
Shattering successions: King Lear’s lessons for business handovers
Who gets a share and say in the family business?
We explore the principles and governance of dividing a business.
Hearts and thrones: the tragedy of succession
The tale is well-known: Lear, an ageing king, decides to split his kingdom among his three daughters, hoping for an “unburdened crawl towards death”. He initiates a test of love, expecting his daughters to declare their affection, in the belief that this will show who deserves to rule the largest portion of his kingdom.
But his search for validation leads Lear astray. He is charmed by the grand, embellished statements of love from his elder daughters, Goneril and Regan, while he overlooks Cordelia’s sincere but modestly expressed love. Cordelia’s refusal to engage in such flattery costs her the inheritance.
This grave misstep – the result of flawed judgement and inadequate succession planning – has disastrous consequences. Once Goneril and Regan secure their inheritance, they swiftly break their promises, stripping Lear of his dignity and authority, plunging the kingdom into chaos and disarray.
The dramatic shift highlights the powerful impact of the latent, hidden forces within the elder daughters. It illustrates how incapacity, along with uncontrolled power and wealth, can fuel corruption. And, ultimately, it is a testament to Shakespeare’s insight into the universal aspects of our complex human nature.
Lear’s planning flaws: a study in misguided merit and governance failure
Whether it’s a kingdom or a business, a successful transition relies on two critical elements:
- Selecting a division principle that aligns with the wealth owner’s and their family’s core values
- Developing and implementing a robust governance system to ensure the transition is smooth and the division’s execution is effective
Together, these elements help safeguard both the business and the family’s enduring prosperity. They can set a course for future success that also honours the legacy’s original vision and principles.
So, with these principles in mind, Lear’s forward-thinking strategy to divide his kingdom during his lifetime was not inherently misguided. He was, after all, simply aiming to prevent inheritance disputes after his death.
But his approach — evaluating merit through declarations of love, transferring power without proper governance, and failing to prepare his successors — unveils significant weaknesses in his method and anticipation.
1. Misapplied merit-based distribution
Erratic, subjective measure of merit:
Whenever an individual distributes wealth, they reveal something of their values, principles and ethical beliefs — including their perspective on equality and equity.
King Lear’s estate division could be described as “merit-based”. However, the way he assessed this merit was atypical, valuing expressions of love over tangible skills or leadership qualities. Driven by a desire for self-validation, this approach is fundamentally flawed. Lear aimed for recognition, perhaps believing that deep declarations of love would ensure absolute loyalty to the kingdom. Yet, he learned the hard way that basing succession on subjective criteria is a risky method for transferring power.
Neglect of successor preparation:
Lear transferred power without properly preparing his successors. He neglected the crucial mentoring process and failed to assess their leadership skills objectively.
This oversight threatened the kingdom’s future stability and underscored a universal principle: the next generation must be prepared for power.
Effective guidance, skill evaluation, and the phased transfer of responsibilities are essential to equip them for the complexities of leadership. This situation underscores the need to establish processes to enhance successors’ technical skills and roles, but also ensure they grasp and embody the values and vision of their predecessors.
2. Lack of proper succession framework
Absence of structured plan:
Successful transitions of wealth and power require a deliberately chosen governance system. As such, a wealth owner can ensure a seamless handover and steer the future path of assets in line with their intentions. Such a governance framework is crucial for safeguarding wealth and legacy, and for protecting against internal and external threats.
The stability of any entity depends on a governance structure that reflects its foundational principles, values and goals. Lear’s neglect in setting up this critical governance led to turmoil, marked by chaos, betrayal from Goneril and Regan. Ultimately, it left him defenceless, and without recourse. This highlights governance as an indispensable, continuous process that requires long-term commitment and, often, behavioural shift across generations. It emphasises the importance of mechanisms that not only distribute power but also preserve the integrity of the transition and the welfare of all involved.
No checks and balances:
Essential to a robust governance framework are the checks and balances that ensure accountability and supervision.
By neglecting these mechanisms, King Lear exposed the kingdom to potential exploitation and poor management. Once he ceded control, no party, including Lear himself, possessed the authority to correct or steer his daughters’ misguided decisions. This gap in establishing a secure leadership framework made the kingdom susceptible to those driven by ambition over ethics, highlighting the critical importance of oversight in safeguarding against manipulation.
Fairness in division: the essential role of governance
While Lear’s initial decision may have been driven by a desire to ease his own burdens, and to avoid potential conflicts after his death, his approach was marred by the absence of a governance framework tailored for the kingdom’s future.
Moreover, Lear’s quest for his daughters’ public affection was driven by his ego, revealing his vulnerability, and precipitating the narrative’s exploration of loyalty, power, and human weakness. Initially motivated by the prospect of a tranquil retirement, his actions in fact appear deeply rooted in a longing for love and acknowledgment, compounded by a significant lack of foresight. This blindness to genuine sentiment leads to a severe misjudgment of character and to dire outcomes.
The lesson we can draw is that no matter how wealth owners decide to divide their wealth, such a decision is not merely about fairness and justice in the abstract. It is as much about the deliberate selection of values and principles that will guide the succession process.
Such a decision must be accompanied by a thoughtful transformation of the current governance system to one that can support and sustain the intended planning goals.
This approach broadens the conversation from the immediate decisions of who gets what (the distribution of assets or roles) to how those decisions are made and sustained through governance.
Business first and family first: principles for dividing a business
Equal distribution divides assets uniformly, but equitable distribution tailors the division based on successors’ circumstances, contributions, and needs. This distinction is relevant for business assets, where equitable approaches consider each successor’s interest and capability in owning and managing the business.
However, fairness in distribution is multifaceted. It requires a deep dive into individual roles, contributions, and future participation in the business. Clear communication and, when necessary, mediation, are essential to align successors’ expectations with the business’s needs in a manner ideally perceived as fair by all parties.
To achieve a distribution that aligns with family values and business goals, wealth owners can consider a range of principles:
- a. Merit-based distribution focuses on rewarding those who have significantly contributed to the business.
- b. Equal distribution offers simplicity by granting heirs an equal share, though it may not suit all situations, especially where involvement varies.
- c. Need-based distribution allocates assets based on each heir’s specific needs, demanding a careful evaluation of individual circumstances.
- d. Strategic distribution aims to bolster the business’s future success, often favouring those best suited to lead.
- e. Customised distribution acknowledges the uniqueness of each family and business, suggesting a blend of principles to meet diverse needs and goals.
By integrating these principles with a robust governance framework, wealth owners can manage the complexities of succession.
A strategic, phased approach — prioritising business and family interests independently before finding a middle ground — ensures the integrity of both realms. This method, emphasising a ‘business-first and family-first’ policy, paves the way for a seamless transition that upholds the family’s legacy and furthers the business’s strategic vision.
Core considerations to reflect on asset division
- Fairness, and alignment with values and principles
- What principles guide your wealth distribution and succession planning? How do they reflect your values and desired legacy?
- How do you interpret fairness and equity in your succession planning, given the diverse needs, abilities, and contributions of successors?
- Are there contradictions between your values and planning principles? How are these resolved with stakeholders?
- Governance and oversight
- What governance structures and mechanisms have you put in place to safeguard the succession process, and beyond?
- How are you facilitating the transition towards the future governance model – including the preparation of your successors?
- What checks and balances have you implemented to maintain accountability and prevent misuse of power during and after the transition?