IN 2011, movie star Jacky Chan announced that he had decided to give away half of his money to charity when he dies.
Chan added that he was not planning on leaving his son Jaycee any of the millions of dollars he had made during his film career.
“If he is capable, he can make his own money. If he is not, then he will just be wasting my money,” Channel News Asia quoted Chan as saying.
The senior generation has given its children two things that they need to succeed in this world: personal wealth and a privileged education. However, most business leaders are not confident in the next generation’s commitment to the business.
As wealth grows, owners start to worry about the impact that sudden wealth will have on their children. This is a growing concern that needs to be addressed, as neglecting this “inheritor’s dilemma” can block the succession plans of family businesses for decades.
A good case in point to counter this dilemma is the one cited by Prof. Joseph Fan in his book, “Critical Generations–Out of the Succession Dilemma of Chinese Family Businesses.”
Unique ownership design
Fan highlighted a case related to the ownership and wealth transfer model initiated by the legendary Taiwanese businessman Y.C. Wang.
Just like any founder-owner, one of the issues that Wang wanted to avoid was the likely conflict within his big family when they inherit his wealth after he had passed on. Therefore, as part of Wang’s wealth transition, he transferred the controlling ownership of Formosa Plastics Group to a charitable foundation. His primary purpose in transferring ownership to a foundation was to effectively shield his business from being compromised by the anticipated family dispute.
These are some of the rules he created:
· No family members could be a beneficiary of the assets.
· All of the income derived must be reinvested into the business and/or donated for charitable purposes.
· The rules of the transfer require that no family members could serve as manager unless he/she is vetted.
When Y.C. Wang died at 91, his wealth transfer achieved business continuity and has sheltered his family business from infighting.
Another case worth mentioning is that of Yu Pang-Lin, a high-profile real estate billionaire based in Hong Kong and one of the world’s top philanthropists. Yu Pang-Lin passed away at the age of 92 in 2015 but in a gathering five years earlier, he announced that he would entrust his entire wealth valued at US$1.5 billion to a bank and the money would then be donated to charity after his death.
Yu was believed to be China’s first billionaire to donate an entire fortune to charity. He once said, “If my children are more capable than me, it’s not necessary to leave a lot of money to them. If they are incompetent, a lot of money will only be harmful to them.”
Children of affluent parents have not had time to create an identity outside of the wealth and status of the business. It is highly likely that they may find it a challenge to develop self-confidence and forge healthy relationships.
After they inherit great sums of money, the central message for successors is often contradictory. “Do what you want with the inheritance” on one hand, while “give back to society” is likely the other.
And while entrepreneurs today are often viewed as rock stars by the general public, there are negative stereotypes to the privileged few. No wonder most business owners try to keep their newly earned wealth under the radar, even to their own family.