When Family Businesses Misjudge CEO Successions. And how to fix it.

This article was first published in the FFI Practitioner, August 19, 2026; https://ffipractitioner.org/when-family-businesses-misjudge-ceo-successions-and-how-to-fix-it/

Every family business reaches a moment when leadership choices determine whether legacy will endure. That inflection point is soon arriving for a large cohort of family businesses globally. According to a  recent survey of 300 family business executives, nearly 8 in 10 expect a CEO transition within the next decade, and 42% foresee this shift within the next three to five years.

While not every family business passes the baton to a family member, the same survey indicates that among firms generating over $1 billion in revenue, 32% expect a family member to become CEO. Additionally, 47% of firms with revenues below $500 million favor a family member. 

Identifying and appointing the right successor from within the family is therefore a critical decision. Mismanaged successions can have far-reaching implications, from erosion of trust among shareholders to damage to the family’s legacy and reputation. Based on my experience, I believe that most family business successions fail because they confuse backward-looking proxies such as birth order, seniority, lineage, or perceived legitimacy, with leadership readiness. Instead, what they need is a lens grounded in judgment, competence, and demonstrated capability in selecting the next CEO from within the family.

Four Mistakes Family Firms Make When Naming a Family CEO

As a researcher on family enterprises and an advisor to multigenerational business families, I have observed four recurring mistakes in succession planning. 

1. Favoring lineage over leadership readiness: Families often elevate successors based on inheritance, assuming bloodline confers legitimacy and that legitimacy precedes competence. While that can give successors positional authority, a lack of capability can lead to strategic missteps, internal fragmentation, and loss of control. 

The Gucci family drama is a classic illustration of this mistake. Aldo Gucci, believed that his nephew Maurizio was the most credible option from within the family to lead Gucci. Aldo actively coaxed him into the business. The logic was lineage preservation, not leadership readiness. Once in control, Maurizio pursued an aggressive repositioning toward high-end luxury without sufficient financial discipline. Prolonged internal disputes and mounting debt eventually forced him to sell his stake to external investors, ending the family's ownership of Gucci.

2. Using seniority or implicit hierarchy as a shortcut for leadership selection: In many family firms, the eldest, the most visible, or the longest-involved family member is assumed to be the natural successor, often without a rigorous comparison of alternatives. Seniority and proximity to the business may signal commitment, but they do not guarantee strategic judgment, emotional steadiness, or the ability to lead a complex organization. More importantly, when the basis of selection is not explicitly defined, leadership transitions lose institutional clarity.

The succession dynamics at Reliance Industries illustrate this risk. After Dhirubhai Ambani's death in 2002, the absence of a formally articulated, capability-based succession framework allowed assumptions about authority to harden into conflict between his sons, Mukesh and Anil. It resulted in a negotiated partition of the empire rather than a strategically designed transition. The split fragmented strategic focus and shareholder value for years. 

3. Prioritizing legacy alignment instead of strategic need: What many owners underestimate is how fundamentally the CEO role changes across generations. The capabilities that built the business are rarely the same ones required to scale it. It can also be tempting to select a successor who resembles the founder or incumbent. Familiar temperament feels reassuring. But resemblance is not aptness. 

In an Indian consumer goods company, the founder increasingly aligned with his son-in-law, whose command-driven style and temperament resembled his own. While remaining skeptical of his more professionally oriented son. However, the business had begun to outgrow its founder-led model. As it expanded, it required greater coordination across functions, professionalized governance, and clearer decision rights. 

The son-in-law's leadership style became a constraint in this next phase. Tensions escalated, decision-making fragmented, and parallel power centers emerged. Despite the presence of capable family members, the absence of alignment between leadership style and the firm's evolving needs ultimately led to a structural split of the business 

4. Not laying out the next chapter: Most families begin succession conversations by debating names. The more strategic place to begin is to first gain clarity on what the next chapter of the business will look like. Is the firm entering consolidation or rapid growth? Is it moving toward professionalization and institutional governance? How will digital disruption, global expansion, or new competitors reshape the business? Only once that mandate is defined should candidates be assessed as each phase demands a different kind of leadership. 

