The Talking Cure: Why Family Businesses Must Learn to Talk Again

At the heart of When Nietzsche Wept, the film based on Irvin Yalom’s novel, lies an idea that every advisor to a business family ought to know. The film follows Dr Joseph Breuer, a nineteenth-century Viennese physician and mentor to the young Sigmund Freud, as he treats a patient whose physical symptoms have defied every remedy. He discovers, almost by accident, that allowing the patient to put unspoken fears, anxieties and resentments into words begins, in itself, to heal. He calls it the talking cure.

A quiet moment. A small room. Two chairs. And a long, difficult conversation. Watching it, I recognised something I have seen lived out again and again in the drawing rooms and boardrooms of Indian business families.

It is simple. And profound.

More often than not, we construct entire narratives in our minds. What the other person will say. How they will react. What the outcome will be. And in doing so, we avoid the one thing that could resolve it.

Conversation.

In family businesses, this becomes not just critical, but existential. Silences are rarely neutral. They fill up, quietly, with assumptions, interpretations, and sometimes quiet resentment. Decisions get delayed. Conflicts deepen. Relationships strain. Not because the issues are too complex, but because they remain unspoken.

What goes unsaid does not go away

Look at the family disputes that have erupted publicly in Indian business in recent years. The Singhanias over Raymond. The Kalyanis. The Lodhas. And earlier, the Ambanis, the Modis, the Mafatlals. Behind the headlines, the cause is rarely a shortage of intelligence or intent. It is the absence of conversation. Fathers who never told their sons what they feared. Siblings who never named the favouritism they felt. Daughters who swallowed slights out of respect. Cousins who watched the cracks widen and said nothing.

By the time the family eventually speaks, usually through lawyers and media leaks, the conversation has already curdled into confrontation.

Contrast this with business families that have stayed together across three, four, even five generations. None of them is conflict-free. But somewhere along the way, each built habits of conversation. Family councils. Structured retreats. Quiet one-on-ones. The Sunday breakfast table. Things get said. Not always politely, not always comfortably. But they get said. And resentment never gets the time to settle.

The real role of an advisor: listen, probe, translate

In my work with business families, I have seen this repeatedly. The moment people sit down and speak, really speak, perspectives shift. Not always into agreement. But always into greater understanding. And often, that is enough to move forward.

Which raises an important question. What is the real role of an advisor to a family business?

It is tempting to think the advisor’s craft is in drafting elegant constitutions, designing governance, or recommending the “right” succession model. These matter. But they are not what families remember us for.

The advisor’s first responsibility is to listen. To hear the mother who worries that her daughter-in-law feels excluded. To hear the son who carries the unspoken weight of not being the father’s favourite. To hear the patriarch terrified of becoming irrelevant, who cloaks that fear in decisions that look like control. To hear the daughter who has quietly stopped expecting to be asked.

The second responsibility is to probe. Not to interrogate, but to ask the questions the family has been avoiding. “What would you want your brother to know that you have never told him?” “If your father could hear this without reacting, what would you say?” These questions are not comfortable. They are not meant to be. They are meant to open doors that have been locked for years.

The third responsibility is to translate. Not languages, though in many Indian families that too matters, but emotions. To reframe a founder’s anxiety about letting go as love, not control. To reframe a next-gen member’s wish to do things differently as stewardship, not rebellion.

Governance helps. Talking heals.

Governance structures help. Constitutions, councils and boards create the scaffolding for difficult conversations that would otherwise blow the family apart. Processes matter.

But at the heart of it, continuity in family businesses rests on something far more fundamental: the willingness to talk.

The families that endure are not the ones with the longest constitutions or the most professional boards. They are the ones where a father and a son can sit on the same verandah, without an agenda, and speak honestly about what they feel. Where a brother can tell another brother, “I was hurt,” without it becoming a lawsuit. Where a daughter can say, “I want to be considered,” and be heard.

Breuer’s insight, offered more than a century ago, has never been more relevant to the Indian business family. It is the talking that cures.

Every empire in Indian business that has broken, broke first in silence. Every one that has endured did so because at some critical moment, someone refused to let the silence win.

That is the first and most sacred task of any advisor worth the name. Before the drafts, before the designs, before the boards and the councils, build the room, the time, and the safety, for the family to finally say what it has been unable to say.

The lawyers, the courts and the constitutions come later. They are the ruins we assemble when the talking has already failed.

Talk. While the family is still yours to keep.

When governance speaks English but not everyone in the family does

This article was first published in the Economic Times on March 30, 2026; https://economictimes.indiatimes.com/news/company/corporate-trends/when-governance-speaks-english-but-not-everyone-in-the-family-does/articleshow/129891869.cms

Family constitutions are often discussed as technical instruments. Define ownership. Clarify succession. Codify governance. Put structures in place. But on the ground, they are anything but technical.

Recently, while drafting a family constitution for a business family with networth of around Rs1,000 crores, a challenge forced me to confront a blind spot. Until then, I had worked with families where members differed in views on leadership or ownership, but were broadly similar in education, exposure, and comfort with English or Hindi. This family was different. Some members were not fluent in either language. A few had very different educational journeys and limited exposure to the wider business environment. 

In India, this pattern is not unusual. Founders often evolve rapidly. They adapt to markets, negotiate complex deals, build networks, and create significant wealth within a single generation. But the rest of the family does not always evolve at the same pace or in the same direction. While they may not be active in the business, they shape family conversations, influence expectations, affect family harmony, and impact how decision-makers think.

Therefore, governance has to be explained at the level of the least comfortable member, not just the most articulate one. When those actively involved in the business understand and agree, there is a natural tendency to move forward. And this is where even well-intentioned constitutions can quietly fail.

A constitution that is not understood is not governance

I drafted the constitution after taking extensive inputs from all. As the process unfolded, I became aware of two gaps. First, the language barrier limited my ability to engage fully with a few family members. Second, my role as an external advisor, bringing in formal frameworks and structured processes, may be intimidating to a few.

Recognising this early, a trusted assistant was brought in who could speak with these members in their own language and in a manner they were comfortable with. It helped surface concerns, expectations, and nuances that might otherwise have remained unsaid. The quality of the document improved because the quality of listening improved.

Yet, once the drafting was complete, another concern emerged. The constitution was thorough and carefully structured, but it could still feel overwhelming to some members. Its length, terminology, and formal tone risked making it accessible only to those already comfortable with governance language. A document meant to guide the family for decades cannot afford to be understood by only a few.

Bridging the gap between intent and understanding

So, what can advisors and families do when education levels, language, and exposure vary widely?

First, stop treating governance as paperwork. Constitutions must be explained through stories, examples, and the family’s own journey. Concepts like stewardship, meritocracy, or accountability become meaningful only when grounded in lived experience.

Second, translation is not mechanical. It cannot be left to someone who merely knows the language. The translator must understand family businesses and care about the family’s future. This could be a trusted family member, a colleague, a friend, or even someone the advisor can comfortably explain things to and convey the essence. What matters is emotional intelligence and conviction. Translation must carry soul, not just syntax. If it feels like homework or an academic exercise, it will fail.

Third, participation builds legitimacy. Listening sessions with non-operating members are not symbolic gestures. They are essential. When people see their concerns reflected, they feel included. Ownership of the constitution grows.

Fourth, education must accompany documentation. Constitutions need orientation sessions, simplified companion guides in local languages, and repeated conversations. Small group discussions led by respected elders or advisors often work better than formal presentations.

Fifth, symbolism matters. A signing ceremony where senior family members explain why the constitution exists reinforces its seriousness. When founders articulate that governance is about continuity, not control, it changes how the document is received.

Governance requires humility, not just expertise

Advisors must approach such situations with humility. Resistance is often due to anxiety. For founders, governance can feel like loss of authority. For members who are less familiar with formal business language, it can feel exclusionary and overwhelming. The advisor’s role is to translate governance into fairness, continuity, and harmony.

Family constitutions must honour where the family comes from while preparing it for where it is going. That balance requires empathy as much as technical skill. We also need to recognise a deeper truth. Governance is not about sophistication. It is about sustainability. Families that built enterprises without formal business training often demonstrate extraordinary commercial intuition and resilience. Our responsibility is to help institutionalise that wisdom in ways every member can access.

A constitution must belong to the family, not the advisor

A family constitution that intimidates will not endure. One that is understood, debated, questioned, and eventually embraced stands a far greater chance of guiding the family across generations.

In countries like India, where entrepreneurial wealth is young and diversity within families is the norm, this challenge will only deepen. The advisor’s real craft lies not in drafting elegant documents, but in translating governance into something human: fairness, continuity, and belonging.

