Lessons learned from 30 world business families With the 6C formula for success and (not) success in Thai family businesses (Part 5)
This article will extract lessons from family businesses in Europe that have been successful and have been operating until today. Some family businesses may have faced some problems but have been able to sustainably operate their businesses for a hundred years.
1. Family business, Bata Bata
Bata family business, which started in Czechoslovakia and later moved to England and Canada respectively.
The Bata shoe family business is 130 years old and has been passed down through four generations. The family business also started operations in Thailand under the name Bata (Thailand) Co., Ltd. almost a hundred years ago to manufacture Bata shoes for students to sell. Everyone in Thailand from my generation knows Bata shoes very well. It was also a listed company on the Stock Exchange of Thailand in 4 and was later delisted from the Stock Exchange of Thailand in 2537, but it still operates in Thailand.
This family business started out as a leather shoe manufacturer and later became a sneaker brand. In the early days, the founders were Thomas Bata and his younger brother Jan, or in Thai, Antonin, and Anna Bata. In the early days, the business grew and the founder, Thomas, believed that a good business must help develop society by improving the living standards of people in the communities where the business is located, which was considered an early ESG concept.
But it turned out that the founder, Thomas, died in a plane crash without making a will. His young son, Thomas Jan Bata or Thomas Jan Bata (Thomas J.), was not yet of legal age, only 17 years old. His uncle, Jan Antonin, came to do business instead of Thomas Jan Bata's father, but his uncle did not pass the business back to his grandson. Therefore, there was a court case that took 19 years. In the end, the son, Thomas J., won the case. Thomas J. got married and had a son named Thomas George or Thomas G. and 3 more daughters.
Thomas J. re-established the Bata shoe business in Canada. The first shareholder structure was for the family's charitable foundation called the Thomas Bata Foundation. The other 80% was in two trusts, where no family member was on the board. Later, Thomas G., the third-generation heir, was appointed chairman, but he could not manage the family business because his father, Thomas J., and mother, were not willing to give up. Finally, Thomas G. resigned and allowed the company to bring in an outsider as chairman and CEO, but the business could not be rehabilitated because no one in the family agreed.
Meanwhile, the Bata business expanded to several countries, with homes, schools and hospitals built as part of the community in India, France and the Netherlands. Eventually, the four third-generation brothers, led by Thomas G, took back control of the business and reorganized the shareholding structure to allow family members to oversee the business.
Until 2002, the 3rd generation siblings, all 4 of them, became the major shareholders, holding 80 percent of the shares instead of the Trust Fund, and there was a change in the board of directors, with 3 family members and 4 outside directors. After that, a professional CEO was hired to manage the business.
Today, the 4th generation, led by Thomas Asher Bata or Thomas A., son of Thomas G., oversees the business in Chile, a key market, and is the Chief Marketing Officer (CMO) overseeing the global marketing of Bata, while his sister oversees the blogger and fashion side of things. The 4th generation continues to manage the family business.
The case of the Bata family business was due to the business structure blocking the role of the third generation heir who entered the business without shares and the second generation leader's reluctance to let go and the founder's failure to make a will at first. However, the family was eventually able to reverse the business crisis with the cooperation of the third generation heir by reorganizing the shareholding structure.
lesson learned
The Bata family business is an example of a first-generation business that takes society into account. However, if the shareholding structure is set up so that family members do not own the business, but rather hold shares through a fund or trust that the family does not control, this could be a mistaken structure that would leave heirs with no motivation to come in and manage the company. In addition, second-generation heirs, i.e. parents, are unwilling to let their third-generation children come in and manage the business.
Therefore, determining the shareholding structure, creating a family constitution, and roles and responsibilities are very important. The problems that occurred in the beginning were caused by the founder of the business not making a will, which led to a legal dispute between the uncle and grandson, which took more than 19 years, which could have caused the business to come to a halt. If there had been a clear legal document or will, the problems would have been reduced.
Interestingly, the current pairing of the shoe business by the owner's sister, a fashion blogger, with the 4th generation heir's Bata shoes is a new marketing strategy that needs to be adjusted and changed to keep up with the changes in the world.
20 years ago, Bata Thailand partnered with Coca Cola to sell Cobrand shoes, which was an interesting idea and is a trend for many current Cobrand products, especially shoes.
When a company listed on the Stock Exchange is not worth it, it is delisted from the Stock Exchange of Thailand. Whether to enter the Stock Exchange or remain in the Stock Exchange must be considered together with each business and family.
For Thailand, Bata shoes may not be very popular today, but for my generation, Bata shoes are still legendary shoes. It can be considered a business that has taken into account ESG (Social) from the beginning. And with the ability of the business heirs who came to help manage the business, it has been able to sustain until today.
2. Beer business family Heineken Netherlands
The Heineken family business is now 160 years old and has been run by four generations of family members. The Heineken family business established a holding company, Heineken Holding Company, to ensure control over the brewing company, even though it does not hold all of the shares in the company.
Until the second generation heir, whose only heir was Freddy Heineken, was kidnapped and held for ransom, causing the heir family to close themselves off and leaving only one heir, Charlene, the third generation daughter, to take over the business because the second generation heir, Freddy, died suddenly.
This third generation heir had no experience in business management, but had to take over the company when it was 3 years old. However, Charlene, whose husband was a banker, helped expand and grow the business by doing M&A until they were offered to merge with SABMiller, a larger US company. The companies offered to merge, but the Heineken family refused because they thought that if they merged, they would not be able to control the management of the business since they only held 138 percent of the shares. If they merged, they would only hold 23 percent, and they have been able to operate the business until today.
The family now has a fifth generation heir to inherit the business by hiring a consultant to take care of the family business. Heineken is a business that has continued to grow to this day.
lesson learned
- The Heineken family has structured its shareholding through a holding company, which allows it to effectively control the management of the operating company, in line with the first C, or Corporate Structure, from the beginning.
- Despite the small number of heirs, this family business was able to operate efficiently, partly because of the capable spouses who helped with the thinking.
Therefore, it is a debateable issue whether or not a family business should allow spouses to work in the family business. Currently, family businesses in Thailand have similar problems because recently, families with few children and grandchildren have considered allowing sons-in-law, daughters-in-law, or spouses to become shareholders or manage the family business.
I think that if spouses are to be involved in the family business, their roles must be clearly defined through the family constitution and company regulations.
- The commitment to expand the business through M&A is one way that has allowed Heineken to grow to this day. The refusal to do M&A made it impossible for the family to keep the business running.
Comparison of Thai business families
Thai business families that can be compared to Heineken are the Bhirom Bhakdi family of Boon Rawd Brewery and the Charoen Sirivadhanabhakdi family of ThaiBev, who have also purchased beer businesses abroad.
Today, the group of Mr. Sathien Settiyatham, the major shareholder of Carabao Dang, has come to make Carabao Dang beer. It is interesting to follow and see whether the beer company of Mr. Sathien Group will expand its business by learning from the case of the Heineken family and how it will expand its business to the next generation.
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