The leadership transition at Tata Group illustrates this risk. When Cyrus Mistry was appointed chairman in 2012, he pursued what he read as the firm's need: restructuring underperforming businesses, rationalizing the portfolio, and tightening capital discipline. However, this direction clashed with the expectations of the Tata Trusts, which placed greater weight on legacy continuity and the preservation of the group's institutional identity. The resulting conflict led to Mistry's removal in 2016. Without that shared definition of the next chapter, even a capable leader can be set up to fail. (Mathew, 2024; Jhunjhunwala, 2020).

The question, then, is how can family businesses move beyond comfort and similarity to identify the leader best equipped for the enterprise’s future.

Be Strategic about Choosing the Next CEO

Keeping the mistakes in mind, how should you move ahead and pick the right CEO? How do you assess if they have the qualities the firm needs in the future? 

Leadership assessment frameworks are abundant. Firms such as Korn Ferry offer validated competency architectures and psychometric tools designed to evaluate executive potential. Major advisory firms publish governance-focused succession guides for family enterprises. Academic research has even proposed formal succession scorecards to structure decision criteria across generations. Most of these frameworks do not directly address the distinctive decision biases that operate inside family firms such as familiarity or birth order. 

Based on my work, here are four dimensions that can help firms make the right succession decision. These dimensions cannot be measured through aspiration. They must be observed in behavior. While most succession conversations focus on readiness, these dimensions focus on risk.

1. Institutional Courage: In family firms, the hardest decisions are relational. For that, you need a leader who has institutional courage- the capacity to act in the enterprise’s long-term interest, even when doing so disrupts family comfort. This surfaces on many occasions, when capital must be redirected away from a legacy division run by a relative, when a long-serving executive must be replaced, or when short-term distributions must yield to reinvestment. Without institutional courage, a CEO becomes a mediator of expectations rather than a steward of value.

This dimension is best assessed through the candidate’s track record. Leaders should look back at moments when enterprise interest conflicted with family preference and examine how the candidate responded. For example, if a division led by a family member was consistently underperforming and the company had to decide whether to restructure it or let it continue out of deference to the relative running it, did the candidate defer, delay, or act? As part of the evaluation, the board or an independent advisor could ask senior non-family executives: “When pressure rises, does this individual protect organizational performance or family relationships? Can you recall a time when this person made a decision that was right for the company but difficult for the people who lead it?”

2. Strategic Fit: A leader’s competence isn’t static. It is context dependent. A successor who excelled in an era of opportunistic expansion may not thrive in a period requiring disciplined integration. A leader skilled at operational optimization may struggle when reinvention becomes imperative. So, the choice cannot be based on who has excelled so far but who is best equipped to lead the firm into its next chapter. 

Businesses should start by defining their most critical strategic priorities for the coming phase. And evaluate whether the candidate has demonstrated depth in those areas. For example, “The company is undergoing pivotal digital transformation. Your internal capabilities are weak, and senior leaders are resisting the changes. What would be your first move? How would you decide what shouldn’t be digitized?”

What matters is pattern recognition, not polish.

3. Judgment Maturity: Founder intuition often dominates first-generation enterprises. That intuition cannot be inherited. But what you can assess in a potential successor is their decision-making and judgment architecture. Strong candidates demonstrate the ability to integrate dissent, weigh imperfect data, and move with conviction without becoming impulsive. 

The evaluation should focus on reasoning rather than outcomes. Look at how they handled decisions when stakes were high or when information was incomplete. What were the trade-offs? Did they lean into family expectations or the enterprise’s needs? Examine the logic they deployed at the time. Were they willing to revise their decision when evidence changed or when they had new information? Past episodes involving capital allocation trade-offs, market downturns, or operational crises are especially revealing, because they expose how judgment functions when the pressure is real rather than hypothetical. 