Because in the end, governance does not succeed when it is written well.

It succeeds when it is felt, owned, and lived.

Family Businesses as a Pillar of Viksit Bharat

This article was first published in the Economic Times on January 29, 2026; https://economictimes.indiatimes.com/news/company/corporate-trends/family-businesses-as-a-pillar-of-viksit-bharat/articleshow/127759602.cms?from=mdr

Introduction: The Missing Big Idea

In a recent letter to the Finance Minister published in the Times of India, Duvvuri Subbarao, former governor of the Reserve Bank of India, posed a question that goes to the heart of India’s economic moment. If Viksit Bharat is the overarching vision of this government, what does it mean in concrete terms, and how are annual budgets aligned to that vision? Drawing a parallel with Manmohan Singh’s landmark 1991 budget, where the “big idea” was liberalisation, Subbarao asks what the equivalent organising principle is today.

This article argues that one such pillar of Viksit Bharat must be explicitly recognised and supported: India’s family businesses. The objective here is twofold. First, to situate family enterprises historically and empirically as engines of nation building. Second, to outline what the Finance Minister can do, through policy and budgetary choices, to enable family businesses to contribute responsibly, transparently, and sustainably to India’s development journey.

Family Businesses and Nation Building: A Historical Constant

Family businesses are the oldest and most enduring organisational form across nations. In India, family enterprises have long been builders of physical infrastructure, educational institutions, healthcare systems, and local employment. At India’s current stage of development, where the need for infrastructure, patient capital, and institution building is acute, these characteristics matter deeply.

History offers a useful parallel. In the late nineteenth and early twentieth centuries, the United States witnessed massive infrastructure creation led by business families such as the Vanderbilts, the Carnegies, and the Rockefellers. Railroads, steel, oil, and finance were shaped by families willing to take long-term risks at scale. These families helped build the economic foundations of modern America.

India today stands at a comparable inflection point. Large family-controlled business groups are deeply involved in roads, ports, renewable energy, logistics, manufacturing, education, and healthcare. These are sectors where long gestation periods and intergenerational commitment are advantages rather than liabilities.

Lessons from the Robber Barons

Yet history also cautions us. Many of the American families who built that infrastructure later came to be labelled “robber barons”. Some lost legitimacy due to concentration of power, weak governance, opaque practices, and an inability to manage succession effectively. Several family empires fragmented or faded, not because of lack of wealth, but because institutions did not evolve alongside scale.

This is a lesson India must take seriously. The choice is not between celebrating or constraining family businesses. The real policy challenge is to fuel entrepreneurial energy while embedding governance, transparency, and meritocracy. Without this balance, family capitalism risks public backlash and private decline.

Why Family Businesses Matter for Viksit Bharat

If Viksit Bharat is about sustained prosperity, social stability, and institutional depth, family businesses are uniquely positioned to contribute in four ways.

First, they provide patient capital. Family owners are often willing to invest across cycles, absorb short-term volatility, and commit to long-horizon projects that are unattractive to purely financial investors.

Second, they anchor local economies. Family enterprises are embedded in regions and communities, making them critical to employment generation, skill formation, and social cohesion.

Third, they enable institutional philanthropy. Many of India’s educational and healthcare institutions have been built by business families, often long before corporate social responsibility became mandatory.

Fourth, they ensure continuity. In a world of rapid managerial churn, family ownership can provide strategic consistency, provided governance systems are robust.

Policy Lessons from Other Economies

Across several jurisdictions, governments are beginning to recognise family enterprises as distinct economic actors whose long-term orientation and ownership continuity require tailored policy responses. As documented by Tharawat Magazine , this shift reflects an understanding that family businesses contribute disproportionately to employment, capital formation, and institutional stability, yet face structural vulnerabilities during succession and ownership transition that generic corporate policy does not address. The emerging response is not to privilege family firms indiscriminately, but to make them visible within the policy architecture.

This recognition has taken different institutional forms. In the United States, the creation of a bipartisan Family Business Caucus within Congress signals an effort to ensure that family enterprises are explicitly considered in legislative and regulatory debates. In Poland and Canada, legal and tax reforms have focused on reducing the cost and complexity of intergenerational transfers, acknowledging that poorly managed succession can destroy productive capacity and jobs. In the United Arab Emirates, a dedicated Family Companies Law, supported by state-backed institutions, seeks to codify governance, succession, and dispute resolution mechanisms, positioning family firms as long-term partners in national economic strategy. Hong Kong, meanwhile, has focused on building an ecosystem around family capital and family offices, combining regulatory adjustments with investments in institutional capacity for stewardship and legacy planning.

What unites these diverse approaches, as Tharawat Magazine underscores, is a move away from treating family ownership as incidental. Instead, policy frameworks increasingly aim to align continuity with governance, transparency, and professionalisation. The lesson for India is not to replicate any one model, but to recognise that if family businesses are to anchor Viksit Bharat, they must be deliberately integrated into policy design, fiscal incentives, and economic measurement, rather than remaining an invisible yet systemically important segment of the economy. 

Policy Recommendations

If robust family businesses are to be a measurable pillar of Viksit Bharat, policy intent must translate into administratively actionable and fiscally grounded measures.

First, formal recognition of family enterprises: The Union Budget can announce a formal definition of family businesses, notified jointly by the Ministry of Finance and the Ministry of Corporate Affairs. This would allow family enterprises to be recognised as a distinct category for policy design, without creating a new regulatory burden. Budget documents can mandate periodic data collection through MCA filings, enabling evidence-based policymaking.

Second, governance-linked fiscal incentives: Under the Direct Tax framework administered by the Central Board of Direct Taxes, targeted deductions or concessional tax treatment can be offered to family enterprises that meet specified governance benchmarks. These may include independent directors, documented succession plans, audited family constitutions, and separation of ownership and management. This aligns tax policy with long-term institutionalisation rather than short-term compliance.

Third, succession and continuity financing: The Budget can create a dedicated Succession and Continuity Credit Window, routed through public sector banks and development finance institutions. Backed by partial government guarantees, this facility would support ownership transitions during generational change, preventing distress sales, fragmentation, and employment loss. This intervention sits squarely within the Ministry of Finance’s financial stability and credit flow mandate.

Fourth, targeted public expenditure for family-led nation building: Capital expenditure allocations for infrastructure, education, healthcare, and energy transition can explicitly prioritise public–private partnerships anchored by long-term family ownership. Viability gap funding and concessional finance can be linked to governance and transparency standards, ensuring that public funds support stewardship-oriented capital rather than short-term extraction.

Fifth, next-generation capability development: Budgetary support can be provided under skilling and higher education heads, in coordination with the Ministries of Skill Development and Entrepreneurship, and Education, for structured leadership and governance programmes tailored to next-generation family members. Treating succession as a national economic continuity issue reframes it from a private family matter to a public interest concern. 

Measuring Progress: Integrating Family Business Health into Economic Reporting

If Viksit Bharat is to move beyond aspiration, it requires metrics embedded in official economic reporting. One such metric should be the robustness of India’s family business ecosystem.

The Finance Ministry can mandate the creation of a Family Business Development Index, published periodically alongside existing economic indicators. This composite index could track intergenerational survival rates, governance quality, professional management penetration, employment contribution, reinvestment rates, and participation in national priority sectors.

Such reporting would serve three purposes. It would signal that stewardship-based capitalism matters to India’s development vision. It would create incentives for business families to institutionalise governance and succession practices. And it would give policymakers an early warning system for stress in a segment that employs millions and anchors regional economies.

Conclusion: A Call for Early Attention

Embedding family businesses as a pillar of Viksit Bharat will not happen overnight. It may not be feasible to incorporate many of these ideas in the forthcoming budget. Policy design, inter-ministerial coordination, and institutional alignment take time.

But that is precisely why the conversation must begin now. As an early set of ideas for the next budget cycle, this article urges the Finance Minister to take notice. If India wants development that is durable, inclusive, and institutionally sound, it must look closely at the families that build, own, and steward its enterprises.

Viksit Bharat will not be built by capital alone. It will be built by families who think beyond one generation, supported by policies that reward responsibility as much as ambition.

