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The strength of a family-run business grows if the family stays together; signs of a split in the family often scare investors, said Ajay S Shriram, Chairman and Senior Managing Director of DCM Shriram, and Chairman of Confederation of Indian Industry’s (CII) Family Business Network. He said the best way to insulate the corporate from differences within the family is through a well-defined family constitution. He said “it can, to a degree, remove a sudden conflict that can ultimately damage the business enterprise.”
Many families have now started adopting family constitutions to minimise sudden conflicts and a loss to business, he told BusinessLine .
Splits in family-run businesses are not uncommon in corporate India. Commenting on the advised modus operandi when dividing such firms, Shriram said: “It is always better to go for an amicable separation, rather than to fight and separate.”
In case of a split in a publicly traded company, stakeholders need to evaluate the capabilities of every member individually while taking a side, he explained.
Family-run businesses have also been accused of preferential treatment to kin while assigning board-room roles. “The qualification of a board member is all that should matter,” he said. In a bid to guide the future of family-run businesses, CII is organising its 13th Next Generation International Conference this month in Goa.
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