4. Boundary Authority: An internal CEO needs to clearly distinguish between family forum and board forum, engage independent directors without defensiveness, and lead professional executives without feeling threatened by their expertise. In many family firms, successors who lack confidence in their own authority tend to centralize decisions, sideline capable non-family leaders, or blur the line between family sentiment and business governance. It also means preventing family disagreements from leaking into organizational processes.

This dimension is best evaluated by examining how the candidate has navigated governance boundaries in practice. Some questions to assess them include: How have they handled situations where a family member's preferences conflicted with a board decision? How do senior non-family executives describe the experience of working with them? Can the candidate clearly define where family input ends and management authority begins? 

A successor who cannot draw these boundaries before appointment is unlikely to hold them under pressure. 

Choose the Future- Not the Familiar

Internal succession is one of the few moments when a family can consciously redesign its leadership logic. It is also one of the most emotionally charged. The candidates are not strangers on a shortlist. They are sons, daughters, siblings, in-laws. The weight of relationships, history, and obligation is real, and no framework can eliminate it entirely. 

But that is precisely why rigor matters. When selection criteria remain implicit, emotion fills the gap, and the resulting choices tend to reflect the family's past rather than the enterprise's future. The shift required is not from affection to detachment. It is from assumption to deliberation: clearly defining what the next chapter demands, assessing candidates against those demands, and making the basis of selection transparent to the family and the institution alike.

The families that endure across generations make difficult choices well, with clarity, with courage, and with the enterprise's future as the anchor.

Tata Group’s next chairman: The next chapter must come before the next leader

This article was first published in Forbes India on August 12, 2026; https://www.forbesindia.com/article/upfront/column/tata-groups-next-chairman-the-next-chapter-must-come-before-the-next-leader/2997016/1

Succession is often treated as a question of finding the next person. In large family businesses and business groups, the more important question is what the institution will need from its next leader. That answer changes with time. A leader who is right for one phase may not necessarily be the person best equipped to lead the next.

N. Chandrasekaran’s decision not to seek another term as chairman of Tata Sons offers an opportunity to ask that question of one of India’s most important business groups. This article is not about assessing the circumstances of Chandra’s decision or speculating about the individuals who may succeed him. It is about what Tata should look for in its next chairman, why alignment among its key stakeholders will be critical, and why the succession process should begin immediately if the Group wants a smooth transfer of leadership. 

Chandra was the right leader for his chapter

It is important to judge a leader in the context in which he takes charge. When Chandrasekaran became chairman of Tata Sons in 2017, the Group was emerging from a deeply difficult leadership episode following the removal of Cyrus Mistry. Tata Group needed stability, credibility, institutional continuity, and transparency in governance. Chandra brought decades of experience from within the Tata ecosystem, particularly through his leadership of TCS. He was a professional manager immersed in the Tata way. 

The Tata Group that Chandra leads today is very different from the Group of 2017. Its ambitions now extend across semiconductors, electronics manufacturing, aviation, electric mobility and other new businesses, alongside established businesses in technology, automobiles, steel and consumer products. Its global footprint is larger and its investments are increasingly capital intensive. Technology, geopolitics, global supply chains and changing regulations are becoming central to the Group’s strategic choices. The leadership requirements of the next phase are therefore likely to be different.

First decide what the next Tata should look like

This is where succession processes often go wrong. We begin by asking who should lead. Who is available? Who is trusted? Who knows the organisation? Those questions matter, but they should come later.

The first question should be: What does Tata need to accomplish in its next chapter?

Where should the Group place its largest bets? How much capital should go into new businesses? Which businesses need acceleration and which need greater discipline? How should Tata Sons balance the autonomy of its operating companies with the need for strategic coherence? What should the relationship between Tata Sons, the Tata Trusts and the operating companies look like in the years ahead?

These are not simply questions for the incoming chairman. They are questions for the institution and its stakeholders.

The events surrounding Chandra’s reappointment make this especially important. His statement indicates that the Tata Trusts and the Tata Sons Nomination and Remuneration Committee and Board had recommended his extension. The proposal nevertheless did not receive unanimous Board support and remained unresolved for six months. Chandra has now chosen not to offer himself for reappointment. The larger lesson is not about one individual or one disagreement. It is about alignment.

