A case study on wealth management of family businesses in mainland China, One Tiger Per Mountain: The He Family Office, has recently been selected as a Harvard Business School Case (Harvard Business School Case 223-001). The case was co-authored by Professor Wu Fei (Academic Director of the EED Program at SAIF), Lauren Cohen, (L.E. Simmons Professor at Harvard Business School), and Grace Headinger (Researcher at Harvard Business School). This is the first case study on inheritance solutions for entrepreneurs in mainland China that has ever been selected by Harvard Business School.
After over 40 years of reform and opening up, mainland China has bred a large number of private enterprises with assets in the hundreds of millions. According to the “2022 China’s Top 500 Private Enterprises Research and Analysis Report” released by the All-China Federation of Industry and Commerce (ACFIC) in September this year, there are 8,602 private enterprises with annual revenue of 500 million yuan or more, and the threshold for entry into the top 500 enterprises has reached 26.367 billion yuan. “Most of China’s private enterprises are family businesses, which have been established for only a few decades. However, as the first generation of entrepreneurs have begun to enter the twilight of life, the question of ‘How to smoothly hand over to the second generation, or even further develop and expand the enterprise?’ is becoming a new issue. This is also the reason why we started to carry out this research.” Professor Wu Fei said that Harvard Business School is intrigued with this micro-sample of Chinese economy, and that they also hope to analyze business cases of Chinese family enterprise inheritance in order to understand their development tendencies.
The case takes the He family in Guangdong as a representative. By focusing on the multiple concerns and typical demands of the founders of entrepreneurs in thinking about the business inheritance, the case analyzed how the founders developed an orderly transition plan of ownership and management by bringing in an external professional family office. The case also discussed “How to balance the relationship between different family branches and different family members with family well-being?”, “How to support the family’s long-term goals through structural and institutional arrangements?”, and “How to promote family unity and family spirit internally and assume social responsibility and public obligations externally?”.
In the concrete implementation of this case, an independent professional consultant — HeFeng Family Office (China’s local family office) — successively planned and designed the family’s domestic and foreign ownership structure for the He family. It assisted the He family in setting up governance structures including: the family committee, family trust protector committee, family charitable foundation and family office. It also drafted and revised the governance mechanism, including the family charter and family policies, and assisted the family investment committee in managing its global investment portfolio.
As their first case at Harvard Business School, Professor Fei Wu, his two co-authors and the HeFeng Family Office went through several rounds of conferment and refinement. With respect to the case parties, the case embodied to the greatest extent the core issues facing the inheritance of Chinese family businesses, including: entrepreneurship, Chinese family member relationships, ownership and management, leadership inheritance, family business strategic planning, family and family business governance, family offices, family trusts, family investments, charitable foundations and social responsibility, family charters, family policies, family agreements, and family memorials.
Fei Wu said, “China’s private economy contributes more than 50% of the country’s tax revenue, more than 60% of GDP, and more than 80% of urban jobs. The smooth pass down and the enterprise’s continuous development are of great significance to consolidate the achievements of China’s reform and development, stabilize social employment and increase tax revenue. We hope that by launching this typical case, we can study more on the topic of reform, development and inheritance of Chinese family enterprises, and provide useful reference and inspiration for other family enterprises.”
