Business / Economy

Private firms have to bring in external ideas

By Cecily Liu (China Daily) Updated: 2014-10-13 10:46

Graham says it is believed that none of the above have convincing succession plans in place, or at least none they can announce.

Many other family-owned businesses, much further down the pecking order than those private giants, are faced with another problem-because of the effects of the one-child policy, many of the single heirs are often not interested or qualified to take over.

Graham says the most important consideration for family succession remains education of the next generation-corporate heir-apparents must understand not just how to run a company, but have an understanding of their business and the markets.

Oracle's services cover a host of areas-those might extend from creating a simple business succession plan, right down to finding the most appropriate schools and internship opportunities for the younger members of the family, in preparation of them taking control.

A crucial component might also be identifying the most tax efficient structure for the succession, to ensure a smooth transition of wealth at the least cost.

Graham says that in his experience, Chinese businesses can often be affected by succession, because it can come upon them suddenly.

Entrepreneurs have often been so overwhelmed with opportunities to make money, that they simply forget to plan succession, he says.

The importance of succession has often been overlooked, too, because many of China's first generation entrepreneurs are the first to actually experience the challenge, after China's reform and opening-up.

Many family owners also simply trust handing over the reins of the business to their own, he says. Many of China's next generation of potential entrepreneurs, too, favor a straight transfer of family power, because starting their own businesses is much harder than in the West, Graham says.

"Keeping it in the family does allow you to go to certain places-but to achieve the next level, you need fresh blood.

"I actually think proper governance is what Chinese companies need if they want to grow," Graham says.

By governance, he means companies need to bring more transparency to their business, and that could mean a board of external directors handling key decisions.

"They'll be lucky if they have enough good members in a single family-bringing in others can supplement their work," he says.

Graham says he fully appreciates that culturally it can be considered bad luck even to talk about succession before older members actually die.

"But still, all good family business should identify key staff, who could conceivably take over if an older CEO retires," he says.

Private firms have to bring in external ideas

Private firms have to bring in external ideas

 Sheep worth their weight in silver and gold for 2015 Strong China links bolster education ties

Hot Topics

Editor's Picks