A capable chairman can find it difficult to lead when the key stakeholders do not have a shared understanding of the institution’s direction. The next chairman should therefore not inherit an unresolved debate about the future. 

What will the next chairman need?

The next chairman will need strong strategic judgement. Tata is too large and diverse for growth to mean pursuing every opportunity. Someone will have to make choices about where capital and management attention can create enduring value.

Capital allocation will be equally important. Tata’s ambitions in new industries require patience and significant investment. The next chairman will have to balance the desire to build businesses of the future with financial discipline and a clear understanding of the returns such investments can eventually generate.

The Group will also need a genuinely global leader. Tata today operates in businesses shaped by technology, geopolitics, global supply chains and cross-border regulation. Understanding one industry will not be enough. The chairman will need to understand how different businesses fit into the larger portfolio and when the Group should act as a group rather than as a collection of companies.

There is another quality that may be even more important: knowing when to intervene and when to step back. Tata’s operating companies have strong professional leaders. The chairman should provide direction without centralising every decision. The ability to empower leaders while maintaining Group-level coherence is a significant leadership challenge.

And then there is continuity. The Tata Group has survived for more than 150 years because it has evolved without losing the values that give the institution its identity. In my earlier writing on Tata, I have argued that institutional memory is a strategic asset. It is not simply a record of what happened in the past. It shapes how people behave when there is no rulebook and when decisions have to be made under pressure.

The next chairman should understand that memory without becoming imprisoned by it. Continuity should provide the foundation for change, not become an argument against it.

The search should begin now

The Group has roughly six months before Chandra’s current term ends. That is useful transition time. It should not, however, become six more months of uncertainty.

Once the mandate is clear, the search for the successor should begin immediately, at a war footing. So that there is enough time for a meaningful handover. The incoming chairman should have an opportunity to work alongside Chandra, understand the Group’s strategic priorities, build relationships with key stakeholders and absorb the institutional knowledge that cannot be transferred through board papers. It is important for Chandra too to facilitate a smooth transition. One measure of a successful leader is not only what he achieves during his tenure, but how well he prepares the institution for the person who follows. 

The Tata Group now has an opportunity to make this transition a demonstration of good governance. It should use the remaining months not merely to find a person, but to clarify the direction, define the mandate and prepare the institution.

The next chairman should not be chosen simply to succeed Chandra. The person should be chosen to lead the Tata Group that comes after Chandra.

How Not To Destroy A Dynasty: Masterclass From The House Of Gucci

This article was first published in the Family Business United, June 29, 2026; https://www.familybusinessunited.com/post/how-not-to-destroy-a-dynasty-masterclass-from-the-house-of-gucci

Twenty-five years ago, in Singapore, I bought a Gucci canvas cross-body bag with money saved from overtime. It was a modest indulgence, earned through hard work, from a brand I knew was considered good. That bag has travelled to work and on holidays, and remains a favourite to this day, mainly for it’s appropriate size.

Then came Sara Gay Forden's The House of Gucci, and the bag in my cupboard quietly changed its meaning. All at once it felt invaluable, a small piece of a history far larger and far sadder than one could have imagined. The history of Gucci is a tragedy of a very particular kind, the kind that should make every business family stop and think.

On the morning of 27 March 1995, a well-dressed man climbed the steps of a building on Via Palestro in Milan and was shot three times in the back and once in the head. He was Maurizio Gucci, forty-six years old, the last of his family to lead the house that carried his name. The man who fired the gun had been hired for the job. The woman who arranged it, as the courts would later establish, was Patrizia Reggiani, Maurizio's former wife and the mother of his two daughters. She had once been the fiercest champion of his rise. In 1998 she was convicted and sentenced to twenty-nine years. The Italian press called her the “Black Widow”.

And yet the murder is not what lingers once the book is closed. What lingers is something quieter and far heavier. The brand survives today. It thrives. It is worth billions. Only, the family that created it doesn’t own it. Three generations built the house, and the third generation lost it. By the time the assassin arrived on Via Palestro, the company had already slipped out of Gucci hands.

