Tag Archives: family feud

Hope Alone Will Never Heal Family Conflicts

oct 16

Lotte: Family Feud

Founded in 1948 in Tokyo by Shin Kyuk-ho, the Lotte Group started off as a chewing gum distributor to children in post-war Japan. Nearly a decade later, Shin expanded the company to South Korea and became the country’s largest confectionery manufacturer. Lotte group engages in several industries, such as shopping, entertainment, finance, hotels, and food.

The feud began on July 27 2015 when the 92-year-old Shin dismissed his younger son Shin Dong-bin, the chairman of Lotte Group, along with six board directors. According to the Korea Herald, Lotte Group lost billions of dollars from its operations in China over the past four years, and Dong-bin had reportedly failed to report the losses to his father. Dong-bin held an emergency board meeting and staged a coup to remove his father as general chairman of the company’s holdings. The younger son kept both of his executive titles. The move angered Shin Dong-joo, who called his father’s demotion unlawful. In January 2015, Dong-joo himself was fired after his father discovered that he had overstepped his role by meddling in the management of Korean operations.

Lotte chairman clinches ultimate victory against brother

The long-running family feud between Lotte Group Chairman Shin Dong-bin and his older brother Dong-joo has apparently ended after the latter disposed of a large stake in the group’s key affiliate. The nation’s fifth-largest conglomerate said Thursday that former Tokyo-based Lotte Holdings Vice Chairman Shin Dong-joo sold a 6.88 percent stake in Lotte Shopping ― 1.73 million shares ― through a block deal for 391 billion won ($342 million).

Group founder Shin Kyuk-ho’s oldest son now holds just 7.95 percent of Lotte Shopping, while his younger brother has 13.46 percent.

The siblings have been fighting for control of the retail giant since July 2015, engaging in a fierce legal battle. But the older brother appears to have accepted defeat in the uphill battle for now, according to industry watchers.

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NEW YORK. NY. On September 3, 2008, at the Republican National convention, former New York City Mayor Rudy Giuliani was the first to use the phrase “hope is not a strategy. Specifically, his convention speech included these words:

“Because ‘change’ is not a destination, just as ‘hope’ is not a strategy.

What Does It Mean? When Mr. Giuliani used the quote in late 2008, he was saying that Obama – and any other president – needs to act.

I am connecting this message to family members who are suffering in silence because of deep conflict within the family and indecision.

Hope Supported by Action

You cannot just hope and wished that the issues will just go away. As a family member, you need to muster enough strength to initiate and act on the problems that are causing tension within the family and have likely spread to the business.

The patriarch/matriarch must act to mitigate the problems. Just sitting around thinking about how the current situation could be better is not going to change anything.

The fact remains that the following problems will never be resolved by just merely hoping for the best:

  • Hope will never address the confusion as to where the business is heading
  • Hope will not reduce misunderstandings among siblings/cousins
  • Hope will never resolve personality differences
  • Hope will not cure the incompetence nor can it terminate unqualified/ dishonest family members
  • Hope can never manage frequent power struggles among siblings/cousins
  • Hope will not create ownership alignments/agreements
  • Hope will not mend emotional outbursts and constant finger pointing and cursing
  • Hope can never cure greed nor will it fix a slew of conflict of interest or self-dealing activities by family members
  • Hope will not remove from the business entrenched inept but entitled in-laws
  • Hope cannot heal a scarred relationship
  • Hope can never promise nor offer solutions to a mismanaged enterprise nor will it help correct a bad P&L (Profit and Loss) financial statement
  • Hope cannot prevent a family member from selling his or her shares to a competitor
  • Hope cannot prevent a catastrophic failure of both the family and the business

Just hoping is plain and simple procrastination!

I can list more issues but one thing is crystal clear, hope is not a strategy. Without any means to address these deep and frightful issues, it will be a bruising struggle for power that will result into more disputes, further antagonizing members and weakening the very foundation of the family business.

If there is continued inaction, these problems can cause entropy and will scar the family and the business forever. The consequences of inaction are irreversible.

