50-50 family business conference victorzheng

8/16/2019 50-50 Family Business Conference Victorzheng

1/30

50-50 Family Business Conference

Four Generations of Leadership Competition

Dr. Victor ZhengCUHK Hong Kong Institute of Asia-Pacific Studies

CUHK, 10 December 2013


2/30

Introduction

* Networking as consumption or investment?

* Wedding banquet and birthday party are common

social gatherings but can achieve different results

* Sabrina Fung’s wedding vs a Dutch teenage girl’s

birthday party

CUHK Business School Center for Family Business 50-50 Family Business Conference Copyright©Victor Zheng 2013 2


3/30

Network Capital for

* Different nature of ca ital: economic ca ital human ca ital

social capital, cultural capital and moral capital

* “

structure” (Coleman, 1990: 302).

* ’

importance to economic capital affect social relations, life

chances social class and more im ortantl social

reproduction.

* Coleman’s ar ument: social ca ital and cultural ca ital as

resource. The way to cultivate the resource varies and is

enforced through repeated exchange. Social class

CUHK Business School Center for Family Business 50-50 Family Business Conference Copyright©Victor Zheng 2013

reproduces.3


4/30


5/30

etwor ap ta or

* Social capital and cultural capital are generic ideas

w c canno e use o s ngu s peop e rom esame social group or with a similar background.

o orrow e concep o soc a cap a an cu uracapital but with emphasis on personal network weaved

network capital, a kind of “idiosyncratic investment”(Williamson, 1979: 242), is suggested for

analysis/discussion.* Network capital is used to explain the growth,

expansion, division and control of the Li & FungGroup, a globalised family-controlled firm based in


.

5


6/30

Dynamic Forces for Development

* Every family/business/individual is organised like a

“ ” “ ” .* There is a saying that every individual is at the centre

“ ” .

* In the Chinese philosophy, there are two forceswor ng ns e: y n an yang

which can be seen

as cen r uga an

centripetal forces.



7/30

Dynamic Forces for Development* If centripetal force is more dominant, family members and/or

business artners can work to ether or live harmoniousl to achieve

common goal.

* If centrifugal force is more dominant, family members and/or

business partners may find autonomy/interest hampered and mostly

seek for splitting.

’- – ,

centralization, segmentation and disintegration – is one of the key

explanations which has absorbed these two forces into

consideration.

* Li & Fung’s story over one century clearly shows how the families

and continuity.



8/30

House United, House Divided

* The firm was founded by Li

- -Guangzhou with equal sharein 1906.

* So they named it “Li & Fung”.

* export trade, especiallyporcelain to the US market.

* Business grew well.* Established a branch in

Hong Kong in the late 1910s.



9/30

r e s ory o ung:

House United House Divided

* In 1937, set up Li & Fung Limited in Hong Kong and

moved their families and their major business to HK whenthe Anti-Japanese War broke out. In 1944, Fung Pak-liu

.

* After the war, Li & Fungre-starte ts us ness

in Hong Kong.

* But in 1946, Li To-mingsold all the shares and

left.



10/30


11/30

Cultivation and Transmission of the

y ung sp an e n o e an s o eFungs in 1946?

- ,generation more senior, not to mention wealthier at

* Network capital is one of the explanations.

* - ’ “ ,

cradle of elites in Hong Kong”, who once got theMorrison Scholarshi and had s ent one ear in theUS for further study.

* Some hints to illustrate how network capital work.



12/30


to “Dr. G.H.B. Wright”, by“Fung Pak-liu”

* This plate was presented in

the early 20th

century.* Wright was the headmaster

of Queen’s College from

* It seemed to be an souvenirafter a key event.



13/30


* Fun Pak-liu “was asked to oin” the

Panama-Pacific InternationalExposition in San Francisco in

.

* Chan Kam-tao, an old boy of QC,,was head of the Chinese delegationto liaise China’s art on the fair.

* After the event, Li & Fung got a bigorder and its trade expanded toHong Kong. Thus, the businessrelied more on Pak-liu’s personal


.

13


14/30


* Li & Fung became a business solely owned by the Fungfamil .

* Under the sibling partnership, it went well after mid 1950s.

* Brothers and sisters were assi ned to different ositions anddepartments.



15/30

u t vat on an ransm ss on o t e

Second Generation Network Ca ital

* Decided to go public in 1972 as more third generation members

joined the company.* After listing, the company expanded further.

* Internal conflicts appeared and one of the “fangs” suggested

“management buy-out” (1989).* Since then, Li & Fung became solely owned by the second fang.



16/30


17/30


* Wh the second brother of the second eneration ot the

controlling power?

* Network capital is still the key explanation as the second

generation brothers and sisters had got similar human capital

and economic capital.* Apart from running the family business, Fung Hon-chu once

served in the Urban Council and Legislative Council. He also

.

* Hence, he had accumulated the thickest network capital.



18/30

u va on an ransm ss on o e

Third Generation Network Ca ital

* In 1992 the third eneration of

Fungs, Victor and William,restructured Li & Fung and

returned to the stock market.

* The company expanded moreimpressively through a series of

mergers and acquisitions.

