Is keeping it in the family a good idea for India Inc?

On Tuesday, Mukesh Ambani stepped down from the board, paving way for his eldest son, 30-year-old Akash Ambani to become the chairman of Reliance Jio Infocomm -- the country’s top wireless carrier. Akash’s twin sister Isha has already been at the helm of the group’s consumer-facing unit, Reliance Retail Ventures Ltd. for the last several years. While the third son, Anant Ambani, is focussing on Reliance’s new energy business. Shares of Reliance Industries soared by 2.5% soon after the succession announcement on Tuesday -- a kind of green signal from the markets.

Similarly, last month, Jamshyd Godrej, the chairman of Godrej Group’s flagship company, Godrej & Boyce, appointed his niece Nyrika Holkar as his successor. Holkar, who is the daughter of Jamshyd’s sister Smita and Vijay Crishna, is an Executive Director who has been managing strategy, M&A, brand and legal affairs at the company.

In 2017, Jamshyd’s cousin Adi Godrej’s son Pirojsha took over as Chairman of Godrej Properties replacing his father while his younger daughter Nisaba was appointed the chairperson of Godrej Consumer Products.

In February this year, Kolkata-based FMCG company Emami’s founder RS Agarwal and RS Goenka stepped down from their executive positions. Agarwal’s son Harsha was named Vice Chairman cum Managing Director while Goenka’s son Mohan was designated Vice Chairman cum Whole Time Director. 

Meanwhile, in the IT sector, two companies where leadership succession took a family-first approach are Wipro and HCL Technologies. Azim Premji’s son Rishad was appointed as Executive Chairman of Wipro in 2019. Azim Premji continues on the board as a Non-Executive Director and Founder Chairman. 

The first woman chairperson to lead a listed Indian IT company, Roshni Nadar Malhotra, took over the reins of HCL Technologies, from her father Shiv Nadar in 2020.

Down south, Venu Srinivasan’s son Sudarshan Venu was elevated as the MD of TVS Motor Company in May while Srinivasan’s daughter Lakshmi Venu was made MD of another TVS group company, Sundaram-Clayton.

While in all the above cases, the next generation leaders went through a systematic grooming process, one can also notice that family membership takes precedence when it comes to selecting a management successor. But is it always the best way forward for family owned businesses?

An experiment by Dabur’s Burman family more than two decades ago paid off handsomely. Dabur India professionalised the company in 1998 when its promoter family decided to hand over executive positions to outside professionals. Today, the family has just four representatives on the company’s 15-member board, in non-executive roles.

According to Kavil Ramachandran, a professor at the Indian School of Business, historically, both the chairman and managing director or CEO positions have been reserved for members of the business families.

Meanwhile, Sebi’s efforts to split the two roles for governance reasons have met with strong resistance. Even if the successors from these families are capable, are they the absolute best candidate for realising shareholder value?