R Gopalakrishnan
Executive director, Tata Sons

The Great Schism in the church one thousand years ago occurred due to the addition of the word "filioque" to the creed, and the ideas that priests should not marry nor wear beards. Trivial? Well, one should not underestimate the influence of trivia in major developments.

Let us not have the wrong debate: it is not about owner versus professional management, but about performing versus non-performing managements.

People caricature owners as entrepreneurial but unqualified, professionals as qualified but bureaucratic. Such stereotyping is flawed.

Nowadays all large businesses are managed by professionals. The control and ownership could be by a family, a trust or widely distributed. In all cases, the interface between ownership and management is a key influence.

The main factor that distinguishes the family business is continuity, argues Giovanni Agnelli, born out of the belief that the company is an inheritance to be protected. This value drives family businesses.

Kellogg Business School Professor John Ward feels that family businesses are inherently more resilient in times of crisis because their nature allows them to adapt to external circumstances.

Nowadays, non-family businesses are learning about a value-led organisation, he feels. Such views about family-managed companies are debatable.

In the last 100 years of Ford, a family member has led for 80 years. Yet, analysts feel that each Ford CEO aims the company in a different direction. When it gets into trouble, it looks for a hero to fix it. When the hero leaves, it falls apart!

What about public companies owned by trusts? Hershey, the $ 5 billion chocolate maker, is owned 77 per cent by the Hershey School Trust.

When the trustees decided last year to sell their stake, a legal hornet’s nest was stirred up. The whole community in Hershey town, Pennsylvania, opposed it because ownership by a trust caused no impediments.

The naysayers said that Barings proved the opposite. Britain’s oldest investment bank was owned by a charity. The directors of the trust and the bank were common. So the same people were monitoring their own efforts at the bank. The governance was flawed.

The truth is that corporate misfortunes are pervasive regardless of ownership structure. The discriminators for a good management are three—results, passion and honesty.

For good leaders, their lives and careers have merged; they enjoy what they do and do what they enjoy. I recall a statement by Sir Thomas Lipton: "There is no fun like hard work."

All this is fine, so long as there is performance. What if performance declines or is below par? Where ownership and management are separate, exit mechanisms exist. Where they are combined, change is difficult because family dynamics come into play.

Two years ago, Jack Nasser was fired by the Ford board which appointed Bill Ford. It is not clear that the performance has improved now. Will the board consider removing Bill Ford, if it is warranted? Possible, but much more complex.