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Stephen Vines

One thing is certain about Li Ka-shing’s retirement from the Cheung Kong groups’ two leading companies, namely, despite announcing that he is stepping down Li will continue to be the most important person in the room when any major decision is made.
Indeed this is the major reason why the share prices of the two companies only dropped modestly after last week’s announcement. Investors simply assumed that there would be little change.
Yet, officially, Li will have no title other than that of “senior adviser” but titles mean very little in Asian tycoon-run businesses because whether they are public or private they are operated in a highly centralised fashion either by the founder or his sons or, in extreme cases, by the son-in-law. Female succession is a distinct rarity.
In titular terms Li Ka-shing’s eldest son Victor takes over from him. There was never a scintilla of doubt that this would be the case as his selection was made from a shortlist with just one name on it. Nevertheless this leaves him theoretically in charge of one of Hong Kong’s biggest companies, with literally thousands of shareholders and partners
Even were it the case that Victor Li was the only person truly qualified for this job, he would have a hard job persuading anyone that this was so because he has never been tested against any sort of competition. That includes competition from his younger brother Richard who was once, incorrectly, rumoured to be in the frame before being dispatched with a great deal of cash to start his own businesses.


Moreover Victor Li will be surrounded by the small coterie of senior executives who have been with Li senior for decades. One of the old man’s distinct abilities has been to cultivate enormous loyalty among those around him, this ensured that the most senior echelon of management rarely changed.
This is both a good and a bad thing because while continuity and stability are valuable assets for a company, new blood and new ideas are required to prevent corporate atrophy.
However advancing atrophy is pretty much the fate of these great Asian tycoon- led conglomerates that were forged by relentlessly hard working and streetwise entrepreneurs who built these companies around their personalities. However they had no plan for continuity beyond clinging on to staff that have served them loyally and are retained to keep a wary watch over their sons who typically undergo a very long apprentice in the family business but rarely get their hands dirty and discover on accession that they cannot possibly escape from the patriarch’s shadow.

The final chapter has hardly been written on the fate of these great family companies, although Joe Studwell produced an impressive interim report with his book Asian Godfathers: Money and Power in Hong Kong and Southeast Asia. Studwell questions many of the assumptions about how this amazingly small group of people achieved such prominence and he is ruthless in demolishing the eugenic myth, which maintains that only their offspring can continue this work. However he was unable to produce conclusive evidence of how things panned out once the sons took over.
This is because most of these companies have barely emerged into the second generation although evidence from other parts of the world, notably the United States, suggests that it is as early as the second generation where the problems emerge. It is therefore not surprising that American companies, which seemed destined to go down the route of family dynasties, have largely abandoned this way of doing things. There are some significant exceptions, such as the Ford Motor Company, which now has a Ford family member back in the driving seat, but these are exceptions that do not prove the rule.
There is a middle way here, one adopted by the Swire family of the conglomerate bearing their name. It involves a careful mixing of family control with a large dose of outsiders, mainly those who have come up through the ranks. A sixth generation Swire was recently named as chairman of Swire Pacific – that’s not bad going for long levity.

This middle way may yet prove to be attractive to the great Asian tycoon conglomerates but there is little evidence of this attraction right now. Instead the problems are coming to a head for these companies because a great many of them were established some half a century ago and are now entering their second generation.
Investors flocked to invest in their shares not because they wanted to invest in companies controlled by smart business school alumni but because they were looking for a piece of the action created by these charismatic tycoons.
The question is: do investors have sufficient reason to be equally keen on their sons?
Stephen Vines runs companies in the food sector and moonlights as a journalist and a broadcaster


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The View

Investors in Li Ka-shing companies now face the big unknown of second generation leadership

Li Ka-shing has announced he plans to step down as chairman and take up an advisory role at the flagship companies he controls, CK Hutchison Holdings and CK Asset Holdings. Photo: Kyodo

Li Ka-shing (left), Chairman of Cheung Kong Holdings and Hutchison Whampoa, delivering a speech at Hutchison's annual general meeting. The two companies will team up with Hutchison Whampoa to bid for development rights to the $12 billion property project above the Tai Kok Tsui station along the Mass Transit Railway Corporation's new airport railway.

(left to right): Victor Li Tzar-kuoi; and Li Ka-shing attend CK Hutchison Holdings Limited and CK Asset Holdings 2017 annual results announcement in Central. Tycoon Li Ka-shing has announced his retirement during the annual results announcement. 16MAR18 SCMP / Sam Tsang

As it happened: Li Ka-shing’s 2018 press conference in Hong Kong

Li Ka-shing at his 2017 press conference during the results announcement of CK Hutchison Holdings Ltd. and Cheung Kong Property Holdings Ltd. in Wan Chai on January 5, 2017. Photo: SCMP/Sam Tsang

Billionaire Li Ka-shing retires, hands corporate empire's reins to elder son Victor

Li Ka-shing smiles and waves at the press as he leaves his home in Deep Water Bay. Photo: Sam Tsang

Hong Kong's richest man Li Ka-shing (R), 89, and his son Victor (L) during a press conference in Hong Kong on March 16, 2018. Hong Kong's richest man Li Ka-shing announced on March 16 he was stepping down as chairman of his flagship company CK Hutchison, marking the end of an era for one of the world's most storied tycoons. Li, who is turning 90 in July this year, has finally concluded mounting speculation about his retirement as he is expected to hand over the reins to his eldest son Victor. 16MAR18 SCMP / Sam Tsang

JPG for ONLINE

Li Ka-shing photographed at Deep Water Bay, when he spoke with reporters using his security guard’s mobile phone. 16MAR18 SCMP / Sam Tsang

From plastic flowers to property and ports: how Li Ka-shing became a symbol of Hong Kong

Chinese President Xi Jinping meets Li Ka-shing and other businessmen and politicians in Hong Kong in 2017. Photo: Handout

Mr Li Ka-shing, Chairman of Hongkong International Terminals' major shareholder, Hutchison Whampoa, is mobbed by reporters while attending the opening of Terminal Seven in Kwai Chung.

(left to right): Victor Li; and Li Ka-shing attends CK Hutchison Holdings Limited and CK Asset Holdings 2017 annual results announcement in Central. 16MAR18 SCMP / Sam Tsang

(100906) -- SHENZHEN, Sept. 6, 2010 (Xinhua) -- Chinese President Hu Jintao (R) meets with Li Ka-shing, chairman of Cheung Kong (Holdings) Limited, on the sidelines of the celebration rally for the 30th anniversary of the founding of the Shenzhen Special Economic Zone, in Shenzhen, south China's Guangdong Province, Sept. 6, 2010. (Xinhua/Li Xueren) (wy)

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Conglomerates built by charismatic tycoons often don’t fare so well under second generation leadership who’ve been groomed for the role but lack street smarts


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Investors in Li Ka-shing companies now face the big unknown of second generation leadership

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Conglomerates built by charismatic tycoons often don’t fare so well under second generation leadership who’ve been groomed for the role but lack street smarts

Conglomerates built by charismatic tycoons often don’t fare so well under second generation leadership who’ve been groomed for the role but lack street smarts