The rule definitely appears controversial and has raised many eyebrows every time I introduce the topic during Family Governance talks. Even my best friend who is a second-generation Chinese family member weighed in on the rule that it is very “un-Chinese”. I leave the readers to interpret what my Chinese friend said.
Lee Kum Kee Policies
But for the 129-year-old Lee Kum Kee Group, the family edict related to extra marital affairs is one of the most powerful rules that the third generation and grandson of the founder, Lee Man-tat has required the next generation shareholders to obey especially those sitting on the board.
There are equally unique and governance rules that Lee Man-tat espoused as well and these are:
Rule No 1: No Late Marriage
Rule No 2: No Divorce
Rule No 3: No Extra Marital Affairs
Any family board member who contravenes Rules No. 2 and No. 3 are expected and required to leave the board automatically and will no longer have the right to speak and participate in the family council and business decision-making process.
Family Constitution and Family Council in 2002
For Lee Man Tat, these rules are important and crucial as the family members have grown in size, some have lost personal interest in the business, the market environment has become complicated, shareholder ownership are dispersed and owners have varying versions of where the future is headed.
After weathering through two major corporate battles, the Lees agreed to finally set up a family council and draft a family constitution in 2002.
In an article penned by Jeff Pao, he highlighted the different corporate governance systems set up by LKK and what came out of the initiatives, most notable was organizing the Family Council Board and the roles of the 29-member family assembly.
Pao further contends that the family council is in charge of the family business, family office, family investment firm, family charity fund and family training center.
I will share more initiatives that the Lee Kum Kee incorporated in their Family Constitution:
a. All family members have to work at least three to five years in other companies after graduating from college if they want to join the family business
b. Family members who violate rules do not just defy the values enshrined in their Family Charter but will also lose their moral and business ascendancy to implement, enforce and discipline erring or wayward family members.
c. Another powerful value worth repeating in this article is their strong adherence to “Si Li Ji Ren“, a Mandarin saying meaning “Put Other’s First, before yourself.”
d. If family members quit the board or company for personal reasons, they can sell their shares to the company and remain as family council members
e. The next generation are allowed to inherit shares even if they are not involved in the daily business operations.
These rules are the heart and soul of Lee Kum Kee’s flourishing existence and the foundation of their commitment to pursue business excellence and stewardship so the business can be handed to the next generation seamlessly.
Lee Kum is the name of the founder, and Kee is a Chinese word that means a new family business.
The enterprise will be celebrating 130 years in 2018 and there are no signs of the group slowing down. On top of their strict observance of protocols, the other critical and indispensable governance rule that the Lee family initiated was formalizing their succession plan.
The family believes that the plan is critical to sustaining a long-lasting family business.