* Not only expanded the HongKong market, but went globally.

* Below are some figures

illustrating the drastic expansion.



19/30

u , –



20/30

King Lun Holdings Limited

Fung Holdings (1937)

Li & Fung Limited(0494.HK)

Fung Retailing Limited

Convenience Retail AsiaLimited (0831.HK)

Trinity Limited (0891.HK)Branded Lifestyle Holdings

Limited LiFung Kids (Holdings

Limited)Toys “R” Us Asia



21/30

Li & Fung’s Staff and Offices, 1990–2012



22/30

u va on an ransm ss on o e

Third Generation Network Ca ital

* Apart from building economic capital and human capital, they

also spent lot of their time on public services and voluntaryworks.

* The following are some of the key positions held by Victor Fung.

1991–2000 Hong Kong Trade Development Council Chairman

1999–2008 Air ort Authorit Hon Kon Chairman

2001–09 Council

of

The

University

of

Hong

Kong Chairman

Present Asia Advisory Board of Prudential Financial, Inc.

(USA) Chairman


resen rea er

ear

ver

e a

us ness

ounc a rman

22


23/30


* In the turn of the new millennium, the fourth generation

mem ers o ne ung.* Succession process has been activated.



24/30


* A art from buildin the next eneration’s economic

capital and human capital, network capital started to beinculcated.

* Will there be another splitting of the family business?



25/30

Discussion and Conclusion* Business growth clearly follows the pattern of:

orma on, v s on an recen ra sa on con ro .* Unity and solidarity is strong when centripetal force

is dominant.

* .



26/30

Discussion and Conclusion* For whatever force is dominant, Chinese family business puts a

strong emphasis on family control, should it be full control or

partial control (models1 and 2).

* It is rare for Chinese famil business to ado t “se aration of

Model

1

Model

2

Model

3

management and control” (model 3)

oncen ra on o Management and Control

Management and Control

Shareholders ShareholdersShareholders

Management

ManagementManagement



27/30

Discussion and Conclusion

* When the centrifugal force is dominant, splitting may

e avo e t roug prun ng o t e am y tree so toachieve recentralisation.

* For non-listed companies, sales of the controlling

stake can arranged privately.* For listed companies, sales of the controlling stake

can be b “mana ement bu -out”.

* For whatever way adopted, network capital seems to.



28/30

Discussion and Conclusion* As Li & Fung can settle family/business dispute by

‘ ’ ,

century and maintained its business vitality.

Formation

and rowin

Competition and

1st s littin

Recentralization

and rowin

Competition and

2nd s littin

Recentralization and

rowin

Competition and 3rd

s littin ?

Family Management Business scale



29/30

Dr. Victor Zheng

Victor Zheng, Ph.D., is currently Co-Director of the Centre for Social and Political

Development Studies, Hong Kong Institute of Asia-Pacific Studies, The Chinese University of

Hon Kon CUHK . Victor received his Ph.D. from the Universit of Hon Kon and oined

its Centre of Asia Studies in 2003 as Research Assistant Professor. His research interests

include development and inheritance of Chinese family businesses and social indicators and

soc a eve opmen n ong ong an acao. c or au ore nese am y us ness an

the Equal Inheritance System: Unraveling the Myth’ and ‘Gambling Dynamism: The Macao

Miracle’ and published a number of papers in international academic journals. He also co-authored and edited a number of Chinese titles including ‘香港華人家族企業個案研究’, ‘華

人家族企業傳承研究’, ‘家族企業與股票市場’, ‘才德之間：華人家族企業與婦女’, ‘香港大

’ ‘ ’ ‘ ’ ‘ ’ ‘ ’, , , , ,

‘一代煙王：利希慎’, ‘香港赤子：利銘澤’, ‘山巔堡壘：何東花園’, ‘滙通天下：香港如何連結中國與世界’, ‘香港身份證透視’, ‘香港米業史’, ‘香港股史’, ‘澳門社會實錄’, and ’澳門

.



30/30

e erences

, . . .

Kegan Paul.

• Coleman, J.S. 1990. Foundations of Social Theory. Harvard, MA: Harvard University Press.

• Fung, B.Y. 2006. 100 Years of Li & Fung: The Rise from Family Business to Multinational. HongKong: Joint Publishing (Hong Kong) Limited. (in Chinese)

• ‘ ’, . . , , . ,

no. 6, pp. 1360–1380.

• Hutcheon, R. 1992. A Burst of Crackers: The Li & Fung Story. Hong Kong: Li & Fung Limited.

• Li & Fung Limited. Various years. Annual Report (including Interim Report). Hong Kong: Li &

Fung Limited.

• Lin, N. 1990. ‘Social resources and social mobility: A structural theory of status attainment’, in

Breiger, R. (ed.) Social Mobility and Social Structure, pp.247-271. Cambridge: Cambridge

University Press.

• Putnam R. 2000. Blowin Alone: The Colla se and Revival of American Communit . New York:

Simon and Schuster.

• Williamson, O.E. 1975. Markets and Hierarchies. New York: Free Press.


• ou na orn ng os , ep em er .

30

50-50 family business conference victorzheng

Documents