“I’m not saying I’d make a better CEO. That’s unsaid.” – Connor Roy
At the time of publication, we are just a few days away from the release of the final season of HBO’s highly acclaimed family business drama, Succession. For many viewers in India, the show’s portrayal of the perils and tribulations of running a family business hits uncomfortably close to home. Many would say this show is an example of art imitating life. Others may see it as a docudrama about their family business. It is a poignant example of what can happen without a clear succession plan, and it packages together many common issues faced by many Indian family businesses – such as an aging founder who is unwilling to cede control or induct his middle aged children, a failure to modernize (as seen in many older media houses that are going through similar existential dilemmas), siblings squabbling for the CEO role, and a founder family & business enthralled in multiple full-blown crises.
Beyond the superficial veneer of drama and power, are there deeper learnings for Indian family businesses, on what to do (or not)? Let’s explore such lessons in the Indian context.
1. Communication is key: In Succession, members of the Roy family of Waystar Royco (Waystar) are often secretive and hide their true intentions from one another, leading to misunderstandings and conflict. The prime culprit in this is Logan Roy himself, who refuses to speak his mind on whom he deems worthy as his successor. Even a series of major health scares suffered by Logan did not push him to decide on a successor e.g. when Logan falls ill in the first season with his stroke, or his UTI infection at the time of a crucial shareholder vote. The entire show is built on his children bickering and in-fighting, trying to please him and get appointed as CEO. As Shiv Roy says, “I just do what my dad tells me”! Some may say Logan is looking for his successor to be a version of himself – but is that what the family wants? Is that what the business needs?
We discuss below how the lack of an articulated succession plan can lead to incessant chaos. By not having an open channel of communication with their father, and mutual distrust of each other, the Roy siblings engage more in inter-se subterfuge, instead of focusing on the health and growth of the business. How is this healthy or conducive for any family business, let alone the fictional behemoth Waystar?
If Logan had sat down with his children and told them what’s on his mind as to who is next in line for Waystar, the siblings could have had time to make peace with that choice and decide on their individual destiny and growth paths. But that would not make for entertaining television.
In the Indian family business context, things are not that different. Elements of blind deference to age over wisdom, and one-way top-down communication or diktats from elder to the younger generations are common. Many next gen of India Inc., often in their 30s and 40s, are clueless about their fathers’ plans for business succession – such taboo topics are not broached in casual conversation. Only when the patriarch passes away and his Will is opened, does the next generation know who owns the business or who is ‘appointed’ as the CEO. There is almost never a conversation that precedes the writing of the said Will. Indian courts are crowded with family disputes arising out of a misalignment on succession.
However, this thinking is changing. Both senior and younger generations recognize the need for an open two-way communication, and are taking professional help to initiate preliminary succession talks. A facilitated conversation, driven by skilled attorneys, with open questions such as “what are your thoughts on the future of XYZ family business” is often the first occasion where younger generations get to speak their mind to their father on where they see the family business going. Having a neutral facilitator opens the door for both generations to understand and work together in harmony, to build a sustainable long-term generational family business, where conflicts are addressed in healthy ways (and not via poisoned Wills). Open and healthy conversations are needed to avoid Logan Royesque failures, and to ensure the smooth transition of power is a process, not an event.
2. Succession planning is crucial: This point cannot be emphasized enough. Even in the first season where Logan suffers from a brain hemorrhage and is missing from Waystar’s helm for a while (but eventually returns, with questionable mental health and capacity), there is no evidence whatsoever that any thinking has been done on who would run the empire even on a temporary basis. Everyone tries to succeed Logan. The family and their acolytes are all against Logan’s ‘wish’ to put Marcia, his 3rd wife (!), at the helm. Connor, the eldest son by the first marriage, opted out of contention to pursue a Presidential run – but in later episodes changes his mind and enters the CEO scramble. Kendall plays a machiavellian game to potentially emerge as a temporary front runner – but dramatically later goes on an unsuccessful activist battle to oust Logan legally. Kendall also attempted to appoint Roman, his entertaining and immature younger brother, as COO – all whilst Roman himself is manipulating his way to the CEO office. Once Logan returns, he is revolted at the idea of Kendall running the family businesses, and that is where the drama begins. Is there any better example of why succession planning should NOT be left solely to the kids?!
A key point that stands out here is the importance of an emergency (even if temporary) transfer of leadership. When Logan suffers his stroke, his hope of a potential recovery is unclear – putting his family and the company’s millions of stakeholders and shareholders at risk of an unclear future. Logan does eventually recover and return to work, but with questionable mental capacity.
All of this could have been avoided, and the family business held in good stead, had Logan consulted with his attorneys to put in place a suitable CEO succession strategy. In the Indian context, whilst many promoters of family businesses are loathe to name a successor(s) early (akin to Logan) or indeed at any point during their (active) lifetime, they can consider leaving behind a ‘break-glass’ letter addressed to the Board, naming a successor in case of death or incapacity (temporary or otherwise). Even better, promoters can take their Board and/or the Nomination & Remuneration Committee (if applicable) into confidence and discuss this choice(s) with them. Of course, all this starts with having a mature Board as a bedrock of wisdom and guidance. Such guidance directly from Logan or the promoter will help the Board and the company’s stakeholders tide over the high emotions that will play out in times like these, and help providing clear direction. Vested interests may disagree with the choice, as is their right, but at least there is clarity.