How India Inc 2.0 can transform familial privilege into impactful leadership

This article was first published in the Economic Times on April 13, 2025. Co-author: Kavil Ramachandran; https://economictimes.indiatimes.com/news/company/corporate-trends/how-india-inc-2-0-can-transform-familial-privilege-into-impactful-leadership/articleshow/120237165.cms?from=mdr

From a distance, the heirs of India’s eminent family-run conglomerates seem favoured by destiny. With access to elite global education, rigorous mentorship, and unparalleled resources, they appear poised effortlessly for leadership. But beneath the apparent privilege is a daunting reality. The successors of family dynasties like Reliance, Godrej, Adani, Birla, Tata, and Bajaj face formidable challenges—legacy burdens, intense public scrutiny, the delicate task of honouring tradition while innovating for the future, and the challenge of finding one’s own voice in a business built by towering patriarchs. 

The weight of Legacy

Inheriting a family business is a paradox: simultaneously a blessing and an overwhelming responsibility. The second or third generation inherits more than businesses—they inherit legacy. Mukesh Ambani's children—Akash, Isha, and Anant—bear not only the weight of managing Jio, Reliance Retail, and new energy ventures but must also live up to the legend of a father who turned Reliance into a $250-billion empire. Similarly, Nyrika Holkar, part of the fourth generation at Godrej, has stepped into a business synonymous with Indian identity—from locks and soaps to real estate and agrochemicals and beyond. 

The problem with legacy is that it sets an invisible benchmark. “Can they ever be as visionary as their predecessors?” is an unspoken question they constantly confront. Even when these inheritors are Ivy League-educated, McKinsey-trained, or battle-tested within their firms, their every move is compared to the founders. The daunting challenge of being in the ‘founder's shadow’—the psychological weight of comparisons that threaten autonomy and individuality in leadership roles, is real! It’s a double-edged sword: the legacy opens doors, but it also limits room for error. 

Balancing Tradition with Transformation

A prominent challenge facing these heirs is navigating between respecting inherited traditions and meeting contemporary demands. Traditional Indian family businesses emerged in regulatory environments defined by protectionism, limited competition, and incremental change. Today's successors must manage rapid digitisation, sustainability imperatives, and stakeholder capitalism, often within organisational cultures that remain anchored in hierarchical, conservative decision-making.

While Sanjiv Bajaj, now Chairman and MD of Bajaj Finserv, has been widely credited for pioneering financial innovations and building a fintech powerhouse, he did so while carefully navigating the strong legacy of Rahul Bajaj’s manufacturing-centric vision. The message to other next-gen leaders is clear: real success lies in transforming without erasing. 

Structured Grooming: Beyond Formal Education

To their credit, most of India’s business families have become much more structured about grooming their heirs. Business education is no longer left to osmosis. Formal mentoring, shadowing senior executives, and rotations across group companies are standard. Many also bring in external CEOs to create professional buffers. For instance, Aditya Birla Group’s Kumar Mangalam Birla gave his children an extended runway, encouraging internships and hands-on training across businesses, including time spent in overseas ventures. Gautam Adani, chairman of the Adani Group, has articulated a clear succession plan, aiming to transition control to the next generation by the early 2030s. 

These measures provide not just technical acumen but also crucial credibility with professional managers. Yet, structured mentorship is not a panacea. The successors must still confront the psychological isolation of leadership, what is often described as the “loneliness of command.” Peer relationships can often become transactional, while relentless media scrutiny denies privacy, significantly affecting emotional resilience and personal identity development.

Family Dynamics: Navigating Collaboration and Conflict

Effective succession in large business families hinges on alignment more than mere capability. Divergent visions between generations can become severe impediments. The recent Godrej family restructuring, where brothers Adi and Nadir Godrej amicably split consumer and real estate arms, is a rare example of smooth succession planning. Conversely, disputes within many Indian family groups escalate publicly, harming reputational capital and performance.

Mitigating family conflict necessitates clear governance structures. Research consistently highlights that robust family constitutions, shareholder agreements, and professional advisory boards can depersonalise family decision-making and facilitate constructive dialogue. Yet, siblings in large family business groups must still demonstrate their ability to effectively manage interpersonal conflicts, notwithstanding the presence of established family governance structures.

Moving from Entitlement to Meritocracy

The shift towards merit-based succession has significantly reshaped India's family businesses, underscoring the need for next-generation leaders to earn their place through tangible achievements rather than relying solely on lineage. Rahul Bajaj famously remarked, "Get me someone who is more capable to run Bajaj Auto than Rajiv," demonstrating his openness to professional capability over familial entitlement. This emphasis on meritocracy proved prescient, as Rajiv and Sanjiv Bajaj subsequently steered Bajaj Auto and Bajaj Finserv to new heights, innovating across automotive and financial services sectors.

Such a meritocratic approach can be further strengthened by instituting advisory councils comprising independent experts, providing objective guidance to ensure strategic decisions are made transparently and competently. Moreover, embracing a pluralistic approach to leadership allows next-generation members the flexibility to find roles aligned with their unique capabilities and passions, fostering an environment where meritocracy genuinely thrives.

The Road Ahead: Redefining Legacy Leadership

India stands at an inflection point, witnessing generational transitions not just politically and culturally, but significantly within its economic landscape. The future of India’s largest family-run conglomerates rests on the ability of their next-generation leaders to transform legacy leadership from a mere entitlement into a purposeful commitment, defined by humility, cohesion, and holistic vision.

Ratan Tata's ascension as Chairman of the Tata Group in 1991 vividly illustrates this journey. Stepping into the colossal shoes of the legendary J.R.D. Tata, Ratan initially faced considerable scepticism. Yet, he went on to not merely sustain but substantially expand the Tata legacy. More importantly, he established himself as a globally respected leader and an icon, demonstrating that inheritors can indeed honour their predecessors while courageously forging their unique path.

Today's successors in iconic Indian business houses are similarly positioned. Their true challenge lies not simply in protecting or expanding business empires but in upholding foundational values, fostering organisational cohesion, and breaking down silos to embrace integrated thinking. In doing so, these inheritors will not merely replicate past successes—they will meaningfully shape India's trajectory, creating legacies defined by integrity, innovation, and a profound commitment to the greater good. 

They have the opportunity to transform familial privilege into impactful leadership. Hopefully, they won’t just wear the crown—they’ll redefine it.

Legacy in Action: Continuity, Storytelling, and Archiving at the TATAs

This Book Review was first published in the Economic Times, December 13, 2024; https://economictimes.indiatimes.com/news/company/corporate-trends/legacy-in-action-continuity-storytelling-and-archiving-at-the-tatas/articleshow/116273631.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

In Jamsetji Tata: Powerful Learnings for Corporate Success, R. Gopalakrishnan and Harish Bhat provide an intimate view into the Tata Group’s legacy, revealing the values and vision that have helped this family enterprise endure across generations. This book benefits from the insider perspective of authors who have “lived” within the Tata ethos. Throughout the book, three core principles stood out to me for their relevance to family businesses everywhere: continuity, storytelling, and archiving. Through these pillars, the Tata Group has not only survived but has actively contributed to India’s growth story for over a century.

Continuity as the Backbone of Purpose

In family businesses, continuity is the anchor that keeps purpose alive. The Tata Group is a compelling case in point, where continuity is not a passive inheritance but a deliberate practice. Jamsetji Tata envisioned an institute of higher education in India and his son, Dorabji Tata, carried this vision forward by establishing the Indian Institute of Science, a foundation for India’s scientific advancement. Later leaders, like Naoroji Saklatwala and Ratan Tata, stayed true to Jamsetji’s goals by expanding the group’s initiatives in healthcare, education, and rural outreach, including regions like the underserved Northeast.

What emerges through Jamsetji Tata is an argument for continuity as more than tradition; it is an evolving legacy that serves as both compass and anchor. Without continuity, iconic Tata projects like the Cancer Research Institute or the Northeast Initiative could have easily become fleeting ventures. Instead, they are legacies, continually renewed by successive leaders. The Tata story suggests that if family businesses seek to last, their purpose must be deliberately preserved and adapted across generations.

The Role of Storytelling in Building Legacy

Gopalakrishnan and Bhat show that in Tata’s journey, storytelling has played a central role in transmitting values and keeping the organization’s mission alive. In business, it’s easy to lose sight of purpose, but stories—especially those that explain the “why” behind values—make those principles memorable and accessible. Storytelling within Tata has preserved a cohesive narrative, reinforcing the organization’s commitment to community, integrity, and resilience in the face of adversity.

Consider the story of Mithapur, a drought-stricken settlement in Gujarat that Tata helped turn into a thriving township. In today’s era, where discussions often revolve around work-life balance, the dedication that went into transforming Mithapur may seem almost unimaginable. Tata’s story in Mithapur illustrates what’s possible when companies invest beyond profit, in places that need development. They offer insights into the ethos of purpose-driven enterprises and inspire budding entrepreneurs to envision business as a force for societal good.

