The Hindu Business Line : `Family-run businesses must document transactions for transparency'

FAMILY-RUN business houses should document all internal agreements to bring about transparency in operations. This would also help the companies in resolving intra-family feuds, said Mr V. Subbiah, past Chairman, CII National Council on Family Business, and former Chairman of EID Parry India Ltd. He was addressing a family business workshop organised by Confederation of Indian Industry (CII).

According to Mr Subbiah, family-run business houses start off as an owner-managed company. Then it is followed up as a partnership of siblings and finally, in the third generation, it becomes a consortium of cousins.

"Start documenting family history, its values and virtues. Family-run business houses should write down a constitution of their own as against verbal understandings. This would help companies to avoid future misunderstandings," he said.

He felt that there was a need to rework the constitution after regular intervals. In this context, he suggested that transparency in activities would solve all sorts of problems within the family and for that regular communication among the several family members was of utmost importance.

According to Mr Sanjiv Goenka, past President of CII and Vice-Chairman of RPG Enterprises, 65-70 per cent of the world's GDP emanates from family-run businesses. However, only a third of it survives in the second generation and 3 cent to 5 per cent survive in the third generation.

"Successful family businesses are committed to preserve and continue its legacy. Those who have been in business for generations, typically see themselves as responsible for preserving and enhancing the business; and at the same time handing over the baton successfully to the next generation," he said.