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  • Clans on the Run

    A little FYI for any one investing in the Asian market.
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    Clans on the Run

    As a new generation takes over, Asia's richest business families are being forced to change their cloistered, Confucian ways

    By Anthony Spaeth


    Posted Monday, February 16, 2004; 21:00 HKT
    Name a Japanese corporate colossus and chances are it started as a family firm: Kikkoman, Mitsubishi, Sumitomo, Toyota. If you go shopping or catch a movie in Manila, you'll doubtless enter a leisure palace decreed by the megawealthy Sy or Ayala clans. Hundreds of millions of Indians garb themselves daily in cloth made by the Ambanis or Wadias. Residents of Hong Kong can barely avoid contributing to the coffers of billionaire Li Ka-shing and his sons, who control office towers, supermarkets, electronics outlets and telephone companies.

    Following the 1997 Asian Economic crisis, the once revered Taipan became closely associated with crony capitalism, and crony capitalists got a heavy dose of blame for the region's collapse

    Business in Asia is a family affair, and the most accurate picture of an Asian economy remains a diagram of an extended family tree connecting clans that make things to those that finance them, with dotted lines sometimes leading to the government (which often has an incestuous structure of its own). The payoff for decades of consanguinity has varied, of course, from nation to nation. For more than 30 years, the impoverished Indonesian archipelago was run as a mom-and-pop operation called Suharto Inc. In contrast, South Korea's economic miracle was engineered by some 30 ambitious conglomerates called chaebols, almost all family controlled, while the commercial drive of industrious Hong Kong and Taiwan emanated from anthills
    of small, adroit family shops that promiscuously abandoned products and premises whenever better opportunities came along.

    The Mori Family
    Two brothers with different visions split a family empire in half

    Built to last
    The world's oldest family firm

    The Li Family
    Hong Kong's "Superman" Li Ka-shing is the richest man in Asia. Can his sons duplicate his dealmaking skills?

    The Sy Family
    Can Henry Sy's all-in-the-family approach handle the complexity of managing a retailing giant?

    The Ambani Family
    Despite the death of their patriarch, the Ambani family is bringing India's Reliance Group into the 21st century

    The Chearavanont Family
    Dhanin Chearavanont built his family seed shop into a multinational
    conglomerate, then risked everthing to save it during the 1997 economic crisis. Now, he's rebuilding again

    The Tsai Family
    Taking pains to be transparent at Taiwan's banking and finance colossus

    Hard Times for the Rich
    Many of Asia's powerful families have become targets for shareholders and prosecutors


    TIME Covers
    Asia's most powerful families on the cover of TIME

    Today, the majority of Asia's publicly owned companies are still family controlled—and the manner in which control is exercised can often be boiled down to one sentiment: a family business is the family's business. For decades, boardroom positions and top jobs at such companies have been passed down from fathers to sons and daughters, not to professional managers outside the clan. Profits have been used to shore up a sister (or cousin) company, instead of going to shareholders. A banker eager to lend to family concerns from Kuala Lumpur to Kyoto has been happily able to dispense with the borrower's balance sheet and P&L statement, which often concealed more than they disclosed. But he ignored at his peril the current blood pressure of the "Old Man" or the risk of antagonizing Wife No. 2 by getting too
    chummy with No. 1 Son.

    But if you talk to the patriarchs and scions of the families that own Asia, they'll tell you that it is no longer business as usual. For the past several years, they have increasingly come under fire for inefficient, outmoded and nepotistic practices. One of the outcomes of the 1997 Asian economic crisis was that the once revered taipan became closely associated with crony capitalism, and crony capitalists—that cloistered business-government cabal that parcels out national economic spoils to a privileged few—got a heavy dose of blame for the region's collapse. Today, free trade, looser controls of capital flows, the information explosion and global competition are making it harder for family businesses to carry on like secret societies. Asians are more suspicious of concentrated economic power, no longer willing to take on faith the wisdom of their socioeconomic superiors. Shareholders are demanding "transparency" and genuine financial
    data, and that publicly owned companies be run for the benefit of all
    stakeholders, not just those who share genes. "The rules of the game have changed," says Jamie Allen, secretary general of the Asian Corporate Governance Association in Hong Kong, a nonprofit organization that monitors the behavior of Asia's company managers.

    For proof, look to South Korea, where conglomerates have for so long been "run like ancient tribes to maximize political power for the leading families, rather than as normal businesses to maximize profits," says Morgan Stanley economist Andy Xie. That all changed with the '97 crisis, which caused the breakup of powerful conglomerates like Ssangyong and Hyundai and fostered in the public a persistent antichaebol backlash. Politicians today win office by crusading for chaebol reform. Business life in South Korea is marked by a steady stream of special investigations into chaebol-related
    bribery, stock manipulation, illegal campaign contributions, tax evasion and fraud. Chey Tae Won, nephew of the founder of SK Group, spent seven months in jail last year for accounting and stock fraud. Chung Mong Hun, the favorite son of the Hyundai Group founder, killed himself last year after being accused of illegally passing money to North Korean dictator Kim Jong Il. And corporate-reform activists successfully pressed tax authorities to slap additional tax on Lee Jae Yong, son of the Samsung Group chairman, for gains made on a controversial Samsung bond deal (though the chaebol is contesting the tax in court).

    Even with the pressure rising, many family empires have yet to change their ways. "A small percentage of leaders is open and willing to face the challenge," says Harvey Chang, who is president of Taiwan Cellular Corp., Taiwan's largest mobile-service provider, and a corporate-reform advocate. "The rest just don't understand it." In the following report, Time looks up close at six immensely wealthy families who recognize that Asia's time-honored ways of doing business may no longer be tenable. These venerable houses, from the Lis of Hong Kong to the Moris of Japan, are to varying degrees expanding in China, battling foreign competition, coping with sibling rivalries and tackling internal change, even to the point of considering the ultimate sacrifice: delegating top management to professionals from outside the circle of kinship. "The public perception," concedes Daniel Tsai, 47-year-old scion of one of Taiwan's richest families,
    which controls Fubon Financial Holding Co., the country's second-largest financial-services company, "is that there should be no family members in the team of a professionally managed company." Individuals know they can only mature by breaking the grip of their families. Asian businessmen are now taking that lesson into the executive suite.

    —With reporting by Joyce Huang/Taipei and Michael Schuman/Hong Kong

  • #2
    Interesting. But I also see the same methodology here in the US. Family is family. The only difference is, we in the US have unfortunately done a lot over the past fifty years to bastardize that concept.
    Experienced Community organizer. Yeah, let's choose him to run the free world. It will be historic. What could possibly go wrong...

    "You're just a jaded cynical mother****er...." Jeffpeg

    (more comments in my User Profile)
    russbo.com


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    • #3
      Isn't family wonderful!

      One of the young Rockefellers reminisced about his grandfather taking him to Grand Central Station as a boy and telling him it belong to him. He's (I don't remember his name, no one would know it any way, and that's how they like it!) doing a movie about the youth of the super-industrial elite. He has been warned by his family about bringing this too light, even friends he wants to highlight in the documentary have been warned by their families, and a few dropped out of the project. 'It stays in the family; we don't talk about our life to the outside.'

      And it's good to see the Hilton empire is in good hands--'Like oh ma God, 200 000 bedrooms & I pick the one with the video camera!'

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