As the spouse of an entrepreneur, the story of Dorabji Tata and his wife Meher Bai, who pledged their entire wealth to save Tata Steel, resonates deeply with me. I know how tough these decisions are. Tata’s stories don’t merely showcase business achievements—they reveal the spirit of sacrifice and conviction that make up the core of the organization’s legacy. And, storytelling isn’t just a tool for marketing but a way to instill values that resonate across generations and communities.

Archiving as a Pillar of Organizational Memory

Perhaps the most understated yet powerful aspect in Jamsetji Tata is the emphasis on archiving as a tool for continuity. By meticulously preserving letters, speeches, and records, Tata has built a repository that keeps its past connected to its future. This archive doesn’t just record facts; it captures lessons, insights, and the reasoning behind key decisions, providing a resource for current and future leaders alike, cultivating a living memory.

For other family businesses, the Tata archive is an inspiring model, underscoring how documenting history and values can build a lasting legacy. Preserving history this way is more than nostalgia; it’s a strategic resource that reinforces Tata’s purpose, ensuring that its ethos remains as powerful today as it was a century ago.

A Blueprint for Family Businesses Seeking Enduring Success

Taken together, continuity, storytelling, and archiving create a framework for sustaining purpose over generations. Gopalakrishnan and Bhat’s account is both a tribute to Tata’s rich history and a guide for family businesses grappling with the challenge of building a legacy that lasts. This book invites business families to consider how they might nurture a shared purpose, disseminate stories that resonate across generations, and preserve the lessons of the past for future growth.

Through their insider perspective, Gopalakrishnan and Bhat reveal that in a world often consumed by the pursuit of growth and innovation, Jamsetji Tata is a timely reminder that true legacy is not merely built, but carefully tended—through continuity in purpose and values, storytelling, and preservation. The authors offer an enduring truth: success may be measured in quarters, but legacy is crafted across centuries.

Navigating the Crossroads

This article was originally published in Business Standard, May 07, 2024; Co-author: Kavil Ramachandran

https://www.business-standard.com/opinion/columns/impact-of-divisions-in-family-businesses-motivations-and-consequences-124050601237_1.html

The recent trend of ownership restructuring and vertical splits amongst prominent Indian family businesses, exemplified by the division within the Godrej Group, has brought to the forefront the complexities and challenges associated with managing large, multi-generational enterprises. While opting to split the business may appear as a strategic manoeuvre to navigate differing visions and aspirations within the family, it necessitates a thorough examination of both the potential benefits and drawbacks. This article delves into a comprehensive perspective on family business divisions, scrutinizing both the motivations propelling such decisions and the adverse consequences they may entail at both familial and corporate levels.

The Positive Aspects

Complexity of Managing Large Conglomerates: As family businesses expand and diversify, managing the intricate web of operations and stakeholders becomes increasingly challenging. Formations of smaller clusters, each having its own strategic business units, allows for streamlined management structures and clearer accountability, leading to enhanced efficiency and agility in decision-making. For instance, the Adi-Nadir and Jamshed-Smita clusters will enable the entities to focus on their core competencies and strategic priorities, driving operational excellence and value creation in their respective sectors.

Unlocking Value and Growth Potential: A split can unlock the individual value and growth potential of different business segments. Specialized focus allows each entity to tailor strategies, attract specific talent, and pursue targeted investments, ultimately leading to greater success and profitability. The division of the Godrej Group into separate entities controlled by different family members should enable each cluster to capitalize on their respective strengths and market opportunities, drive innovation, and value creation.

Accommodating Growth and Aspirations of the Family: As family businesses expand across generations, differing opinions on strategy and management can arise, leading to conflict. Dividing the business offers autonomy to individual branches, fostering ownership and accountability while reducing discord. For example, the Birla Group split allowed each faction to pursue independent growth, leveraging diverse skills. Additionally, younger generations may seek opportunities aligned with their interests, driving innovation. For instance, the Bajaj Group's diversification into finance empowered the next generation to pursue their entrepreneurial vision.

Learning from Past Experiences: Observing the challenges faced by other business families during succession or disputes can serve as valuable lessons. Proactively choosing to divide the business allows for a planned and amicable transition, ensuring the preservation of family relationships and the brand's reputation. The Bajaj family's decision to split the Bajaj Group into separate entities facilitated a smoother transition of leadership and ownership, mitigating the risk of future legal battles and reputational damage, while preserving the family's unity and legacy.

Ownership and Rewards: A strategic and amicable split within a family business can enable individuals to have greater "skin in the game" and receive rewards commensurate with their contributions and aspirations, ultimately fostering harmony and prosperity within the family. The Mittal family, for example, founders of the Mittal Steel Company, decided to amicably split the business to align ownership with individual aspirations and rewards.

Moreover, the division of the business not only aligns ownership with individual aspirations and rewards but also serves to minimize politics in decision-making processes. By decentralizing control and empowering each cluster within the family, quicker decision-making is facilitated, eliminating the need for seeking approval from numerous stakeholders.

While the preceding discussion highlights reasons that motivate families to split, it's essential to recognize that divisions entail inherent risks and complexities too. Below, we discuss some negative impacts of splitting.

Unintended Downsides

Loss of Synergy and Economies of Scale: A unified conglomerate often benefits from synergies between diverse business segments, leading to cost efficiencies, shared resources, and heightened bargaining power. For instance, the Tata Group's diversified portfolio leverages synergies across industries, bolstering its competitive edge and financial performance, including a cohesive brand identity. However, the division of such conglomerates, as seen in the case of the Ambani family's split of the Reliance Group and the TVS group, risks diluting these synergistic advantages, thereby impacting profitability and competitiveness.

Potential for Family Conflict and Rivalries: While division may aim to address existing disagreements or differing aspirations within the family, it can inadvertently give rise to new challenges and rivalries between the separated entities. The battle between two hero group entities, post the split, regarding the use of the brand name ‘Hero’, highlights the potential for discord arising from family business divisions. Such conflicts can impede decision-making processes, hinder strategic alignment, and erode shareholder value.

Challenges in Succession Planning and Leadership Development: Staying unified provides access to a broader talent pool, both from within the family and externally, ensuring continuity and strength in leadership across the organization. The Murugappa Group's robust leadership development programs serve as a prime example, facilitating seamless succession planning and talent pipeline management across its diverse business verticals. However, splitting the business may curtail these opportunities, making it more challenging to ensure a seamless succession process and maintain robust leadership across the separated entities.

Emotional and Cultural Impact: Family businesses often pride themselves on strong cultural identities and shared values that underpin their success. The Murugappa Group exemplifies this with its deep-rooted cultural ethos of trust, integrity, and entrepreneurship, which has fostered a cohesive organizational culture and sustained business performance over generations. However, division poses a risk to this unity and shared purpose, potentially leading to emotional challenges and a loss of cultural cohesion within the family.

Growing Wealth Disparity: Past business splits have revealed that while divisions may start out equitable, over time, one faction often amasses more wealth and resources. For example, the Ambani brothers' feud over the Reliance Group's assets led to a significant wealth gap between Mukesh and Anil Ambani. These disparities can fuel family tensions and perpetuate financial inequalities, highlighting the socioeconomic impact of family business divisions.

Harmonizing Family and Corporate Choices

In navigating the complex terrain of family business divisions, it becomes imperative to acknowledge the nuanced interplay of motivations and consequences. While the prospect of splitting a conglomerate may offer avenues for addressing immediate challenges and accommodating evolving aspirations, it also entails significant risks and losses, both at the familial and corporate levels. The case studies of prominent Indian business families, such as the Ambanis, Birlas, and Munjals, underscore the intricate dynamics and far-reaching implications of such divisions, ranging from wealth disparities to emotional upheavals.

By embracing a proactive stance towards addressing emerging challenges, family conglomerates like Godrej could potentially have emerged as global powerhouses, wielding not just economic influence but also shaping the broader political and societal landscape. However, by choosing to split, these conglomerates risk diluting their legacies and missing out on transformative growth opportunities. Ultimately, the path forward for family businesses lies in striking a delicate balance between tradition and innovation, unity and autonomy, to ensure sustained success and relevance in an increasingly competitive global landscape. We can only hope that the sum of the parts is eventually greater than the whole, in numbers, as well as in family harmony, togetherness, and impact.

Pledging of Shares by Promoters of Family Firms in India: Regulatory Concerns and Recommendations

This article was first published in the The Prime Directory 2023, Prime Database Group, September 2023. Co-aurthors: with Ray, Sougata & Ramachandran, Kavil; https://www.primedatabase.com/article/2023/Article-Nupur_Pavan_Bang.pdf 

Introduction

The practice of pledging of shares has existed in the Indian financial system for a long time. However, it gained significant disrepute during the Satyam Corporate Governance scandal in 2009. Since then, the Securities and Exchange Board of India (SEBI) mandated the promoter shareholders of firms to declare their pledging activities to the stock exchanges within seven days.