Objective Intervention Is Important

The best and only option is for family members agreeing on solutions and subsequently formulating family agreements. To avoid making the issues less personal and ensure greater objectivity, it is imperative for the family to engage the services of a third party facilitator who will propose initiatives leading to the creation of mutually agreed governance policies defining the roles and responsibilities of family members active and not actively working in the business.

The good news is that most family related problems are predictable and initiating policies before they happen or morph can eliminate or reduce further tension and will de-escalate a brewing conflict when the founder or patriarch is no longer around.

Do not get me wrong, hope and prayer can work in the face of a difficult situation, but family members need to act and do their part now. There is still time.

(esoriano@wongadvisory.com)

*****

LINK:

http://kore.am/a-breakdown-of-the-lotte-family-feud/
http://www.koreatimes.co.kr/www/tech/2017/02/694_224573.html
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Why Am I Passionately Espousing Family Governance?

oct 2.png

Samsung

Samsung Electronics, the crown jewel of the Samsung group, has reported record profits despite Lee’s arrest in February and a damaging recall for Galaxy Note 7 phones that were prone to battery fires. The financial success was largely thanks to events set in motion by Lee’s father in the 1990s. The elder Lee made the decision to break into the memory chip industry and followed up with massive and risky investments that rivals could not match every year.

Those investments are paying off. Samsung, the world’s largest maker of memory chips for servers, mobile devices and computers, was the biggest beneficiary of supply constraints and explosive demand for mobile devices that pushed up prices.

Longer term, however, some analysts see risks for Samsung and its flagship Samsung Electronics.

“South Korea’s chaebol system is similar to monarchy,” said Park, the Seoul National University professor. “In the monarchy system, you need a king.”

There is also potential for a destabilizing family feud over inheritance when the elder Lee dies.

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Over the past seven years, our firm, W+B Family Business advisory has been spearheading family and business governance in Asia.

Most of our alliance partners in the business sector and the academe in North America, Indonesia and Singapore have referred to our vigorous campaign as “relentless”.

In our head office, we modestly refer to our work as the “W+B Method”.  International clients have acknowledged our method as best in class and we solely look at it as our compelling value proposition.

Why is W+B vigorously campaigning to promote Governance?

It is a race against time. We have witnessed first-hand, emotionally charged families being torn apart because of rivalry, greed, envy, vengeance and sometimes senseless loss of human lives.

There have been quite a number of cases where family members would “kidnap” a parent allegedly suffering from dementia in order to prevent an asset sale or overthrow a sibling in power or seeing siblings conspire in forging documents so they can surreptitiously sell assets.

I have experienced several cases where I had to enforced disciplinary action and initiate expulsion of family members engaged in self-dealing, conflict of interest transactions and in rare cases absconding with large amounts of money.

These are unfortunate but live cases of family conflict! When the battle lines are drawn, you can expect discord among family members, sometimes violent confrontations, parents inconsolable and confused, and the business on the brink of a major setback or at worse, imploding.

Without any doubt, as Family business advisors, we have the herculean responsibility to intervene and affect the governance process because it is the way forward and the right thing to do.

To quote a Bloomberg report related to the never-ending family drama unfolding at Samsung:

“Sabotage, espionage, succession battles, and sibling rivalries — it sounds like a season of “Game of Thrones.” But it’s the real-life drama of the Lee family, the Korean dynasty that founded Samsung with wealth equal to 17% of the country’s GDP.

It’s a fragile situation. If successor Lee Jae doesn’t navigate this right, there are family members waiting to take his spot.“

Currently, Lee Jae is in jail and family members and non-family shareholders are allegedly plotting separately to let him stay in jail for good.

Governance Intervention Must Be Holistic

Our coaching interventions are straightforward. As a Senior Advisor, my role is to articulate very important and purposive set of ideas and beliefs before any actual engagement. The key is to educate and prepare members for the journey toward corporate governance.

Educating family members is critical. The willingness and readiness of every family member to go through the process is equally vital.

