Rupert Murdoch’s announcement that he will be handing over the CEO role at 21st Century Fox to his son, James, 42, and elevating his other son, Lachlan, 43, to the position of co-executive chairman, once again brings family business succession-planning to the forefront. From published news accounts, it appears that Murdoch’s sons know the business. Most recently, James was the co-chief operating officer of 21st Century Fox and Lachlan was its non-executive co-chairman.
Remember the old adage about family business — the first generation builds it, the second generation lives off it and the third generation kills it. The Family Business Institute lent some credence to this maxim with its research that found that 30% of businesses make it to the second generation, 12% make it to the third and only 3% to the fourth. Of course, income tax planning can have as much of an impact on the successful ownership transfer of a family business as subsequent generational interest or business acumen.
Some high-profile family-controlled companies handle generational transfers well. But for every Ford Motor Company (fifth generation rising through the ranks; family still in control) and Anheuser Busch (fifth generation leadership prior to InBev merger), there is the bitter fight for control over Hancock Prospecting involving Australia’s Rinehart family. That dispute had two of the founder’s grandchildren suing their mother for control of a trust estimated at $4-5 billion (the kids won).
Rupert Murdoch, 84 and in reported good health, will remain the chairman of 21st Century Fox. The family effectively controls the company through its 40% ownership of voting shares and Rupert continues to have more rights in the family trust than the children. He is a proven entrepreneur and businessman but for this transfer to be successful, the strong hand of the father must turn over the reins of 21st Century Fox to his sons– not just in appearance, but in fact.