September 13, 2016 5:00 pm JST
My Personal History

Dhanin Chearavanont (13): From family business to modern corporation

The buildings CP Group used as its head office during the 1950s and '60s are now warehouses. (Courtesy of CP Group)

As Charoen Pokphand Group steadily grew larger, I sensed that the time had come to turn the family business into a corporate organization.

Rather than continue to do everything ourselves, we decided to bring in outside experts to manage the company. Novices can only run a business for so long before its operations become too large and complex for them to handle.

The change was also intended to protect the business. My father and his brother, and later me and my brothers, had pooled our strength to help the company grow, but even so, my father worried about the possibility of family feuds.

As my brothers and I got married, he had us move out and establish our own homes. His thinking was this: It doesn't matter how well brothers get along with each other; once they marry and start their own families, disputes are bound to arise if everyone tries to live under the same roof.

Tough talks

In companies set up by overseas Chinese, it is not uncommon for even the second and third generations of the founding family to be directly involved in their management. But there are numerous cases in which family quarrels end up ruining the business.

I decided my family had to be kept away from the management of our company. I asked my older sisters, who were also involved in the business, to step back from it. "I'm going to pay you more than the company does now," I told them. "I want you to enjoy life more."

Somewhat tougher was persuading my oldest brother's wife to give up her role. From the time he started up the feed business, she had handled its finances. She had a likable character and wanted very much to continue being involved in her husband's business. But it was for the company's good, so I hardened my heart and explained to her that no matter how hard she worked and no matter how much she sacrificed herself, because she was the chairman's wife, people would always harbor suspicions about her actions.

In this way, I convinced one family member after another to withdraw from management and replaced them with young, newly hired professionals.

Furthermore, I forbade the children of any of our families from entering CP's core business, namely agricultural and food products. Of course, this included my own sons.

If a company has a solid management team, the business will go well. If one of the owner's sons were to join that team, however, he would not be judged on his own merits. Even if he ran the company well, everyone would assume he had simply inherited a position at a company successfully managed by others.

Bringing a son on board could also jeopardize the company's future. Capable members of the management team might decide to resign, feeling that their prospects for promotion had been lost. Not only would the company lose valuable executives, it would have trouble ensuring a smooth transition from one leadership to the next.

I never studied economics, but I learned from experience that a separation of ownership and management is important. Managers use their specialized knowledge to generate profits for the company, and the shareholders receive those profits. Shareholders should not be expected to help with management. Otherwise, chaos and inefficiency would ensue.

Once I had convinced my family members to become shareholders, I devoted myself to management. Because they were treated well, and because I did not try to monopolize shares myself, nobody in the family was dissatisfied with this new arrangement.

As manager, I worked harder than anyone else and was content with a decent salary and bonuses. Had I tried to usurp my bothers' shares, they would have resented me, and society might have given me the cold shoulder.

In 1969, when I turned 30, my oldest brother told me to become president of CP Group. In this way, the family business was reborn as a company run by experts, and my inheritance of the business was complete. Even after this transition, I have remained on good terms with my brothers. When we meet now, we talk like old friends.

Dhanin Chearavanont is chairman of the Charoen Pokphand Group.

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