A report by ratings agency Moodys and it’s Indian associate ICRA indicates that family owned firms that dominate the country’s business landscape face major challenges in grappling with issues regarding corporate governance including succession, board independence and transparency.
The survey covered 32 companies in 16 prominent family groups, covering a broad cross-section of Indian industry. The survey included companies belonging to the Tatas, the Ambanis, Godrej, Vedanta, Wipro, Essar, Bharti, TVS and the Muruguppa Group among others. Family-owned companies comprise 17 of the 30 Sensex stocks and have specific characteristics compared to other firms.
The survey acknowledged that these companies have responded well to the opportunities available in the fast-growing and liberalising economy of modern India.
In my experience, family owned organisations have been as well and sometimes even better managed than other types of organizations. However, to my mind, issues of succession is the bane of family owned enterprise. We have seen business families almost disintegrate due to issues of succession and ownership.