| A legacy of mistakes
This is the title of a book that appeared some years ago about Joseph Kennedy. He was the father of JFK, Robert and Edward, grand-father-in-law of the second most powerful Republican today after the president, Arnold Schwarznegger, governor of California, and other prominent American descendants. Joe Kennedy founded the fortune that enabled his descendants to live well, participate actively in politics and become a legendary political family in the United States of America.
The book depicts Joe Kennedy as an unpleasant character, with little ethical, moral or financial scruples. He was a womanizer on a compulsive scale and used every trick to make money, including his influence over the early American position on Hitler as a result of which the US entered the war very late. His son, JFK, was fortunate to be assassinated so that he is remembered for having created a Camelot, an ideal reign. The reality was that his ethics were questionable, he was a compulsive womanizer, he almost got the world into nuclear war because of his attempts to destabilize Castro in Cuba, he initiated the American involvement in Vietnam with American troops leading to thousands of deaths, and achieved little on the domestic front.
Yet he has iconic status in the US. He and his brother, Robert, by their youthful looks, great speeches, public positions on issues like the civil rights of blacks, but little action, raised the hopes of many millions. Another brother, Edward, sullied his reputation early in life with the death of a young woman in a car accident from which he ran away. He developed a reputation as an effective liberal senator. The sons washed the sins of the Father and the Kennedy name carries magic instead of a nasty odour. This is despite the ugly incidents involving many of the Clan in subsequent generations.
Nearer home we have examples of the sons and daughters having inherited power from fathers (and mothers) and then having to correct their serious mistakes.
Early in his prime ministership, Rajiv Gandhi spoke to his party and lit into the power-brokers who had damaged it. He tried to sort out the mess in the Punjab created by his mother. He attempted reconciliation with Pakistan. He tried to enter into a new relationship with the US, at a low ebb because of the double paranoia of his mother and of President Nixon. He tried to move away from the “command and control” economy that his grandfather and mother had foisted on India, thus effectively, and for fifty years, stifling entrepreneurship and economic development. He wanted to use technology to move India into active participation in the world economy. That he did not succeed with any of his ideas could also be traced to his inheritance, since neither his mother nor his grandfather ensured that he received the education that could have enabled a better understanding of the complexities of India and its politics. He sincerely tried to clean up the damage caused by the policies of his mother and grandfather. But he could never admit that he had a poor legacy and was trying to clean it up.
Sri Lanka has seen a similar situation. S.W.R.D. Bandaranayake, as prime minister, imitated the Nehru-Gandhi model of economic management and its many years of development. He fuelled the antagonism between the Buddhists and the Tamils that directly led to the civil war by the Liberation Tigers of Tamil Eelam, bringing the economy down to its knees and almost destroying the nation. His wife and successor continued on this path. The daughter, as prime minister and president, has had to clean up after her parents but without being able to blame them.
Benazir Bhutto inherited her father’s love of a good life and power at any cost. With her education and political exposure at a young age she could have modernized Pakistan. She did attempt initially to change the direction of the country from being India-centric, but soon got lost in her pursuit of a good life for herself.
Chandrababu Naidu got to be chief minister of Andhra because of being the son-in-law of the charismatic NTR but he first broke away from him. He was able to clean up many of NTR’s mistakes, developing a modern and action-oriented reputation. But he has never blamed NTR. The young President Assad of Syria, the junior Mubarak being groomed by his father to take over as president of Egypt, and many other children of parents who gifted them countries and companies, have struggled to improve their inheritance after the damages caused by their parents to the inheritance. Few have been successful in cleaning up their countries. Perhaps they need to disassociate themselves first if they are to clean up successfully.
Being a member of a dynasty gives easy entry into the club of rulers, but it does not necessarily teach the inheritor how to rule. (Even that education may not ensure that this is the best leader for the job.) This is the case with political or corporate inheritances. The heirs must also recognize the serious errors of their sires and preferably break away from them. This is more likely in business than in politics. We can find many examples. We do not have research to back this conclusion, and some political scientist or economist or management academic can do the research and add to the knowledge.
Under the license-permit raj, many industrial empires progressed in India. They made their founders and families very rich. Their expertise was not in running their companies to be productive and efficient, but on developing and using contacts and connections to expand and build their empires. In the open and highly competitive economies of the Nineties, not all heirs have succeeded in transiting prosperously into the new situation. There are three types: “old industry” that was powerful even before independence; those that had heirs trying to introduce change in harmony with their parents; and those that broke away. I am not counting here those like Escorts, who inherited a strong business but poor competence among the heirs destroyed much of their value.
In the first group are companies like the Lalbhais, Bombay Dyeing, Godrej, Mafatlal, Sarabhai, and so on. Among them are those in which the founders detached themselves entirely from the business and the others in which they continued to have a say. The former have perhaps had a better record of making corrections than the latter. Godrej is one of those that has made the corrections successfully.
But there are few in this group that have made spectacular progress under the heirs. An interesting example is that of the Sarabhais, who expanded under the charismatic Vikram Sarabhai, but whose preoccupation with scientific research and building India’s space mission, atomic energy programme and other research as well as the Indian Institute of Management in Ahmedabad, left him little time to man his companies as well as he did his research outfits. Other members of the family ran major brands like Calico to their closure. But there was no “sin” here of Vikram Sarabhai, only that he had too many successful nation-building activities to do. His successors are trying, but the group no longer has the prestige that it once had.
Arvind Mills in this first group is a good example of falling from the top of its industry, rising rapidly under the next generation, declining again and now rocketing ahead, all under the same heir. Again no ‘sin’ of the fathers, only of misjudgments by the heir. But there are other examples (like Bombay Dyeing), of companies with a long history, that have under subsequent generations, performed poorly. Again no “sins” of fathers, perhaps more the inefficiencies of their children.
In the second group there are examples like the RPG Group, Amalgamations Group, SPIC, and many others who were built post-independence. In an open economy and with competition, they began to find it difficult to prosper. Parts of the Amalgamations Group appear to be trying hard to sustain itself under the leadership of the third generation. The same cannot be said of many others who were left bereft when competence became more important than connections.
The third group includes companies like Apollo and Ranbaxy. The heirs found that the founders had not grasped the implications of liberalization. Some heirs realized this long before 1991, while others got the point at its onset. They broke away from the founding fathers and took the company in directions that they had identified. Apollo became a major tyre company despite its factory being in communist and labour-dominated Kerala. Ranbaxy became the first Indian multinational company and is well on its way to becoming one of the world’s leading pharmaceutical companies.
As in politics, inheritance is many times a poisoned chalice, especially when the fathers (or mothers) have been careless in building strong teams, identifying successors and educating their designated heirs in running their heritages. By not doing this it is not they who lose. The loser is invariably the poor investor and lender or the citizen. As Rajiv Gandhi once said, he kept hearing only of sick companies, not sick promoters. To this category we might add countries and states.