Beyond financial capital

Since family businesses are ultimately financial enterprises, most major issues revolve around corporate wealth.

Which successor is the most business-savvy, both street smart and book smart? How should profits be utilized—as dividends to shareholders who increasingly expect greater returns, or as assets to be plowed back into the business for expansion? Should the younger generation be required to take MBAs even if their souls are say, in the humanities?

These important questions have no right or wrong answers. They need to be openly discussed within families. But in their narrow focus on the business aspect, I have witnessed several families get into conflict or even wrung apart, when the notion of resources is limited to just plain money.

Other kinds of capital

Economics teaches us that capital is not just financial—it includes human, cognitive, social, even psychological resources.

Lee Woon Shiu, managing director of Bank of Singapore, tells Wealth Magazine about the dangers of such “ïntrospective and inward perceptions of wealth.”

He says: “Successful patriarchs/matriarchs are often focused solely on their main core business of driving the family’s corporate wealth. Accordingly, they often unknowingly ignore the ‘soft’ factors or concerns in wealth succession and family governance.”

“This often results in a loss of talented family members who may otherwise perhaps be able to contribute in the business’ philanthropic and strategic long-term community development efforts.”

The need for qualified successors is essential, but if these heirs are not happy, then what is the purpose of taking the helm?

I admire people who can make their contentment second only to that of the larger good. The Confucian hierarchical culture has produced a number of them, some of whom I have featured in past columns.

But all of us only have one life to live, with hopefully, no regrets when our time comes.

Successful founders, for all their incredible work ethic, are generally content that they have established a legacy that can be passed on to the next generation. But very few studies have been done on their successors.

Are the latter satisfied with their lives? Would they have chosen a different path if they had the chance to do so?

“Families which recognize that their wealth lies in their human and intellectual capital, and promote the culture of allowing family members to pursue their individual happiness, often reap more rewarding and sustainable longer-term contributions ultimately to the family legacy,” Lee says.

Maverick Shih

The value of human capital can be seen in Taiwan IT family business turned global corporation, Acer. Founder Stan Shih had discouraged his three children not to join the family business, relying instead on professional executives.

But when Acer expanded into software and cloud computing, Stan invited his son Maverick, who for years had been in the US honing engineering skills and garnering top-notch work experience. Maverick even started his own company, but he is now back in Taiwan, in charge of Acer’s cloud services.