platforms, Ambani’s e-commerce ship of ambitions. Anant is a principal in Jio Platforms, the oil and chemical business, as well as Reliance’s renewable energy units.

“What Ambani does is very rare,” Ping said at the Tanuto Center in Hong Kong, referring to his future planning. These parents usually stick to everything until the last minute. He has become wise because he has learned from his family’s previous mistakes that they do not want to repeat.”

Bloomberg

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