Is there a right to succession in a family business?

By Jeremy Hazlehurst

“Third-generation hereditary succession is as grotesque at Samsung as it is in Pyongyang,” wrote a correspondent to The Economist recently.

The writer was making a slightly odd comparison between one of South Korea’s most successful chaebols – the state-supported manufacturing giants that continue to dominate the country’s economy - and the bizarre personality cult of Kim il-sung that lies beyond the demilitarised zone to the north.

“By what right”, asked the letter-writer, does Lee Jae-yong, grandson Samsung’s founder, inherit the job of chief executive?

It’s an interesting question, which should interest any family business that thinks seriously about the most serious question of all - succession. Let’s unpack what the question means.

You should always be wary when you hear talk of “rights”. In one sense, there is no puzzle here at all. Lee Jae-yong has a perfect right to inherit his father’s business, because (presumably) it is written in the constitution of the company that he can inherit the job.

Maybe I’m putting words into his mouth, but the letter-writer seems to think that this in some way contradicts natural justice. But that’s a notoriously slippery concept. Jeremy Bentham, the man who invented utilitarianism, called talk of natural rights “nonsense on stilts”, and he was absolutely right.

Rights are political or legal entities. They don’t exist “out there”, in the fabric of the universe. Whatever people who bang on about human rights might have you believe, human rights are an invention of European Enlightenment culture, they were not discovered like the laws of physics or maths.

So Mr Samsung III has the only right that matters, indeed the only sort that exists, to succeed his father. Rights-wise, that’s the end of the argument.

But that conclusion leaves a bit of a nasty taste in the mouth. Rights are important, properly understood, but they’re not the only important ethical consideration. In this case, quibbling about rights doesn’t seem to quite answer the question of whether this succession is right or wrong.

The real question is whether he is right to exercise his right. And the way to evaluate that is, as Bentham would have been keen to point out, by looking at the consequences of his appointment.

Now, I’ve no idea whether Lee Jae-yong is a genius or a dunce. The question of whether he is the right man to take over Samsung is the question of whether he is likely to lead the company to triumph or disaster.

That is, whether he will keep the company healthy and profitable so that employees, family members (including the as-yet-unborn ones) will have a business to give them an income.

Again, I’ve no idea if Lee Jae-yong is a cool-headed pragmatist who is able to calmly assess his own strengths and weaknesses or a vainglorious idiot who would try to claim his right against all advice, but increasingly family businesses are looking outside their own gene-pool, realising that the modern world sometimes demands management skills they don’t have.

Lego is a great example of a company where a non-family member calls the shots, and it has been reborn since he took over.

They have waived their right to have a bash at running the business and, with an eye on the future, have stepped aside. Philosophers often contrast what is right and what is prudent Happily, they sometimes converge; but only if you banish “rights” from the room.

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