Forden tells the story of one family. The lessons belong to every family that owns a business. There is an old saying that every business family secretly dreads, shirtsleeves to shirtsleeves in three generations. The Gucci saga is perhaps the most beautifully dressed proof that the saying is real. It is a pattern that repeats across families, across centuries, across continents. A pattern, unlike a curse, can be understood and broken, if only we are willing to study how it forms.

Why most dynasties fade by the third generation

Research across the world shows that only about a third of family businesses make it into the second generation, and barely one in ten survives into the third. Those numbers frighten every founder who reads them. They are not, however, handed down by fate. Family firms seldom die because the world has stopped wanting what they make. Customers were still queuing outside Gucci's Fifth Avenue stores even while the family was tearing itself apart in the courts. One observer noticed something telling, that the more sensational the headlines grew, the more shoppers walked in to buy. Family firms often die or family loses control of the firm because the family loses the ability to own itself and to govern itself.

John Ward, who did as much as anyone to build the modern study of family business, argued that the long life of a family firm is a matter of discipline. Families that endure plan their succession early, while there is still time to do it gracefully. They keep the roles of family, owner and manager from blurring into one. They put their governance in place during the years of calm, long before any storm arrives. Forden's book is, in effect, a long record of what happens when a gifted family does none of this. Read as a warning, it becomes one of the finest masterclasses imaginable in how to destroy a dynasty. So let us turn it the other way around, and read each act of ruin as a lesson in how to keep one alive.

First, the rise, because every fall begins with a gift

Guccio Gucci opened his house in Florence in 1921, a small leather-goods shop on a quiet street. The origin story has since become legend. As a young man he had worked as a porter and lift-boy at the Savoy Hotel in London, where he watched the monogrammed luggage of the wealthy pass through the lobby and resolved to make something just as fine for his own countrymen. He did exactly that. His craftsmanship in saddlery and luggage became the family's first and finest inheritance. In time he brought his sons into the firm, and after the war he divided the company among three of them, Aldo, Vasco and Rodolfo.

Here was familiness in its purest form, that special bundle of strengths a family brings to its firm when shared identity, trust and complementary talent come together into something no outsider can copy. Aldo was the engine. A marketing genius, he carried Gucci across the Atlantic and built a glittering empire that reached across America, Europe and Asia. He understood, better than anyone else in the family, that people did not buy a Gucci bag for the leather. They bought it for the feeling of carrying it. He pushed the family into perfume and into watches over his brothers' objections. And he gave them the image that should have become their constitution. “My family is the train”, he liked to say. “I am the engine. Without the train the engine is nothing, and without the engine the train does not move.” It is a lovely picture of how much they needed one another. The sorrow of the story is that the train forgot that it needed an engine.

Lesson one: the trap of dividing ownership equally

When Vasco died of cancer in 1974, leaving no children, Aldo and Rodolfo bought out his widow's stake and emerged as equal partners, fifty per cent each. On paper it looked like elegant symmetry. In practice it laid down a fault line that ran through everything that followed. The two halves were identical in size. Behind them lay contributions that were perceived very differently. Aldo had built the American business and much of the global one. Rodolfo, a former actor, had put in far less according to Aldo’s family, and he held precisely the same half. Aldo felt the imbalance keenly. Quietly, he began to steer profits into the perfume company, where he and his sons held the larger share, so that Rodolfo saw only a thin slice of the returns.

Resentment crept in from every side. Rodolfo blamed Aldo's restless expansion for the thin profits. Aldo's sons seethed that their uncle drew an equal half from an empire their father had built. Everyone felt cheated. No one felt heard. This is one of the oldest traps in family business, and one of the most misread. Equal and fair are two very different things. When a passive owner holds the same stake as the one who creates the value, the paperwork may call it just while every family dinner says otherwise. Scholars of socioemotional wealth remind us that families guard much more than money. They guard their pride, and their sense of having mattered. Wound that, and no dividend will ever heal it. The Guccis never built any way to revisit who owned what, and why. In Forden's telling, that frozen fifty-fifty shaped all that came after.

