What saved Lee Kum Kee

The Lee Kum Kee (LKK) Group, known for its iconic sauces, is often wracked by family feuds.

In 1888, Lee Kum Sheung started LKK in Guangdong, China, moved to Macau in 1902 and finally headquartered in Hong Kong in 1932. Overseas Chinese who went to Singapore, Malaysia, the Philippines and others treasured LKK sauces, and brought these with them to new lands.

However, growth was marred by vicious squabbles:  between siblings, among cousins, between fathers and sons. After weathering several storms that almost destroyed the enterprise, third-generation Lee Man Tat heads the business today.

In 1972, Man Tat proposed the addition of products, such as soy sauce and hoisin sauce, to expand the business. His father supported him, but not his uncles, so Man Tat bought them out.

In 1986, Man Tat wanted to increase factory production, but his younger brother refused. Again, the former bought out the latter, leading to his family branch being in sole control of LKK.

His five children joined the firm, but in 1999, Man Tat faced possibly the most heartbreaking conflict of all with his youngest son, Sammy Lee.

Years earlier, Sammy had convinced his father to set up an herbal health care product division. But in 1999, this had cost the firm so much money that Man Tat wanted it sold. Sammy disagreed, offering to sell his shares in the parent company just to keep his baby afloat, but for a year, father and son could not resolve the impasse.

At the turn of the millennium, Sammy wrote a note to himself: “We is bigger than I.”  He returned to the fold, and asked for a five-year grace period to make the health care unit become profitable. He succeeded.

According to Forbes Asia, the LKK Group is the largest oyster sauce maker in the world and on track to becoming the largest soy sauce maker in two years, with more than $3 billion in annual profits. But the health care unit itself generates double the revenue and profits.

“It’s throwing off so much cash that it’s investing billions in real estate in Hong Kong, China and London,” says Forbes.

Family council

What turned toxic family relationships around? In 2002, Sammy and his siblings proposed the creation of a family council and a board. The family council, composed of Man Tat and his wife, their four sons, their one daughter, would handle family affairs such as succession. The board, composed of Man Tat and his sons, would handle business affairs such as growth.

Evidence of the willingness of the family to go against tradition is the fact the four sons agreed that their sister would have an equal share of the inheritance.

Today, several grandchildren have joined the family council that “oversees everything from family investments to a charitable foundation, a learning and development center and a family affairs office.  It’s a venue for dispute resolution and succession planning.  Capping it all is a constitution canonizing all the house rules.”

Armed with a constitution, the family council follows practices that many other successful business families live by, such as “prohibiting spouses from working for the group, requiring a two-thirds majority to change the constitution, and setting mandatory retirement ages of 65 for the business unit and 70 at the family council … allowing non-family members to be the chairman or chief executive of any of its business units.”

For the Lee family, survival of the business is paramount.  “We are studying an idea of banning family members from involvement in the business,” Sammy tells Forbes.

Many business families will never agree, but this proviso makes sense. As the generations increase, each individual’s share decreases.