The Ceres house is divided (Part 3)

August 16, 2019


President Lincoln once said, "A house divided against itself cannot stand." Even that expression first appeared in the Bible, specifically Matthew 12:25, "Every kingdom divided against itself will be ruined, and every city and household divided against itself will not stand."
In my years hammering deals by way of mediation and pushing governance amongst ASEAN family businesses mired in conflict, I have encountered dozens of firms suffering from short life expectancies due in part because of senseless infighting. High net worth families are clueless on what governance really means and their lack of pre-agreed rules of engagement (protocols, governance structures) and a well-planned succession plan have become the biggest thorn in family relationships.
When the founder dies or becomes incapacitated, family businesses fall apart as power struggles and conflicts erupt over inheritance and disagreements over the way the business is run and manage. This is a vicious cycle that every family business must recognized and address immediately. My advise is for founders and leaders never to take governance for granted while they are still in control.
It's not about Money
Family feuds in Asia, and elsewhere in the world, have always been about money, lots of money. 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 of these disputes are sewn by seeds of jealousy, greed, thirst for control, bitterness, hatred, and hurt feelings resulting from real or perceived preferential treatment by a parent. The case of the Yanson family, operators of the biggest group of bus companies in the Philippines, should serve as a warning to family enterprises. Founder apathy has its price.
In a study initiated by our research group at W+B Family Business, there is a 75% to 80% certainty of throwing away the business due to founder neglect or indifference in pursuing governance. Losing a business can mean conflict among siblings/branches resulting to a decimated ownership and/or a sellout where ownership falls into the hands of a few members. Evidently, any family breakdown primarily points to a long standing sibling rivalry ending with a power grab. All these culmination events can strike a death knell to the enterprise immediately right after the demise of the leader. The Italians have a fancy term for it, "dale stalle alle stele alle stalle" (from stalls to stars to stalls).
All About Ownership and Control
The ongoing dispute is all about ownership and control of the bus empire. When the conflict erupted last month with the ouster of Leo Rey as company president, Roy was quoted in media as saying that "these issues would not have happened had his mother respected what his father, Ricardo Yanson Sr. did when he apportioned his estate among the six while he was still alive."
Roy went on to add, "As majority shareholders, the four siblings had control over the board and whatever the board decides on, the rest of the management, including Leo Rey who remains as a director, and its employees are mandated by law to follow."
From the pronouncements made by Roy, it appears that ownership had been passed on to the siblings. I can only speculate that the decision to pass ownership to the offspring was primarily to reduce the relatively high estate taxes at that time. Many have considered their estate planning completed when they have selected some transfer of wealth approach with their accountant or lawyer. Plainly, it does not work that way. And that single action by the founder, I believe, has caused untold pain and suffering to the surviving family members.
To be continued...



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