Regulatory bodies such as SEBI and RBI have continually highlighted their concerns around pledging. As pledging-induced corporate governance scandals have seen stock prices plummet, investors too have called for pledging to be curtailed via the introduction of stringent regulations. Academics and corporate governance experts have associated share pledging with several detrimental firm-level outcomes. Some of these concerns are highlighted below.

Concerns

Health of the financial system: In India, financial institutions have seen a considerable rise in their exposure to debt backed by pledged shares in the past decade. Often, the asset cover set by lending institutions may be too small to cover the price risk associated with shares as collateral. Where pledging loans are non-recourse (i.e., the borrower is not personally liable for the loan apart from the provision of collateral), there is a possibility of the lender not recovering the principal amount in the event of a sudden downturn in the stock price and loan default.

Loss of control of the firm for controlling shareholders: In the hunt for wealth diversification and legacy building, controlling shareholders may be tempted to over-pledge their shares with a lack of provisions to repay the loan or answer margin calls. There have been numerous instances where margin calls have led to controlling shareholders losing control of the firm. These disruptions result in a significant loss in market capitalization of the firm and raise considerable doubt over its future.

Underinvestment in innovation and risk-aversion: While innovation is a strategic driver of long-term growth and firm value, investment in innovation is much riskier than the firm’s business-as-usual activities. Post pledging, there may be a strong incentive for the promoters to underinvest in R&D activities to reduce the possibility of future margin calls.

Impact on accounting practices: To reduce the risk of a decline in the firm’s share price and subsequent margin calls, promoters may attempt to falsely present a positive picture of the firm. Consequently, firms where controlling shareholders pledge shares have a higher propensity to indulge in inferior accounting practices such as earnings management and choose lower-quality auditors to continue earnings management and navigate through the regulatory requirement of a financial audit.

Decline in Firm Value: Following a share pledge by a controlling shareholder, increased risk-aversion and a rise in the firm’s equity risk is likely to contribute to a decline in firm value in the longer term. Thus, while insiders pledging shares receive benefits in the form of a loan, outsiders must face a decline in firm value with no associated upsides, if the loan amount is not used for the same firm and with a judicious strategic plan.

Theoretically, there is a divergence in risks and rewards of the promoters who pledge their shares and other shareholders of a firm. This may act as an incentive for the promoters to pledge their shares despite all the concerns mentioned above. In the next section, the authors enumerate a few recommendations for the regulators that should help minimize the negative impact of pledging, while retaining the tool to access funds when in need.

Recommendations

Awareness and information dissemination: Despite concerns from all quarters over the negative implications of pledging, SEBI has indicated that it does not intend to prohibit the pledging of shares. SEBI believes that it should be the right of the owner of equity to decide the best possible way of utilizing it. Hence, given its positioning as a relatively accessible form of financing for shareholders, pledging of shares is expected to remain in the financial markets as a popular form of raising capital. Moving forward, it is critical for the regulators to create awareness and disseminate information about pledging of shares to all key stakeholders (including minority shareholders and financial institutions).

Integration and standardization: As of now, the disclosures on pledging by promoters to SEBI and the information available to RBI regarding the lending by financial institutions are not integrated. Both the regulators should jointly seek information from the promoters and disseminate the information in a consolidated manner to the investors. In addition, rules surrounding adequate cover for share pledges (and provision of the maintenance margin) must be standardized and ensured that they are implemented across all financial institutions uniformly.

End-use of pledging capital: SEBI has been considerably proactive in monitoring the pledging of shares and introducing stricter regulations around the same. We feel that these are steps in the correct direction. However, disclosure of the reasons for pledging must be mandated against all share pledges irrespective of the size of the pledge to further protect the interest of the minority shareholders. SEBI must actively mandate the precise destination of the funds obtained through pledging, as several promoters provide vague reasons for pledging in the disclosure reports. 

Control and cash flows: In an ideal scenario, the associated risks, returns and control should be homogenous across the firm’s shareholders. That is, the promotors, institutional investors and the retail investors should receive returns (in the form of capital gains and dividends), face risks and exercise control in accordance with the size of their shareholding in the firm. However, pledging may alter this homogeneity associated with stock ownership. While the shares are used as a collateral to raise funds, the promoters continue to enjoy all cash flows associated with those shares as well as their control and voting rights. In a way, this incentivizes the promoter to pledge their shares since there is no immediate negative consequence of doing so.

While, in a situation where the firm is close to default or needs immediate cash, the promoters might have no choice but to use pledging as a tool to access immediate capital, the promoters should have a plan to pay back the loan to the financial institution. Checks and balances are required to ensure that due to asymmetry of information, the promoters do not “cash out” of firms in distress leaving the financial institutions (lenders) and other shareholders to take the fall. A negative spiral in the stock price will most significantly impact the minority shareholders and leave the lenders with a collateral that may not cover the value of the loan extended. Such divergence can be checked by the SEBI by bringing in clauses such as deferred dividend payments until the shares are pledged or suspending the voting rights in proportion to the extent of shares pledged.

Guidance to the board: The role of the board of directors is critical in the event the promoters pledge their shares due to its far-reaching implications. The Ministry of Corporate Affairs may stress of the benefits of an empowered board of directors. It may also lay out the responsibilities of the board if a promoter wants to pledge its shares. The directors must caution the promoters from over pledging and should shield the firm from the promoters if they try to manage the margin calls by taking hasty or short-term view decisions in the firm. In addition, the board of directors should also evaluate if pledging is indeed the best option for the firm. Independent directors to be more vigilant and check that decision making at firm level is not impacted. In addition, they should be made more accountable for lack of carrying out their fiduciary duties.

Guidance to promoters: The Companies Act should also detail the expectations from the promoters when deciding to raise capital via pledging, viz. the promoters should be cognizant of the risks that this form of financing carries, the promoters should be reasonably confident of the cash-flow generation abilities of the investments made by them in the future. Overtly wishful and hopeful thinking by promoters without due diligence has indeed impacted many business barons in making over-optimistic bets. Also, the impact of variations in stock price of the firm observed in the short-term on the pledging contract should be manageable. The promoter should also have a contingency plan to answer margin calls made to the firm and they should disclose it to SEBI.

Compliance: Disclosure by the promoters and the companies should be monitored stringently with strict action for delays and non-compliance. For a better governed and efficient running of the market, there must not be any slip between the cup and the lip.

Conclusion

When we study individual cases of pledging of shares, we find that in conjunction with bad business decisions, pledging has had dire consequences for the promoters and other stakeholders. Such companies are many. They include Satyam, Future Group, and Zee Entertainment. However, there are also companies that have created long-term wealth for all shareholders by using pledging as a strategic tool to raise funds for expansion and growth. Examples include Apollo Hospitals and Granules Pharmaceuticals.

Therefore, all cases of pledging of shares should not be painted with the same stroke of negative. Rather, responsible pledging should be promoted, with appropriate checks and balances, transparent motivations to pledge, and a plan to revoke the pledge.

An Unmissable Journey For Family Business Owners & Scholars

This review was first published in the Family Business United on August 22, 2023; https://www.familybusinessunited.com/post/an-unmissable-journey-for-family-business-owners-scholars

About the book:

The Cartiers is the revealing tale of a jewelry dynasty's four generations, from revolutionary France to the 1970s. At its heart are the three Cartier brothers whose motto was 'Never copy, only create' and who made their family firm internationally famous in the early days of the twentieth century, thanks to their unique and complementary talents: Louis, the visionary designer who created the first men's wristwatch to help an aviator friend tell the time without taking his hands off the controls of his flying machine; Pierre, the master dealmaker who bought the New York headquarters on Fifth Avenue for a double-stranded natural pearl necklace; and Jacques, the globe-trotting gemstone expert whose travels to India gave Cartier access to the world's best rubies, emeralds, and sapphires, inspiring the celebrated Tutti Frutti jewelry.

Francesca Cartier Brickell, whose great-grandfather was the youngest of the brothers, has traveled the world researching her family's history, tracking down those connected with her ancestors and discovering long-lost pieces of the puzzle along the way. Now she reveals never-before-told dramas, romances, intrigues, betrayals, and more.