In India, legal tools such as Enduring Powers of Attorney are not recognized as they are in the UK; and even such ‘break-glass’ letters are an informal approach to this issue. Hence, the only real long-term solution that can smoothen succession and avoid disputes and disharmony is a mutually agreed, thoroughly documented and implemented succession plan. Easier said than done.
Whilst many family businesses do treat the process seriously, they remain in the minority. Indian promoters conveniently forget about their mortality and leave this important planning until too late. Indeed, India’s most famous succession battle arose when the Ambani siblings feuded after their father, the late Mr. Dhirubhai Ambani, suddenly passed away without leaving a Will.
3. Role of the Board: A key legal issue that emerges from the show is the lack of relevance of Waystar Board. Remember that Waystar is a US listed company, subject to stringent disclosure and filing requirements. Almost every US listed company, especially one of such size and scale, would have a clear CEO succession plan in place – even if not disclosed to the public. Here, Waystar’s board is a sideshow, with little or no involvement in the CEO selection process. In an episode or two, the Board makes noises regarding their need to act to designate a successor to Logan, but its role seems to have been overridden by the Roy children who have sufficient voting power to take control of this decision. All three kids from Logan’s 2nd marriage are on the Waystar board. Two of them are not employed by the company and lack any semblance of knowledge in corporate governance, or the business of Waystar – Succession is an excellent example of bad governance in action.
This is unfortunately very common in India as well, especially in relation to being a director in the family business notwithstanding merit or competence. Indian public companies are dominated by family businesses, with majority shareholding and voting control resting in promoter hands. Recent amendments have tried to break the unholy nexus between the promoter and the businesses, but such changes only go so far. An example of this is the retreat by SEBI on the potential separation of the Chairman and Managing Director (MD) position in public companies. Based on the wise recommendations of the Kotak Committee on Corporate Governance, SEBI had wanted to split the positions of the Chairman and MD or CEO, including the requirements that the Chairman and MD/CEO must not be related to each other. This requirement was to be applicable to the top 500 listed entities by market cap., effective from April 1, 2022. However, such is the widespread involvement of relatives in (listed) family businesses that India Inc. was not ready, legally, emotionally or operationally, for this move. Ultimately, this requirement was made voluntary by SEBI in 2022.
A well-run family business needs to have a credible and strong Board, with suitable internal mechanisms regarding CEO succession. They should have the intellectual wherewithal to stand up to a belligerent promoter like Logan, especially when they are value destructive.
Beyond the legal requirement, the patriarch (in almost every case, CEOs of large Indian family business are male) must exhibit an ‘inner’ desire to be make space for the next generation, or indeed find an outsider as a successor, and then take proactive and concrete steps towards succession. The Board, if filled with the right people, can be an important sounding board for this decision. The board would clearly need to know intricacies of the businesses, vision of the patriarch, as well as be cognizant of the next generation’s competence and potential successors.
Any action without the alignment of both the legal / commercial requirement of the patriarch’s own mind is a recipe for disaster. This is where both the family and the Board can help guide the patriarch on a role that befits his status and recognizes his contributions. There is no one-size-fits-all approach here, and each patriarch needs to decide for himself, with all such inputs factored in, on when to step aside.
4. Balance family and business: In Succession, the Roy family is so consumed by Waystar that their personal relationships suffer. Similar to India, the boundaries between the family, the business and the family in the business, is blurred and often non-existent. What is the Roy family without Waystar Royco? And vice versa? The constant power struggle and fight for approval from Logan has driven the Roy siblings apart. Their interactions are toxic and acrimonious, driven by one-upmanship – there does not exist any nurturing or healthy relationship between anyone in the Logan family. Despite the Roy’s desire to mend their family ties (as seen in one story arc where they have a family summit), their past emotional baggage and ties to the family business prevent any meaningful short-term changes.
Acknowledgment and early recognition of this duality of relationships in family businesses is important and we slowly seeing this awareness grow in India. Families are implementing formal measures, such as family constitutions and advisory forums, to establish formal and informal bodies discussing diverse perspectives. A formal approach is crucial here. In some families, even family members not involved in the business, and regardless of their shareholder status (e.g. children, cousins, female spouses, etc.), also have their voices heard. This helps create a healthy and conducive atmosphere, where all stakeholders, direct and indirect, work towards the common success of the business. But unless carefully undertaken and administered, usually with the help of a family office secretariat, this could end badly. Such structures and approaches towards setting boundaries and making time for family activities etc., away from the daily tribulations of running a business, can help maintain a healthy family dynamic and prevent family conflicts from spilling over into the business.
With the 3rd season of Succession ending on a cliffhanger (no spoilers!), the world eagerly awaits to see the future of the Roy family and Waystar. However, Indian family businesses should treat the show as a cautionary tale of the challenges they may encounter in their own journey, if steps are not taken to navigate these avoidable issues. In the meantime, happy viewing!
For further information, please contact:
Rishabh Shroff, Partner, Cyril Amarchand Mangaldas
rishabh.shroff@cyrilshroff.com