Lesson two: a next generation with no real role will create a destructive one

Few figures in the saga are as moving as Paolo Gucci. He was talented and restless, and by every account he was treated abominably. Working under his father Aldo, who was authoritarian and certain of his own genius, Paolo was handed a title and given no authority. “I was not allowed to do anything”, he complained. When he tried to start a line under his own name, the family that had stifled him closed ranks against him as one body. Aldo, who quarrelled endlessly with Rodolfo, instantly joined hands with him to crush the boy.

What does a cornered son do? Paolo handed evidence of his father's tax evasion to the American authorities. Aldo, the architect of the entire empire, was convicted and sent to prison. A son put his own father behind bars. Read that line again, slowly, and let its full weight settle on you. It is hard not to feel a flash of anger at Paolo, and just as hard to hold on to it. Who had made him this way? A family that gave him a famous surname and no room to be himself, a family that treated his hunger for dignity as an act of betrayal. The lesson is plain and unforgiving. The next generation will find a role in the business one way or another. The only choice a family really has is whether to give that role to them openly, or to force them to seize it in anger. Talent that is denied an honest outlet does not simply disappear. It festers, and then it turns.

Lesson three: keep the family, the owners and the managers in clear view

Many years ago, Renato Tagiuri and John Davis gave us the three-circle model, a simple and powerful way of seeing a family business as three overlapping groups, the family, the owners and the managers. One person may sit inside all three circles at once. The circles still remain distinct, and a family gets into trouble the moment it forgets which is which. The House of Gucci shows what happens when the circles fold into one another and no one can tell them apart any more.

Think of Patrizia Reggiani, long before she plotted a murder. In the early years she was genuinely good for Maurizio. She gave a timid young man the courage to stand up to a domineering father. “I knew he was weak”, she said, “but I was not weak. I pushed him so hard that he became president of Gucci.” Over time, though, her ambition found no proper home, and so it spilled into interference. She held no formal position in the company, yet she tried to run it through her husband, feeding his grievances against his uncle and his cousins, and measuring respect by who was offered champagne first at a party. Her appetite was unmistakable. She once said that she would rather “weep in a Rolls-Royce than be happy on a bicycle.” 

Most business families wrestle with similar questions. What is the rightful place of the son-in-law, the daughter-in-law, the person who marries into the family and the firm? Shutting them out is rarely the healthy answer. What works is clarity, with them and with everyone, about where ownership ends and management begins, and about how a marriage relates to both. A family that leaves these lines undrawn ends up negotiating its most intimate relationships through resentment. And resentment, as Gucci shows us, can turn deadly.

Lesson four: why control without grooming is a trap

Rodolfo loved his only son, and he failed him in the most ordinary way a loving father can. He never let him grow up. As one of Maurizio's associates put it, “Rodolfo gave him the castle and not the money to maintain it.” Rodolfo held on to every decision, trusted his son with almost nothing, and prepared no one to follow him. On his deathbed he confided his fear that money and power would change his boy. They did, for the simple reason that the boy had never been allowed to practise being a man.

So, when Maurizio finally took control, he held the largest single block of shares in the company and very little experience of running it. His vision was brilliant. He dreamed of a global luxury house with professional management, modern design and sophisticated marketing, which is more or less the company that non-family professionals would later build on the ruins he left behind. A vision, though, has to be carried out, and owning a company teaches a person nothing about running one. 

Maurizio managed, in the unsparing words of his own advisers, “by intuition”. He was charming and mercurial, a child in a sweet shop who wanted everything at once and understood almost nothing about cash flow. Within a few years a company that had been earning sixty million dollars was losing sixty million. “Intuition”, one adviser observed, “will carry you while business is good and will desert you the moment business turns bad.” 

Here is the lesson every owning family should write upon its heart. Ownership is something a family passes down to its children. The skill to run a great company is something each generation has to build for itself, or buy in honestly from people who already have it. To know what you are good at, and to bring in fine professionals for everything else, is one of the highest forms of stewardship a family can practise. Maurizio came to it too late, and he came to it on borrowed money.

