One of the shining examples of successful family businesses at the highest level is Power Corp. of Canada. In 1968, after nearly two decades of successful acquisitions, Paul Desmarais acquired Power Corp. to be the anchor of his growing conglomerate of companies. For the next 28 years, he grew Power Corp. into one of the largest and most successful holding companies in the world. It owns everything from U.S. investment firms, European utility companies and Chinese asset management companies. Today, its holdings include roughly $48 billion of public company securities.
Mr. Desmarais started his succession planning early.
In the 1980’s, he gave his young sons various roles in the company and in 1996, they took over full management as co-CEO’s. The Desmarais family is again in the news because they are now transition to the third generation. A pair of cousins – one son of each of the co-CEO’s – is taking over management of the Company. Anupreeta Das and Kim Mackrael of the Wall Street Journal recently sat down with the outgoing co-CEO’s to discuss the secrets of their hugely successful family business.
With all the challenges to succession and sharing control among family members, the current co-CEO’s have been asked how they were able to manage and grow the empire their father built without the infighting that is so common among siblings in a second generation, and how they expect their respective sons to do the same. The answer is a little surprising but makes excellent sense. And it was Paul Desmarais’ idea beginning back in the 1980’s when the first succession planning started.
Put simply, the brothers have equal authority but completely separate spheres of control and expertise. One son, Paul Jr., focused primarily on growth in Europe; the other, Andre became the expert in the exploding Chinese market. But it was not just a division of geographic territories. They focus on their disparate strengths, rather than being in a position to compete. Paul Jr. is generally the “finance guy” and Andre is the gregarious one. It goes beyond their corporate roles and into their family and social lives. It was observed that the two brothers rarely run in the same circles or attend the same parties. They both explain that this is all intentional – that they and their father firmly believed that they would co-exist best if they each had their networks, social lives and family circle. They are grooming the next generation of leaders to follow the same advice.
It is an interesting lesson for any business owner planning to pass ownership and/or control to multiple members of the next generation. Rather than focusing on how to divide up authority on all decisions and foster competition, let the individuals of the next generation find which aspects of the business are their strengths and which are not. It may be that each member of the next generation has a particular interest or ability that suits him or her. Further, encourage them to establish their own individual family lives, their own social spheres and their own identities, separate from the family enterprise. With luck, this will enhance the different skills and characteristics each can bring to bear without framing everything as a competition for one, coveted, leadership spot.
Read the full Wall Street Journal article here.
Drew Steen is a business transactions attorney at Davis Wright Tremaine, LLP. He represents both buy-side and sell-side clients in mergers and acquisitions, venture capital investments, joint ventures, equity co-investments and restructurings. He also serves as regular corporate counsel for several closely-held and family-owned companies. Drew can be reached via email at andrewsteen@dwt.com or directly at 206.757.8081.