The Cartiers also offers a behind-the-scenes look at the firm's most iconic jewelry- the notoriously cursed Hope Diamond, the Romanov emeralds, the classic panther pieces, and the long line of stars from the worlds of fashion, film, and royalty who wore them, from Indian maharajas and Russian grand duchesses to Wallis Simpson, Coco Chanel, and Elizabeth Taylor.

Published in the two-hundredth anniversary year of the birth of the dynasty's founder, Louis-François Cartier, this book is a magnificent, definitive, epic social history shown through the deeply personal lens of one legendary family.

Review:

Francesca Cartier Brickell's magnum opus, "The Cartiers," creates an enthralling narrative that captivated me from the very beginning. As I delved into the book, I felt part of the Cartier family, standing shoulder to shoulder with the family members and the illustrious figures that shaped their history. The author masterfully blends historical facts with personal accounts, transporting the readers to the grand salons and dazzling soirées of the Belle Époque, where the Cartiers' creations adorned the crème de la crème of society.

This book is an enchanting exploration of family, business, artistry, and the timeless allure of the Cartier legacy, the brilliance of a dynasty that, while no longer owned by the family, continues to thrive as a testament to their enduring legacy. This must-read book offers invaluable insights and profound lessons for family business owners and scholars, making it an essential addition to any family business library.

The book delves into the heart of family dynamics, the unique opportunities, and challenges that being a family business pose. The nuances of sibling camaraderie, complex relationships between cousins, shared vision and family governance, and the circumstances leading to selling the family members' stake in the business, have been poignantly narrated.

I can safely say that I have read thousands (at least a thousand plus some more) of books in my lifetime. Many of them are good. Few are extraordinary. And a handful are books that transported me to being a witness to the journey, the story. Buddenbrooks by Thomas Mann was one such book. The Cartiers is the other. While it is not right to compare both, they are both magnificent in their own right. One significant difference is that Buddenbrooks is fiction, while the Cartiers is reality! And the reality is stranger rather more interesting than fiction in this case.

In this fan-girl account and book review, I dwell upon my journey with the Cartiers in the following paragraphs. In the process, I highlight a few aspects where Cartiers provide living proof of the theories in family businesses.

Traveling back in time

One of the book's most compelling aspects is the portrayal of iconic personalities who adorned Cartier's jewels. From Princess Grace of Monaco to the incomparable Elizabeth Taylor, their stories intertwine with the history of the pieces they wore, elevating them to objects of profound significance, and transporting the readers to the world of passion, resilience, opulence, and elegance.

Brickell's meticulous research and intimate family anecdotes allowed me to travel back in time to participate in the Cartier journey. I was there when the fire broke out in the Cartier store leading monsieur Louis-François Cartier to be risk averse. I felt his pain when his only son Alfred traveled to the US, and he pined to be reunited with him. I witnessed Alfred convincing his eldest son, Louis, to marry a Worth as it would benefit Cartier's name and business. I celebrated with Alfred when Jean-Jacques Cartier, his first grandson, was born (albeit with a tinge of guilt. But I had traveled back in time to 1919, you see! I can't really blame myself for being a part of the patriarchal society back then).

I rooted for Jacques to return to the business. I cried out aloud. "Oh, come on, Jacques. Cartiers needs you. Come back soon." I felt one with Elma and Nelly, like the third band of the Trinity ring.

I witnessed the Eiffel Tower being unveiled and felt the anxiety of Pierre and Nelly aboard a ship from New York to London when they heard of the Titanic sinking. I traveled to the durbars of the Gaekwads and the Nizam of Hyderabad with Jacques.

When Jacques passed away, I sobbed uncontrollably. I felt the pain of Nelly and Jean-Jacques. I paid my obeisance to the genius of Louis. I felt the loneliness of Pierre, who lost both his brothers within a year.

Adapting on the go

The Cartiers' journey mirrors the ever-changing landscape of world society, as their creations adorned monarchs, celebrities, and the crème de la crème of society. Good jewelry touches every who's who, from the Czarinas to the Kings, the Nizams, the businessmen, Elizabeth Taylor, the Beatles, Elton John, and more recently, Deepika Padukone.

As demonstrated in their successful multi-national transatlantic operations, the Cartiers' ability to embrace change and adapt to evolving markets aligns with the "Dynamic Capabilities" theory, allowing them to thrive through turbulent times. As the Romanovs fell and the bodice gave way for practical clothes for women, as the war raged and even the wealthy preferred a more austere way of life, as the Maharajas in India paved the way for democracy and the rare pearls gave way to cultured pearls, the Cartiers kept adapting through their designs, prices, and products.

Expression of feelings and archiving

Francesca Cartier Brickell found a trunk of letters in her grandfather's cellar. These letters formed an important source of information for her book. The letters provided her with the raw emotions expressed by the writer. When Louis-Francois wrote to his son Alfred, "I don't need to tell you that I long for your return. You and I are inseparable…," we can feel him pine for his son. I could imagine Pierre fuming when he wrote to his nephew, Claude, "…the consequences, serious for you and regrettable for us."

While the means of communication have increased, they have become instant, will future generations have such words of expression to recreate the journeys of the 21^st century, which will be history in the future? Will we have saved WhatsApp messages and phone calls? Do the torchbearers of business families today express themselves so openly through emails? The reality is not lost on any of us.  

We are in touch more but express less. We talk more but communicate less. We write more words, but they mean less. We have more storage, but we have no records of emotions.

The book is a testament to the importance of writing, expressing, and archiving. This art is dwindling and will cost legacy building dearly in centuries to come.

Familiness and Resources

At its core, "The Cartiers" is a profound exploration of the power of family unity and vision in shaping a lasting legacy. The Cartiers' unwavering belief in brotherhood and collaboration embodies the concept of "familiness," where the family's collective strengths drive their entrepreneurial endeavors to remarkable heights.

The book delves into the heart of the Cartier family, exposing their triumphs and tribulations, successes, and challenges. Brickell brings forth the complexity of family dynamics, painting a vivid picture of their relationships and the impact of their shared passion for jewelry. The interplay of personalities between the Cartier brothers – Louis, Pierre, and Jacques – was a driving force behind their success, where creative vision, sales acumen, and financial acuity converged harmoniously. It propelled them through challenging times, navigating global conflicts, economic downturns, or changing consumer preferences.

On one occasion, Pierre recognises their strength, "We brothers are very close, that is our strength" (pg 131). Jean-Jacques added, "Pierre was a brilliant businessman. He didn't have Louis' creative vision, but then again, Louis didn't have Pierre's ability for selling or his understanding of finance... But Pierre understood the markets and he understood people's motivations. Cartier needed the mix of different talents, you see, that was one of the reasons that it did so well" (pg 243).

It's not that the brothers did not have differences or fights. They did. "The trade knew how tight the Cartier brothers were. That was important. It was one of their strengths-when dealing with one, you were actually dealing with all three. They had a lot more bargaining power that way", said Jean- Jacques (pg 330). This crucial lesson in unity is a beacon for any business family seeking to thrive across generations.

The Cartiers also demonstrate the resources acquired through marriage in a family business. All three sons of Alfred Cartier, and Alfred himself, married into families that benefited the Cartier business. The strategic alliances forged through marriage enhanced their reputation and helped them build strong family social capital. The Cartiers' embrace of such unions underscores the importance of carefully curated partnerships and their role in building lasting success.

Family governance and togetherness

In 1906, "Not wanting any arguments between his sons, Alfred had a dispute resolution clause built into the firm's constitutional documents. If there was a disagreement between Louis and Pierre, the matter should be resolved by either Alfred or, interestingly, Louis' father-in-law, Jean-Philippe Worth." There was even a family council in place. Most business families don't have a stated dispute resolution mechanism or a constitution, even today! They must have one! The Cartiers' shareholding also changed and kept up with the growing multi-national transatlantic operations.

However, the presence of family governance mechanisms did not prevent the Cartiers from eventually selling off their stake in the firm. I think one reason the family sold out their stake was the dwindling bond within the fourth-generation members, their bond with the business, and the passion to keep it in the family.

The fourth generation of the Cartiers grew up apart due to the third generation primarily living in three different far-off cities. They did not have the same bond as the third generation, which had grown up together. Brickell laments, "But whereas three close brothers with complementary talents could survive the storms life threw at them, from a huge global conflict to a great depression, the cousins, lacking the same bond and shared upbringing, found the challenges of the postwar world overwhelming" (pg 539).

I also felt the pressure on Claude, Marion and Claudel, and Jean- Jacque to live up to their predecessors. Each one of them handled it differently. The tussle between Pierre and Claudel was unfortunate. But who was wrong, and who was right? I felt anger towards Claudel, but could I blame him for being different from the rest of the flock? I could feel the weight on his shoulders and the rebellion, perhaps because of it.