Lesson five: build the rules of the family before the quarrels begin

Through the 1980s, Gucci became famous for its lawsuits rather than its loafers. There were criminal complaints over forged signatures, with civil suits piled on top of them. An eighty-year-old patriarch had his office boxed up and emptied overnight. Brother was set against brother, and cousin against cousin. In all of this there was no family constitution, no family council, no shareholders' agreement worth the name, and, most damaging of all, no neutral person to whom a dispute could be carried before it reached a courtroom.

It is hard not to compare this with the Cartiers, whose story has appeared in these pages before. As far back as 1906, old Alfred Cartier wrote a dispute-resolution clause into the firm's founding documents. If his sons ever fell out, the matter would go to a named arbiter. The Cartiers kept a family council at a time when most families kept only their quarrels. They were not spared every grief. They were spared the spectacle of destroying one another in public. The Guccis had built no such structure, and so every disagreement had only two places to go, into silence or into court. Families reach for litigation when they have built nothing better to reach for. A constitution, a family council, a forum where grievances can be aired and settled inside the family, the habit of mediation in place of a lawsuit, these are the load-bearing walls of a dynasty. They have to be raised in the sunshine, because no one can raise them in the middle of a storm.

The reckoning, and a bitter irony

The end arrived quietly, in a lawyer's office, with the stroke of a pen. Worn down by the family wars, Maurizio first joined hands with the Bahrain-based investment house Investcorp to buy out his relatives. It was the first time an outsider had ever held a meaningful block of the family's shares. Then, drowning in losses he could not manage, he sold his own remaining half. On 23 September 1993, in the offices of a Swiss bank in Lugano, surrounded by lawyers and financiers, Maurizio Gucci signed away the last of the family's stake. After more than seventy years, not one Gucci owned any part of Gucci. Eighteen months later he was dead.

Here lies the cruellest irony of the whole story. Once the feuding owners were gone, the professionals turned a near-bankrupt company, within a decade, into one of the most valuable luxury brands on earth, its sales climbing from a few hundred million dollars into the billions. Everything Maurizio had dreamed of came true. The global house, the professional management, the modern marketing, all of it arrived. It simply arrived for strangers, while the family watched from outside the gates. The craftsmanship of the first generation, the genius of the second and the dream of the third all lived on. The family that had carried them was simply no longer there. That is the true shape of shirtsleeves to shirtsleeves. The wealth does not always vanish into thin air. Sometimes it just moves quietly out of the hands of the family that built it.

What the bag came to mean

Let me come back to that Gucci bag, bought in Singapore a quarter of a century ago with overtime money. For twenty-five years it was simply a beautiful thing, hard-earned and much loved. Since reading Forden's book, I cannot pick it up without thinking of the family whose name it carries. The bag has outlasted the family's ownership of the very company that made it. There is something almost unbearably poignant in that. A canvas cross-body bag, in a cupboard in India, has held on to its Gucci for longer, in a sense, than the Guccis themselves did.

Strip away the murder, the courtrooms and the couture, and the book leaves a business family with a handful of quiet instructions. Divide ownership in a way that feels fair to those who build the value, and be willing to revisit it as contributions change over the years. Give your children a genuine role in good time, before their talent curdles into resentment. Keep the family, the owners and the managers in clear view, and decide with open eyes where the people who marry in will stand. Earn the right to manage the business, or hand that task to those who have earned it. And raise your governance, your council and your means of settling disputes while the days are still calm, because none of it can be raised once the quarrels begin.

Guccio Gucci began with a craftsman's pride and a porter's eye for beauty. His grandsons inherited the genius and never learnt the grace of sharing it. The bags still sell. The name still shines. The family is simply no longer in the room where the decisions are made. Every dynasty would do well to keep that warning close.

A great family business is rarely destroyed in a single dramatic moment. It is undone slowly, across ordinary years, each time a family allows pride to win over governance. The House of Gucci shows us where that road ends. The ending of our own story is still ours to write.

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.