Godrej family's division strategy: A model for amicable business succession

By exiting each other's companies, and divesting their stakes, the Godrej family has delineated clear boundaries, ensuring that successors understand their respective roles and responsibilities.. (Image: Pixabay)
By exiting each other's companies, and divesting their stakes, the Godrej family has delineated clear boundaries, ensuring that successors understand their respective roles and responsibilities.. (Image: Pixabay)

Summary

What sets the scheme for division apart is its transparency and meticulous planning, setting an example for Indian business families to emulate

The Godrej family has initiated formal division of the century-old conglomerate by exiting the boards of each other’s companies, with plans to divest their shares soon, recent reports said.

Five publicly listed companies comprise the Godrej group: Godrej Consumer Products Ltd, Godrej Properties, Godrej Industries, Godrej Agrovet, and Astec Lifesciences. Plus, Godrej & Boyce operates as a private company within the conglomerate.

What sets this scheme for division apart is its transparency and meticulous planning, setting an example for Indian business families to emulate.

At its heart lies a fundamental principle: clarity breeds harmony. By exiting each other's companies, and divesting their stakes, the Godrej family has delineated clear boundaries, ensuring that successors understand their respective roles and responsibilities.

This clarity not only fosters a sense of direction but also mitigates the risk of future conflicts or ambiguities – all of which augurs well for the interests of small shareholders by mitigating the risk of uncertainty on account of succession planning.

There are two branches of the founding family, with Adi Godrej and his brother Nadir on one side and their cousins, Jamshyd Godrej and his sister Smita Godrej Crishna, on the other. 

The two main groups are Godrej Industries & Associates, led by Adi and Nadir, and Godrej & Boyce headed by Jamshyd Godrej and his sister. Overall, this division scheme comes as a win-win for all involved parties. Each group's next generation is already deeply involved in their businesses, spearheading them in executive roles, post-division.

The scheme ensures each side would have greater autonomy and control over their respective entities post-division. Adi and Nadir will divest their stakes in Godrej & Boyce, while Jamshyd and his family will transfer interests in Godrej Consumer Products and Godrej Properties. Earlier this year, Adi and Nadir resigned from the Godrej & Boyce Board, while Jamshyd left his seat on the boards of GCPL and Godrej Properties.

Also Read: Godrej Consumer’s getting picky about its portfolio

This strategic exchange of assets ensures that each branch can govern its entities according to its vision and expertise, unhindered by conflicting interests or overlapping control. Overall, this division scheme emerges as a win-win for all involved parties.

The decision to retain real estate assets worth 3,400 crore under Godrej & Boyce is fair and equitable. A separate agreement will govern ownership rights, mitigating potential sources of contention pre-emptively.

However, an elephant remains in the room: What will happen to the Godrej brand? What rules will govern the use of the Godrej brand value by each family member? These questions have not been answered yet. 

This should have been sorted as part of this family agreement proactively, as that would shield individual enterprises, while also protecting the collective reputation and goodwill the iconic brand commands.

Beyond its implications for the Godrej family, this division serves as a valuable lesson for managing generational transitions at a time when succession battles and family disputes have become fairly common in India’s corporate sector.

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