The Godrej group has amicably split the family business into two, without the melodrama seen in many other family-run businesses. Corporate India has seen disputes in family-run businesses getting nasty, ruining the group image. Such disputes also shake investor confidence and affect the medium- to long-term performance of a company. The Godrej family business split is a lesson for family-run businesses to adopt a more practical approach when it comes to succession planning and division of business. Ultimately, the name and prosperity of the family members depend on the success of the business they run.
The Godrej family business has been sorted into an ‘enterprises group’ and an ‘industries group’. The first comprises Godrej & Boyce and its affiliates, with presence across industries such as aviation, defence and IT. It will now be controlled by Jamshyd Godrej as chairperson and managing director, Nyrika Holkar as executive director, and their families. The industries group—which includes the listed companies Godrej Industries, Godrej Consumer Products, Godrej Properties, Godrej Agrovet and Astec Lifesciences—will have Nadir Godrej as chairperson and will be controlled by Adi Godrej, Nadir Godrej and their families. Both the groups will continue to use the Godrej brand. The split clearly shows that the family adopted a business-first approach while trying to accommodate the ambitions of the next generation.
Unfortunately, not many business families are able to execute such a plan and end up going public with their differences. The Singhanias of Raymond have been in a bitter family feud over the control of the company. Baba Kalyani of Bharat Forge has been in a legal battle with his sisters over the partition of the company. There are others like the Murugappas and Kirloskars who have also been engaged in bitter succession fights. Of course, who would forget the fight between the Ambani brothers two decades ago? Such disputes put a big question mark on the future of family businesses. Investors would always be wary of such eventualities unless the family members devise a cordial succession plan years in advance of a forced reckoning. In India, 350 out of the 500 top listed companies are family-owned. So it’s important for the country’s economy that these companies manage family disputes well.