Tag Archives: Lee Kum Kee

Royal Selangor’s Amazing 132 Year Success Story

I am back in the country after a grueling 7 days of uninterrupted Family and Corporate Governance campaign covering major business groups in two of East Africa’s biggest economies, Kenya and Ethiopia.

This campaign is an initiative of the World Bank’s private sector arm, International Finance Corporation or IFC in making sure the investment they placed in these family owned enterprises adhere to Corporate governance protocols. 

Family-owned and controlled businesses loom large not only in Asia but also in Africa. Some are grappling with awkward succession battles, while others have shown innovation as younger members rise through the ranks. The issue is why do some family businesses go on for centuries. What is their secret?

To address this phenomenon, I have embarked on a new set of articles that will focus mainly on family business longevity series. The first two companies I shared  last month was that of the almost 500 year old/18th Generation Toraya Confectionery Group from Japan and the Hongkong based Lee Kum Kee Condiments Group. Toraya has been recognized as one of the world’s top 25 oldest family owned business.

Next in our longevity success stories is Royal Selangor, a 132-year old Malaysian pewter manufacturer and retailer and considered the largest of its type in the world. 

Founded in 1885 by Yong Chin Seong, Yong Wai Seong and Yong Koon, it is a successful family business that has weathered global recessions, survived two world wars as well as the boom and bust of the tin industry, including a bitter family feud.

The company started out making Chinese ancestral worship items in the 1880s and later expanded to cigarette boxes and vases that appealed to European colonials. In the 1950s it began making souvenirs and corporate gifts after the Malaysian independence sparked a tourism boom.

Royal Selangor opened its first store abroad in the 1970s and now has 50 stores around the world in countries including Singapore, Japan and Australia.  The brand is also found in stores such as Harrods and John Lewis in the UK.

For all these fame and fortune,  “Thanks to proper succession planning and a family charter in place,” notes Yoon Li, who runs the business with cousin Chen Tien Yue, making them the fourth generation to do so.  Apart from the two, the company is run by a team of professional managers. “We rely on the heads of various departments to come up with strategies and execution plans,” says Yoon Li.

For the fourth generation family members, formulating a Family Charter was the best thing that ever happened to Royal Selangor. And to prevent a repeat of a damaging family feud, a six-member family council along with a family charter, were established in 2002 with guidelines to handle potential disputes. 

Yoon Li says his family’s charter has gone through at least 30 iterations since it was implemented. It was put in place to ensure that the family business “was not considered a place of occupation for family members or an employer of last resort.”

This policy simply means that anyone interested in joining the family business is required to have worked outside the scope of the company for at least two years. The charter basically sets the ground rules and is the constitution for how the family engages with the business. For instance, things like who gets to have a physical office and who is allowed to use the resources of the business are specified in the charter. 

“It is this foundation that has kept the family run entity in business all these years,” he adds.

(esoriano@wongadvisory.com)

Rule No. 3 No Extra Marital Affairs

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.

(esoriano@wongadvisory.com)