A 53-year-old Harvard Business Review article could hold clues to India’s persistent business family feuds
- Much of the focus this week was on the quarterly results of IT companies and the winding-up of Hindenburg, the short seller that shook the Adani group. But what caught the eye were news reports on how family feuds, that old bugbear of Indian business, continue to bedevil even some well-run firms.
A contested will, family agreement, multiple HUFs and warring siblings, the ongoing feud between Babasaheb Kalyani and his sister Sugandha Hiremath at the $3 billion Kalyani group, has all the familiar ingredients of the boiling pot that is the Indian business family. With Hiremath laying claim to a third of all the family assets on the basis of a newly discovered Kalyani Hindu Undivided Family (HUF), the nearly 13-year-old battle within the group has just been given a fresh spark.
Whatever the merits of Hiremath’s case, it is another instance of the bugbear that seems to grip almost every Indian family business, usually in the second or third generation. The names just keep adding up. Since 2000, these include Ambani, Hinduja, Oberoi, Chhabria, Singhania, Wadia, KK Modi, among many others. Given the family’s preponderance as owners of Indian business - and a report by the Thomas Schmidheiny Centre for Family Enterprise of Indian School of Business places the number of such businesses at nearly 91 percent of all listed Indian entities - it is safe to say that a very large share of business in India is crippled by this menace.
Indeed, even as the alarming developments in the Bharat Forge group play out, the dispute within the Kirloskar family is getting equally messy with one faction (Kirloskar Brothers Ltd.) seeking intervention by Securities Appellate Tribunal (SAT) for the disclosure and implementation by Kirloskar Oil Engines Ltd of a 2009 deed of family settlement signed between prominent members of the family and affiliated business entities.
Matters in India are further complicated by the attitude towards women who in most cases are excluded from the business. Thus, in 2017, following the death of chairman MV Murugappan, a bitter feud erupted in the Murugappa Group when his daughter, Valli Arunachalam, demanded a seat on the board of the holding company Ambadi Investments Ltd (AIL), on the basis of the 8.15 percent stake she held along with her sister and mother. The family insisted that women couldn’t be given a seat on the board, leading to a legal battle that was only resolved in November 2023.
Also read | Lodha versus Lodha: How a family agreement brought the Lodha brothers to battle
While India has seen a very large number of such feuds, globally, too, there have been instances of battling members of prominent families. The feuds between the siblings of the Dassler family in Germany, the Gucci family in Italy, the heirs of J Paul Getty in the US and the bitter dispute that racked the Koch family, are just some examples of how “each unhappy family is unhappy in its own way", to quote Leo Tolstoy slightly out of context.
Yet, most of the Western instances are dated. Such estrangements have become far fewer in the West since companies now have widely dispersed shareholdings. Families have also ceded much of their control over the businesses they had set up. Often, that was driven by the death of the original founders and the realization by their inheritors that wisdom lay in letting professional managers run the companies.
In 1971, Harry Levinson, chairman of The Levinson Institute and clinical professor of psychology emeritus in the Department of Psychiatry, Harvard Medical School, wrote a piece for the Harvard Business Review titled “Conflicts That Plague Family Businesses". In it, he provided a brilliant insight into the root causes of business family conflicts linking them to psychological factors. Significantly, he traced the cause of most conflicts back to the founders, rather than to their descendants, because of what the business really means to him/her. The three factors Levinson identified were:
- The entrepreneur characteristically has unresolved conflicts with his father.
- An entrepreneur’s business is simultaneously his “baby" and his “mistress."
- For the entrepreneur, the business is essentially an extension of himself, a medium for his personal gratification and achievement above all.
“The fundamental psychological conflict in family businesses is rivalry, compounded by feelings of guilt, when more than one family member is involved", writes Levinson. It is a very unusual explanation placing the problem of such conflicts in the realm of psychology, rather than pure business. It could explain why otherwise wise and sharp founders die without leaving behind a will or those who do put in place succession plans that are ambiguous, setting the stage for future battles.
While family feuds are common enough in India, the worry is that both Bharat Forge and Kirloskar are well-run groups. If the current fracas drags on - and in both cases it has been simmering for years - it will eventually have an impact on performance and thereby on shareholder returns.
Going by Levinson’s analyses, battling siblings might want to consider a visit to a counsellor, along with the many that they make to corporate lawyers.
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