The New York Times recently carried a story about a feud among family members who are heirs to the Samsung fortune. The current CEO, Lee Kun-hee was appointed head by his father, just as the latter was about to undergo surgery for cancer. Yet Lee Kun-hee was the third son. The eldest was passed over. The Times quotes Mr. Lee, reflecting on that moment, “ I still cannot forget the shock.” Now the elder brother, who calls Mr. Lee “childish and greedy,” is suing, along with his sister, for a greater share of the family fortune. Mr. Lee swears, “I won’t give them a single penny. I will fight them to the end going all the way to the Supreme Court and even to the Constitutional court if I have to.”
People who work with family firms, (my colleague, Nancy Drozdow, is a leader in the field), are familiar with the feuds that can divide siblings and generations. The potent mix of family and money accentuates conflict. Siblings, parents and children who are part of, or share in the wealth of a family business cannot simply treat each other instrumentally, and negotiate their differences, much as they would with shareholders of a publicly held company. Their differences are bound up with feelings of obligation, sacrifice, fairness, self-regard, loyalty, love, and of course hate. Family business relatives can become “intimate enemies.”
In light of the emotional burdens and costs a family business can impose why does it persist as such a vital form of capitalist enterprise, even into the twenty first century? It has of course much strength. When the family coheres, the blood, as they say, “is thicker than water.” Feelings of loyalty can trump family members’ temptations to pursue their own self-interest. So when the family firm works, it stands undivided, unlike many other corporations or institutions.
But in this blog I want to point to another dimension that gives the family firm its staying power. It carries and underlines the idea of the “continuity” across the generations, a feeling and experience not available to many families, where children go their own way, with career choices and life styles often quite different from one another and their parents.
It is useful to look at this historically. The early modern Family in Europe emerged out of a prior communal milieu in which a wife's loyalty could be to her family of origin rather than to her husband. Among the wealthy, a marriage was really a kind of political alliance between two clans. The medieval Catholic Church also privileged the community of believers over families, while in the protestant reformation, the nuclear family with the father as the paterfamilias, and its religious leader, became dominant. Natalie Zemon Davis, a great historian of early modern Europe, shows how parents of this new nuclear family set themselves upon the task of preserving the family’s continuity down through the generations while increasing its patrimony. (Ghosts, Kin, and Progeny: Some Features of Family Life in Early Modern France" pages 87–114 from Daedalus, Volume 106, Issue #2, 1977.) That is why family firms were so instrumental to the early development of capitalism.
I suggest that this fantasy of continuity remains strong today, and is one of the main psychological attractions of family business. Few of us have the opportunity to feel a part of history, to take up the gifts of the generation that precedes us and pass on our wisdom, resources and creative solutions to the next. The uncertainties are too great, so much is unpredictable; we often lead our lives in fragments, bringing coherence to it only in retrospect. The family business is a vehicle for overcoming this fragmentation.
Perhaps this helps explain why succession is so difficult in family businesses, and why many are sold to outsiders just when the next generation could succeed the prior one. At the moment of succession, when a parent gives way to a child, the fantasy of continuity is tested in the most concrete way. Will the child be true to the parent’s vision, will the parent trust the child to preserve the firm, does the child feel authorized by the parent, will the child’s innovations diminish the parents’ contribution, will continuity elevate both sides or lead to the devaluation of either or both? Just when continuity seems possible, it is most difficult to achieve.