It’s not the first amicable division of a corporate family empire in India. A few others have done it in the past — Bajaj Auto, the highly diversified TVS group, the RP Goenka group, and the Munjal family, etc. Even then, the Godrej group’s success in splitting the 125-year-old conglomerate without a whiff of conflict is unique. For, it’s never easy to ensure a harmonious “realignment” of a group with tangled cross-holdings in dozens of industries.
In the case of the Godrej family, where different scions run different businesses within the group, parcelling them out was a difficult task. The credit for this equitable split should go to the transparency and meticulous planning with the help of trusted external advisors. At the end of it all, the agreement, which took over two years to come to fruition, clearly sets an example for many business families which find passing the baton to the second or third generation extremely difficult.
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By exiting each other’s companies, and divesting their stakes, the Godrej family has delineated clear boundaries on succession planning, ensuring that successors understand their respective roles and responsibilities. Adi and Nadir Godrej will divest their stakes in Godrej & Boyce, while Jamshyd and his family will transfer interests in Godrej Consumer Products and Godrej Properties.
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Earlier this year, Adi and Nadir resigned from the Godrej & Boyce Board, while Jamshyd left his seat on the boards of GCPL and Godrej Properties. Even details such as a no-competition agreement and each group being free to use the Godrej brand name have been thrashed out.
The most contentious was the agreement over the family’s huge landholding of around 3,400 acres, including a single parcel of 3,000 acres in Mumbai. Even that was sorted out with the family members agreeing to hold it under Godrej & Boyce. A separate agreement on ownership rights will mitigate any potential source of contention pre-emptively.
In a statement that reflects the maturity with which the issues were settled, the group acknowledged that the division was necessary in view of the “differing visions” of the family members. Such a difference is only natural when the third generation comes into the business.
While the first generation is typically an entrepreneur who has an idea and starts a business, the second generation, in contrast, grows under the shadow of the patriarch/matriarch, learning tricks of the trade, understanding wisdom, and values. As the family tree expands faster with the addition of the third generation, aspirations, ideas and thoughts on managing business invariably starts to differ.
Owners of family businesses in India need to understand that they can’t keep these issues under the carpet for too long. Corporate history has shown us how founders are great at starting and building, but usually terrible at letting go and allowing the organisation to grow into a second phase of life without them. What emerges clearly is that most of their companies sank because the families that owned them couldn’t sort themselves out.
In this kind of scenario, when family feuds break out, and division of assets is forced between family members, wealth built over decades is wiped out within weeks at the altar of greed. This is important as India needs its family-owned businesses to do well as even now, over 70% of the top 500 firms in BSE are family-controlled. The Godrej group has given them a good template.
It’s not the first amicable division of a corporate family empire in India. A few others have done it in the past — Bajaj Auto, the highly diversified TVS group, the RP Goenka group, and the Munjal family, etc. Even then, the Godrej group’s success in splitting the 125-year-old conglomerate without a whiff of conflict is unique. For, it’s never easy to ensure a harmonious “realignment” of a group with tangled cross-holdings in dozens of industries.
In the case of the Godrej family, where different scions run different businesses within the group, parcelling them out was a difficult task. The credit for this equitable split should go to the transparency and meticulous planning with the help of trusted external advisors. At the end of it all, the agreement, which took over two years to come to fruition, clearly sets an example for many business families which find passing the baton to the second or third generation extremely difficult.
By exiting each other’s companies, and divesting their stakes, the Godrej family has delineated clear boundaries on succession planning, ensuring that successors understand their respective roles and responsibilities. Adi and Nadir Godrej will divest their stakes in Godrej & Boyce, while Jamshyd and his family will transfer interests in Godrej Consumer Products and Godrej Properties.
Earlier this year, Adi and Nadir resigned from the Godrej & Boyce Board, while Jamshyd left his seat on the boards of GCPL and Godrej Properties. Even details such as a no-competition agreement and each group being free to use the Godrej brand name have been thrashed out.
The most contentious was the agreement over the family’s huge landholding of around 3,400 acres, including a single parcel of 3,000 acres in Mumbai. Even that was sorted out with the family members agreeing to hold it under Godrej & Boyce. A separate agreement on ownership rights will mitigate any potential source of contention pre-emptively.
In a statement that reflects the maturity with which the issues were settled, the group acknowledged that the division was necessary in view of the “differing visions” of the family members. Such a difference is only natural when the third generation comes into the business.
While the first generation is typically an entrepreneur who has an idea and starts a business, the second generation, in contrast, grows under the shadow of the patriarch/matriarch, learning tricks of the trade, understanding wisdom, and values. As the family tree expands faster with the addition of the third generation, aspirations, ideas and thoughts on managing business invariably starts to differ.
Owners of family businesses in India need to understand that they can’t keep these issues under the carpet for too long. Corporate history has shown us how founders are great at starting and building, but usually terrible at letting go and allowing the organisation to grow into a second phase of life without them. What emerges clearly is that most of their companies sank because the families that owned them couldn’t sort themselves out.
In this kind of scenario, when family feuds break out, and division of assets is forced between family members, wealth built over decades is wiped out within weeks at the altar of greed. This is important as India needs its family-owned businesses to do well as even now, over 70% of the top 500 firms in BSE are family-controlled. The Godrej group has given them a good template.
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Godrej & Boyce and Godrej Properties have announced that they will continue their collaboration for the development of land in Vikhroli. Godrej Construction has successfully designed and built four phases of Godrej Platinum, while Godrej Properties marketed the project. The companies are now working on a new project.
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