Eu Yan Sang family wars

Eu Yan Sang is not your usual musty, dim, pungent Chinese drugstore. Bright colors and sparkling clean interiors contribute to the modern ambiance.

On Singapore for a lecture, I was suffering from body aches, and the saleslady offered a selection of capsules and powders. I asked about their potency. Her explanations were not the standardized jargon in Western medical texts, but they still sounded plausible, steeped in traditional Chinese medicine (TCM).

When I inquired about specific ingredients, the lady readily rattled off a primer on the benefits of ginseng, bird’s nest, mushrooms and other ingredients. The packaging looked professional, and the certifications reassured me of quality. I succumbed and bought Ling Zhi capsules.

Caring for mankind

In 1873, Eu Kong left his hometown in Foshan, in the Guangdong region of Southern China, to seek a better life in Malaya. His fortune began with tin mines, and when he observed the laborers turning to opium to ease their pains, he offered them Chinese herbs. Eu Kong set up his first TCM shop six years later in Gopeng, Perak in what is now Malaysia. He named the shop “Yan Sang” (which in Cantonese means “caring for mankind”).

The business was passed on to Eu Kong’s son, Eu Tong Sen, and at the dawn of a new century, he expanded not just the family tin mines but also went into rubber plantations, finance, and real estate. But he never forgot his father’s goal: with every tin mine, there would be a medical shop for the workers. Soon, there existed a chain of stores in the region, and he decided to brand them with the family name, hence “Eu Yan Sang.”

Eu Tong Sen became a tycoon, with more than 1,000 pieces of property in Malaysia, Singapore, Hong Kong. But as a man of voracious appetites, business and otherwise, he fathered with his multiple wives, 13 sons and 11 daughters, who unsurprisingly did not get along. Eu Tong Sen tried his best. Upon his death in 1941, the shares of the business were equally divided among the 13 sons. Usually, in traditional Chinese family businesses, the daughters do not receive any shares.

Like many parents, Eu Tong Sen must have felt that the equal division of shares would minimize squabbles over the family fortune. He must have believed that this conscious act would show his sons that he viewed them equally, not favoring one over the other. But equality does not denote fairness (see “Equal is not always fair,” March 21, 2014) and is sometimes not the wisest plan.

Things might have turned out differently had Eu Tong Sen designated a capable successor and quelled dissent among his other children. But visionary as he was, he did not foresee that equality of shares also meant that there would be no majority vote in major decisions, with factions scheming to take advantage of each other.

Third-generation curse

A popular saying predicts that by the third generation, the business started by the first and expanded by the second would have been squandered. For decades, it appeared as if Eu Yan Sang was headed along the same path, because by the 1980s, the family business empire had disintegrated.

Eu Yan Sang Holdings was listed on the Singapore Stock Exchange in 1973, but descendants of the warring family branches did not work together, and even with non-family professionals trying to keep the company afloat, the family interests in mining, real estate, finance all but disappeared.

There was no way the third generation could fix things. The drug store would have gone the way of the other businesses had it not been for a white knight from the fourth-generation, Richard Eu, the great-grandson of the founder. Richard’s father had discouraged him from entering the family business, for aside from family conflicts, medicine the world over was modeled after the experimental tried-and-true scientific drugs of the West.

“Eu Yan Sang [medicine] was the only business that was left,” Richard said in a lecture for Asia Society in 2009. “By the mid- to late-’80s, it was considered pretty much a sunset industry. There was no platform for my generation to get involved in the business.”

But he took on the challenge.

Born in 1947 in Hong Kong, Richard two years after moved to Singapore, which has since been his home. He studied in the Anglo-Chinese School, then went to Kent College, Canterbury, and garnered his law degree at the University of London. Then he worked in finance as a merchant banker, a stockbroker, a venture capitalist, among others.

In 1989, against all odds and against his father’s advice, Richard Eu became the general manager of Eu Yan Sang.

To be continued next week

Queena N. Lee-Chua is on the Board of Directors of Ateneo de Manila University’s Family Business Development Center. Get her book “Successful Family Businesses” at the University Press (e-mail [email protected].) E-mail the author at [email protected].