Dynastic feuds: the house of Gina Rinehart

Deep down we love a family spat, especially when it’s a high-profile family and the spat involves lots of scandal. So, for seasoned observers of family business, the latest instalment from the Rinehart family is particularly juicy. Here’s the woman who’s on her way to be the richest in the world (according to Forbes magazine she’s only beaten to the title of world’s richest woman by the Wal-Mart heiresses Alice and Christy Walton and French cosmetics queen Liliane Bettencourt) and yet she is quibbling with her children about their annual security bills. With her wealth estimated to double by 2014 to $18 billion on the basis on one deal alone – South Korean steel giant Posco’s move to increase its holding in Rinehart’s Roy Hill iron ore project to 15 per cent – combined with her recent forays into media ownership, including the acquisition of a cornerstone stake in Fairfax Media, the publisher of BRW, mean Rinehart’s dirty laundry will come under increasing scrutiny both here and abroad.

Strip away the salacious details, however, and the acrimony serves as an example of the biggest issue family businesses face – succession planning. Family businesses are at the heart of the economy, according to the Family Business Association. They account for 70 per cent of all businesses and employ about 50 per cent of the national workforce. Time and again surveys show the transfer of the business from one generation to another is the biggest source of stress and particularly because the generations think so differently.

The baby boomer generation is often the founder or bulwark of the business and – it’s a stereotype – but they typically have worked all hours for decades to build it up. Generation X wants to take over the running of the business after working in it for years but doesn’t necessarily want to make the same sacrifices and can also want to make significant changes to the business model. Meanwhile, Generation Y often may not want to be a part of the business at all, causing extra stress for the older generations. Furthermore, these differing needs can’t be discussed rationally because of the dynamics of a family.

The Rineharts are a classic example but others include the feuding Moran family which built a fortune in the healthcare industry and globally with the ever-shifting alliances within the Murdoch family. One of the best cases of succession planning gone wrong comes from India where the rupee trillionaires, brothers Mukesh and Anil Ambani, fell out in 2005 after the death of their father Dhirubhai, the founder of the mega-conglomerate Reliance Industries. That left the two of them battling for supremacy and to preserve the family peace, their mother had to intervene to divide the company in two and the brothers have been trying to outdo each other ever since.

There are no winners in family feuds and the business inevitably suffers. In the case of the Moran family, many of its healthcare assets had to be sold off to pay down debts.

Wealthy families feuding is a great spectator sport but family businesses across Australia should use the Rinehart saga as a trigger to look at their own dynastic intentions and make sure their own houses are in order before sitting down to read about hers.

Kate Mills

BRW

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