In the end, family bonding, pride in the family name, and shared values keep the family and the business together. Brickell wonders, "Perhaps, as a unified family, the Cartiers might have adapted to the changes sweeping through the luxury world, but apart and alone, they could not" (pg 536). Perhaps. It is difficult to say in hindsight. But I would like to believe it too.

From the time Louis shifted to the US, accounts of his lifestyle there did not leave me with a good feeling. After that, the sale of New York and Paris branches did not surprise me. The writing was on the wall, in a sense. His last will and testament read, "Division in families creates ruin and misery. I command my heirs to maintain harmony among themselves and with their cousins " (pg 381). Unfortunately, Louis' caution could not prevent the sale of the New York Maison by his son, the first nail in the coffin.

Resilience

The book weaves through tumultuous events such as the World Wars, the sinking of the Titanic, and the great depression, where unforeseen circumstances and personal emotions intertwined with the fate of the business. Their united front and complementary talents fuelled their resilience through trying times.

I shared the family's despair as the war raged, with Jean Jacques on military service, Louis and Jacques not keeping well, important clients fleeing from London, Paris, and as America joined the war. I watched in horror as Milton Heath was bombed.

This period seemed so much like the Covid times. Family members worrying about each other, and businesses shut down completely. I would probably not have understood or related to what the Cartiers were going through if I had not lived through the Covid era.

The Cartiers survived these periods and came out stronger each time due to their vision, passion, innovative strategies, and togetherness.

Innovation

From a humble beginning in Paris to the global prominence of the brand, the Cartiers built an empire, one gemstone at a time. The Cartiers' unwavering dedication to craftsmanship and their innate ability to cater to the desires of royalty and celebrities alike are portrayed with such vividness that it's almost palpable. Their creations become more than just jewelry; they transform into symbols of love, power, and human emotion.

Louis's "Never copy, only create" mantra ran through the entire organization, irrespective of the location and the brother handling the business. The Cartiers' devotion to their craft and innovative spirit is encapsulated in their iconic creations, such as the Trinity ring and the Tank watch, which symbolize enduring love and timeless elegance.

While change is the only constant, and the Cartiers kept adapting to the changing customer preferences, the Cartier style remained a constant.

Other stakeholders

Brickell's attention to detail illuminates the family's commitment to their craft, evident in their unwavering focus on quality and customer relationships. I traveled alongside the Cartiers and witnessed their interactions with esteemed clients. These accounts underscore the importance of nurturing relationships with customers and the role of exceptional service in elevating a family business to new heights.

The book also delves into the profound impact of dedicated employees, showcasing how their passion and loyalty contributed to Cartier's reputation for unparalleled craftsmanship. The Cartiers' commitment to nurturing a talented and loyal workforce exemplifies the "Family Human Capital" concept, where family members' and employees' shared values and dedication contribute to the company's sustainable growth.

All three brothers relied heavily on their loyal employees, entrusting them with substantial responsibilities and giving them a free hand to run the business. The Cartier brothers empowered their team and nurtured a culture of excellence. Allowing them to excel in their roles and contribute to the company's growth was instrumental in building long-term success for the family firm. I deeply appreciated the role of employees like Toussaint, Jacqueau, Muffat, Glaezner, Hasey, Bellenger, Devaux, and many more in keeping the Cartier flag flying high in war and peace, in times of family unity and otherwise.

At one time during my journey with Pierre Cartier, I asked him incredulously if Jules Glaezner actually arranged for the stars of a hotly anticipated play to wear Cartier jewels on stage during their performance, then invited "several carefully selected clients, to attend the performance in a special box with him"? Glaenzer had actually selected the jewels for the actors with these clients' tastes in mind. After the show, he went backstage with his guests to meet the actors and collect the necklaces, bandeaux, and bracelets. He then announced that carrying such a huge amount of valuable jewelry would be too risky. Instead, he proposed that each of his female guests select an item to wear for the remainder of the evening and that he would collect it from each of them the following morning. He then took his guests out to a nightclub, where, as intended, their jewels were much admired. The next day, a Cartier delivery boy called at the guests' homes for the jewelry only to find that each woman had decided to buy what she had been wearing the previous evening (pg 253-254).

It was usual for multiple generations of the same family to work at Cartier. Many Cartier employees in all three branches worked for them for decades.

Indian connection

Being an Indian, I cannot but devote a sub-section to the role the Indian Maharajas played in the Cartier's rise. Though, it's not without the realisation that it was the period when the struggle for independence from British rule was underway, and the grandeur of the Indian royalties seems misplaced. But then, really, who am I to judge?

The book's portrayal of the Indian Maharajas and their penchant for extravagant jewels adds a mesmerizing facet to the Cartiers' journey. I traversed the opulent durbars of the Gaekwads, the Nizam of Hyderabad, the Maharaja of Patiala, and the Maharaja of Nawanagar, alongside Jacques. Jacques's escapades to India seem like a dream. Imagine him bringing his Rolls Royce to India! I am thinking of his Rolls Royce on roads where there were no roads!

India was once called the "golden bird," and the intertwining of the Cartier's legacy with the wealth and grandeur of Indian royalties was, therefore, no surprise. Yet, the extent left me gaping in awe. When Muffat was summoned by the Maharaja of Patiala, Maharaja Bhupinder Singh, and he opened one gem after another from a trunk full of gems, Paul Muffat tried to hide his awe. I did not. I stood there with my mouth open!

Conclusion

I read the book with a childlike awe and wonder. I did not want the book to end. Francesca Cartier Brickell's extraordinary narrative has etched an indelible mark on my soul, allowing me to traverse time with the Cartiers, witnessing their triumphs and sharing their heartaches. When I stood alongside Brickell at the crypt, my eyes were wet. I felt the connection with the Cartier ancestors more deeply than she would have realised that any reader would.

For family business scholars, "The Cartiers" is a treasure trove of examples that compliments the theories. The book offers a rich tapestry of the Cartiers' experiences, exploring topics such as familiness, succession planning, intergenerational collaboration, the role of communication in maintaining family harmony, family constitution, and the intersection of family and business values. These lessons provide a unique opportunity for scholars to delve into the complexities of family enterprises and draw inspiration from a remarkable family business and the family that created and nurtured it.

For the family business owners, "The Cartiers" is a timeless journey that will speak directly to them, offering a profound understanding of the enduring power of unity, passion, and vision. They will find themselves nodding in recognition in many places as if looking into a mirror reflecting their experiences. It provides invaluable lessons, and a poignant reminder of the lasting impact a family's commitment can have on generations to come.

In conclusion, "The Cartiers" by Francesca Cartier Brickell is an exquisite literary gem that navigates the depths of family business dynamics with grace and insight. I have read numerous books on business families. But none is as exquisite, fascinating, and emotional as the journey of the renowned Cartier family through the ages!

When a Corporation Traverses 100 Years Sans a Formula

This article was first published in Outlook Business, August 1, 2023; https://www.outlookbusiness.com/the-big-story-1/lead-story-8/when-a-corporation-traverses-100-years-sans-a-formula-6810

Centennial companies have weathered the storms of time, evolving their ownership structures to adapt to the changing dynamics at the macro, meso, and micro levels- socio-economic-political-institutional, business and society, and family levels. A few factors include the institutional framework of the country, industry-specific dynamics, profitability and earnings trends, corporate governance practices, family, state, or foreign multinational company ownership, and mergers and acquisitions.

The evolution of the ownership structure is essential to navigate the challenges thrown by the dynamic environment, and its implications extend beyond financial performance. It influences firm strategies, value, dividend policy, corporate governance, corporate social responsibility, environmental sustainability, and industry dynamics. This article looks at some factors that have transformed ownership structures in long-lasting companies.

The Great Family Sagas

Family ownership has been a prevalent characteristic of many long-standing Indian companies. Many of them have surpassed the century mark and, yet, have retained family ownership, symbolizing their resilience and commitment to legacy, despite the challenges faced during inter-generational ownership and succession transitions.

The ownership structure has evolved from individual ownership to a holding company or trust for reasons such as separating ownership and management, facilitating succession planning, protecting family assets, optimizing taxes, and enabling business expansion. These transitions are driven by a desire to ensure long-term sustainability, enhance governance practices, and secure the family's wealth and legacy in the evolving business landscape.

