Leadership of Family and State Firm Boards

Professor Per Sun, School of Management, Fudan University

Mr. Andre Chieng, President of AEC
Mr. Bernhard Simon, Managing Director and family spokesman on the executive management board, Dachser GmbH

The first speaker, Mr. Simon, is one of the 3rd generation in the family that behind Dachster GmbH. As a private business, Dachster emphasized its absolute independence in operation, which means its 16 shareholders are all family members. At the same time, Mr. Simon is proud of the stableness of the company’s operation and the trust with its customers that built upon it. This is quite different from my previous idea that family businesses tend to be more unstable because of the problems in succession issue. It then really interests me that how such family business runs and how it is different from the companies in common practices.

The differences turn out to be quite impressive. What Mr. Smith emphasized the most is that how company’s corporate governance separates the family issues from the company issues. In Dachster’s governance, family issues are resolved within “family office”, outside of company’s management, to minimize its influence on the running of business. The main task of family members, or the shareholders, is to appoint their representatives in the supervisory board and to review executives’ performance with external auditors. Furthermore, to ensure the independency of the management, only 2 of the 5 directors on board represent family members and currently the chairman of the board is from external. I believe all these arrangements are to ensure that the company is run by the most competent person instead of the owners. People may be well aware of this idea, but it is still extremely difficult for a family to limit its power in its own business and passes on this practice through generations.

Mr. Chieng then talked about the family business in China. Family businesses in China usually have shorter life in history than western ones and Mr. Chieng tried to explain this phenomenon based on China’s business culture. When a Chinese family looking for executives for their business, they highly value the security of their ownership and thus dislike ambitious managers. In many cases, this leads to incompetent management. Another possible reason could be family’s high involvement in firm’s management. Family business usually has strong personal character of the founder and it is thus quite difficult to pass on the power to founder’s successors or outsiders. These two points concur with my personal understanding of Chinese business, which I think currently is still more ruled by people instead of by regulations.

Mr. Chieng also talked about the state firms in China and claimed that the operation of those state firms still lack of efficiency and transparency. This idea sounds quite familiar and is not so interesting without the comparison with the western practices.

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