Just 20 or 30 years ago, octogenarian family-business leaders were few and far between. Now, as life expectancy rises, an increasing number of business leaders are in their 80s and demographic trends will ensure this rises further in the future. But does it make good business sense?
The issue of octogenarians running family businesses was brought into sharp focus recently by the actions of Rupert Murdoch, the 80-year-old CEO and chairman of News Corporation. He seemed to be dithering when he appeared in front of a parliamentary select committee looking at allegations of phone hacking by News Corp’s UK division.
The media conglomerate’s shares are traded at a discount – dubbed the Murdoch discount – compared to those of rivals, partly analysts reckon because of the complicated share structure in place which has enabled the Murdochs to controls almost 40% of voting rights, despite owning around 12% of the company’s shares. Murdoch has run the media conglomerate like a fiefdom, but some commentators complain he no longer is the brilliant media mogul he once was.
Wisdom and relevance in family businesses
“Family-run businesses are often very patriarchal and if the head of the family is still at the helm, it can be extremely difficult to change the way things are done,” according to independent business psychologist Caroline Gourlay, who works with family business, helping them prepare for the transition of management to the next generation.
But older people are often the keepers of organisational wisdom in a company, understanding what does and doesn’t work in their industry, reckons Gourlay. They will have learnt from previous mistakes, yet there may be a tradeoff between wisdom and speed as people get older, she added.
“Older people often have very sound judgement, particularly if they are intelligent to start off with and have kept engaged with the business. Some people get so practised at this that their judgement is instinctive and very sound. But they undoubtedly start to slow down, especially once they reach their ninth decade,” she said.
Another issue Gourlay highlights is that “they may not stay relevant”. While many octogenarians are as technically savvy as people in their 30s, others will refuse to engage even with basic business tools like email.
“Their judgement is based on experience in a pre-internet world, a world that doesn’t exist anymore,“ she said.
This is something which Bernard Kliska, senior consultant at the Family Business Consulting Group, reckons is particularly relevant. Older leaders will often run into problems if they believe what made them successful in the past will work in today’s business environment.
“They need to change with the business world as it develops,” he said.
It’s not just News Corp that might have had problems with an elderly leader. Ingvar Kamprad, although 85 years old, remains heavily involved in IKEA – the company he founded. He retired in 1986, but insiders say the flat-pack retailer’s “senior advisor” continues to direct strategic decision-making.
In the US, Si Newhouse Jr, 83, and his 81-year-old brother Donald own and run Advance Publications, which includes Condé Nast. Si’s famously hands on, counting ad pages in his publications and comparing them with competitors himself. But a number of Condé Nast’s publications, including Modern Bride, Elegant Bride, Gourmet and Cookie, have folded in recent years, which might lead to questions over the Newhouse brothers' leadership abilities, or at least whether they are capable of taking the business forward.
Implementing a retirement age
The question is not “can someone in the 80s run a family business, but should they”, Gourlay said. In companies where an 80-year-old is in charge, there may be two generations waiting for their turn at the helm.
“Even where the generations below are in senior positions, they rarely have full autonomy and the organisation can get stuck,” she reckons.
Kliska said children could become frustrated and bored in family businesses where an older member dominates, leading the next generation to feel alienated from the business.
From his experience working with family businesses, he has found that leaders who have not made a retirement plan by the age of 67 are unlikely to leave the company. “They feel they are the best to run the business,” he said.
However, Kliska reckons companies need to establish and implement a retirement age to avoid conflict in the future.
Nevertheless, just being 80 doesn’t mean that business leaders are any less sharp. Li Ka-shing, the 83-year-old chairman of Hutchison Whampoa Limited and Cheung Kong Holdings, still shows a razor-sharp business brain. And even long-term observers of Murdoch reckon he is just as astute as was 20 or 30 years ago and that his “dithering” persona belies one of the best business minds of his generation.