Finally, the advisor’s role is to underscore the importance of embracing pre-work rules before starting the process of change. These are the following:

a. Governance and Succession is non-negotiable.

b.Size of the business is immaterial.

c.The bigger the number of family members, the more complex it can become.

d.Intervention should be on the 3 circles (Family, Business and Ownership). Each circle has its own unique characteristics so a tailor-fitted approach must be in place.

e.Procrastination is like a thief of time. Delaying governance further can increase the volatility of the family and the business.

f.Age is a factor. As the founder and the business leader ages, succession and related issues in a multi generational family can offer more challenges.

g.Compliance of the rules and activation of the Governance Councils as enshrined in the constitution is non-negotiable.

(esoriano@wongadvisory.com)

*****

http://www.chicagotribune.com/business/ct-samsung-prison-qa-20170825-story.html

 

Family feuds and shattered families

I HAD a wonderful time exchanging notes with the participants of my family business talk last Friday at the Holiday Inn in Makati. It was a sold out event with whole families coming in droves and occupying several tables armed with loads of questions related to governance.

To those who attended, many thanks! It is my sincere desire that the key learnings highlighted in the talk can translate into actual application and pocket wins leading to harmony and growth in your respective family businesses.

Family feuds in the Philippines, and elsewhere in the world, have always been about money. Lots of money. However, although estate fights are commonly perceived to be just about money, there is almost always more to a family war than just the money. Many estate disputes are sewn by the seeds of jealousy, greed, thirst for control, bitterness, hatred, and hurt feelings resulting from real or perceived preferential treatment by a parent.

The infighting becomes more intense if the patriarch or matriarch had another family on the side or children from previous marital relationships. A significant number of inheritance disputes also involve testators and beneficiaries who come from dysfunctional families, are mentally ill or addicted.

According to lawyer P. Mark Accettura, author of the book “Blood & Money: Why Families Fight Over Inheritance and What To Do About It,” the combatants can always trace their problems back several years, if not all the way back to childhood. It is clear that inheritance conflict doesn’t come out of nowhere; it is a continuation of long-term relationship problems that resurface upon the illness or death of a loved one. And they aren’t just about money or greed; they are about much more. But what is it that so often drives people to wage war against their own flesh and blood over a loved one’s estate?

There are five basic reasons families fight in matters of inheritance. Author Mark Accettura accurately points to the following:

First, humans are genetically predisposed to competition and conflict; our psychological sense of self is intertwined with the approval that an inheritance represents, especially when the decedent is a parent; we are genetically hardwired to be on the lookout for exclusion, sometimes finding it when it doesn’t exist; families fight because the death of a loved one activates the death anxieties of those left behind; and finally, in some cases, one or more members of a family has a partial or full-blown personality disorder that causes them to distort and escalate natural family rivalries into personal and legal battles.

Accettura cites that these sources of family conflict are not mutually exclusive; in most cases, some combination of the five elements present themselves in a combustible cocktail of family rivalry and conflict. Case in point: The bitter family squabble over the estate left by lawyer and businessman Potenciano “Nanoy” Ilusorio, which included shares in Philippine Communications Satellite Corp. (Philcomsat) and the Baguio Country Club, valued at between P1 and P2 billion pesos at the time of his death in 2001.

Pitting one set of siblings against another, the Ilusorio family feud has dragged on for more than 15 years now, clogged the court system with more than 300 legal suits and counter-suits, and entertained the idly curious, as it played out in the media over the years. To quote media covering the conflict, “It’s not the first ‘prominent/wealthy family’ inheritance battle waged nor will it certainly be the last, but the ongoing estate litigation of Potenciano ‘Nanoy’ Ilusorio’s heirs has emerged as one of the longest, nastiest, most public, no-holds-barred litigious family feuds in Philippine history or in the annals of jurisprudence.”

Far from easing tensions, the death last Feb. 17, 2016 of Potenciano’s widow, Erlinda “Nena” Kalaw-Ilusorio, in New York City, seems to have raised the simmering bad blood between the rival family factions back to boiling point.

In a newspaper article that came out two months ago, the rival factions are now said to be fighting over the ashes of the dearly departed, a weird echo of the tug-of-war they played over the custody of their aged and non compos mentis father just before his death in 2001, and quite possibly, a prelude to renewed fighting on the legal front over her estate, on top of the pending tussle over other Ilusorio assets.

To be continued…