Examples include a) Bajaj Group, which transitioned from individual family ownership to a holding company structure with Bajaj Holdings & Investment Limited (BHIL) as the apex holding company. This restructuring facilitated a more streamlined approach to managing the diverse businesses and enhanced corporate governance; b) the Murugappa Group transitioned to a family trust structure, the Murugappa Chettiar Trust (MCT), to ensure seamless succession and preserve family values, and; c) the Godrej Group has utilized a combination of family trusts and holding companies to optimize tax efficiency and facilitate estate planning. This structure allows for efficient wealth management and seamless intergenerational transfers.

Going Public

Large, long-lasting companies do not need to go public. There are ample examples, such as Parle Products or the Serum Institute of India, that have chosen to remain privately held perhaps to a) retain control- by staying private, families can make strategic decisions with a long-term perspective without being influenced by short-term market pressures, and b) to avoid the regulatory requirements and public scrutiny that come with being a listed company- staying private offers greater flexibility and autonomy in decision-making, allowing companies to operate with fewer regulatory constraints and disclosures. This can be advantageous for companies that prioritize confidentiality or have unique business models that may not fit the public market's expectations.

However, as they grow in size and complexity, most companies venture into the realm of public listing, embracing the benefits of wider ownership, enhanced corporate governance, and often valuable insights from institutional investors. Public listing allows firms to access capital for fuelling expansion, streamlining systems, processes, and structure, adhering to stringent corporate governance standards, promoting transparent practices, and greater financial discipline. Bombay Stock Exchange (BSE), India's oldest stock exchange, transformed from a secretive club of brokers to a publicly listed company.

Going public may dilute the family's ownership and control over the company. However, some families view the benefits of accessing public capital, enhancing liquidity, and widening the shareholder base as a means to achieve their long-term vision for the business. Reliance and the Aditya Birla Group have used Initial and Follow-on Public Offerings to fuel expansion plans and fulfill the vision of becoming a global player across diverse businesses. While Infosys went public in 1993 to adopt best-in-class governance practices, enhance transparency, and build trust with investors and clients.

The Shape-Shifters

Mergers, acquisitions, corporate restructuring, and strategic alliances have significantly altered ownership structures and dynamics in the corporate world. Founded in 1892, Britannia Industries went from a humble bakery to a confectionery conqueror through strategic alliances and acquisitions, including a merger with the biscuit division of a British company. These strategic moves strengthened its market presence and transformed its ownership structure.

Similarly, Hindustan Unilever Limited, formed through the merger of Lever Brothers, the Indian company Hindustan Vanaspati Manufacturing Co., and United Traders Limited in 1956, exemplifies the impact of a merger on ownership structures. Tata Group's Indian Hotels Company Limited, established in 1903, in its 120 years of existence, has entered several partnerships, strategic alliances, and mergers and acquisitions to become the World's Strongest Hotel Brand and the largest hospitality group in South Asia.

Each of these activities impacts control, shareholding structure, and governance, reshaping the companies' landscape.

Shareholder Activism

Institutional investors and shareholder activism have become key players in the ownership narratives of Indian companies. In the case of Satyam Computers 2009, shareholder activism played a crucial role in exposing fraudulent activities and seeking justice for the shareholders. After the scandal came to light, several institutional and individual shareholders of Satyam, including mutual funds, pension funds, and retail investors, actively pursued legal action and sought remedies for the losses incurred due to the fraudulent practices of the company's management. They filed lawsuits against the company, its management, auditors, and other involved parties. As a result, the founder lost control of the company, and subsequently, the company was acquired by the Mahindra Group through a competitive bidding process.

Making Their Own Stories

The evolution of ownership patterns in long-lasting Indian companies is a captivating case study with important implications for the broader business landscape.

The ownership journey of these companies teaches us that there is no one-size-fits-all formula for success. The enduring family-owned businesses remind us of the power of tradition and the importance of nurturing strong family bonds. The public listings highlight the advantages of opening up to the world, attracting diverse shareholders, and embracing corporate governance principles. The shape-shifters prove that strategic alliances and acquisitions can rewrite a company's destiny. And shareholder activism reminds us that no company is safe from the demands of its shareholders, regardless of its age or legacy.

The evolving ownership patterns in Indian centenarian companies are a testament to their resilience, adaptability, and ability to thrive in an ever-changing business landscape. Their stories provide valuable insights and inspiration for companies of all ages, urging them to embrace change, write scripts, and captivate audiences with ownership journeys.

ESG and Stakeholder Capitalism: Seeking Value for All

This article was first published in Outlook India on May 09, 2023. Co-authors: Moksh Garg, Sougata Ray; https://www.outlookindia.com/business/esg-and-stakeholder-capitalism-seeking-value-for-all-news-284879

Nobel Laureate Milton Friedman, in his famous essay "The Social Responsibility of Business is to Increase its Profits," published in the New York Times magazine in 1970, famously wrote, "There is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits..."

Compare this with the Statement on the Purpose of a Corporation adopted by 181 CEOs of America's largest companies in 2019. The Statement declared, "…companies should deliver long-term value to all of their stakeholders – customers, employees, suppliers, the communities in which they operate, and shareholders."

Post the Covid19 pandemic, calls for "stakeholder capitalism" has further picked up the pace. Gone are the days when economic profits alone determined a firm's success. The for-profit entities are being held responsible not only for the bottom line but also for the activities through which they create shareholder value and the value they create for other stakeholders. As a result, it is no longer surprising to see them getting mired in controversies or even attacked by their shareholders over broad-ranging social issues. This has led shareholders and the wider investor community to take stock of businesses beyond traditional metrics.

Measure accurately and improve

The method to measure economic profits has been established and standardised for long. However, measuring stakeholders' value creation is still in its infancy. And, what cannot be measured, cannot be improved, managed, or controlled. Therefore, combined with changing social dynamics and the issue's salience, many rating agencies and data providers started providing ESG ratings for companies.

At the most basic level, ESG ratings aid investors in comprehensively evaluating a firm by analysing it across its three major dimensions: environmental, social, and governance actions and impact. While ESG, in spirit, is a step in the right direction, it has been wrestling to drive a commensurate impact worldwide. There are significant roadblocks impairing its overall uptake and effectiveness. Two major hurdles are the lack of standardized disclosures by corporate and inconsistent measurement criteria employed by the ESG rating providers (ERPs).

Disclosure: Our research at the Thomas Schmidheiny Centre for Family Enterprise, Indian School of Business, suggests that less than 4% of the total publicly listed Indian firms have been assigned ESG ratings between 2014 to 2021. We arrived at this figure by consolidating three different ERPs, i.e., WRDS Sustainalytics, Thomson Reuters, and CRISIL. The reason for the low coverage of companies by ERPs is that ERPs rely on publicly available data to make assessments. However, most companies – especially the medium and small-sized ones – do not track their ESG activities, let alone disclose them publicly. Even companies that make complete disclosures do not follow any standard procedure, making their interpretation subjective and comparisons across companies challenging.

Measurement: While comparisons across companies are difficult due to a lack of standardised disclosures, how information for the same company is compiled, measured, and converted into an aggregate score differs quite a bit from ERP to ERP. A study conducted by researchers from MIT, published in the Review of Finance, reported steep inconsistencies in the ESG ratings assigned to a business by different agencies (Berg, Koelbel, & Rigobon, 2022). In many cases, firms are assigned highly inconsistent ratings by different ERPs owing to differences in methodology, scope, or weights (importance) assigned to attributes. The divergent estimates about the same underlying entity add to the confusion and defeat the very purpose of these ratings.

Sample: The number of firms assigned an ESG rating in India (by the three ERPs cumulatively) is a minuscule percent of all listed firms (4%). Further, because we cannot compare the ratings across ERPs, research must be done using the data from just one ERP, reducing the number of companies that can be studied even further. Additionally, the number of years of data available for each ERP varies. In such a scenario, the reliability and generalization of research become questionable.

ESG ratings and their effectiveness are subject to substantial political debate in the West. The opposition has openly attacked ESG for its overly ambitious vision but deeply flawed implementation. Some critics have even questioned the morality of ESG by calling it a fabricated tool to legitimize greenwashing. However, in our opinion, although ESG is undoubtedly far from perfect, it remains one of the most potent ways to reimagine businesses in a society fraught with grand challenges.

In line with the old saying "do not throw the baby out with the bathwater," we expect that in the Indian context, SEBI's mandate for BSE Top 1000 companies to report their ESG activities as part of the Business Responsibility and Sustainability Reporting (BRSR) shall alleviate some of these concerns. However, it is time that companies understand the spirit of ESG, and even those companies that do not fall under the purview of BRSR voluntarily disclose the steps taken toward a more sustainable future. Let us actively work towards addressing the pitfalls, bringing more standardisation to disclosures and objectivity to measurement.