UK: Succession - Who will inherit the mantle when the last of Britain's grey-headed gang are all gone? (2 of 7)

UK: Succession - Who will inherit the mantle when the last of Britain's grey-headed gang are all gone? (2 of 7) - But the legacy of the past 10 years is neither so simple nor so ephemeral as this implies. A second sea change, from nepotism to meritocracy

Last Updated: 31 Aug 2010

But the legacy of the past 10 years is neither so simple nor so ephemeral as this implies. A second sea change, from nepotism to meritocracy, has its origin in earlier decades though flourishing only in the Thatcher era.

As economic historian Leslie Hannah points out, two cultural stereotypes in particular have been used to explain the impact of social and educational background on British business: the old-boy network which guaranteed a place on the board to all but the most incompetent; and (as Wiener argues) the deleterious influence of the public schools in driving young men away from commerce into more "gentlemanly" pursuits.

Research into earlier years suggests that the first of these stereotypes is nearer the truth. From 1905 to 1971 public school men - particularly those from the famous establishments such as Eton or Harrow - were the norm for chairmen, with only a small increase in the number who had been to university. However, when Hannah looked at the past decade of chairmen from the top 50 companies listed in the Times 1000, the pattern had changed.

In 1979 a hefty 29 chairmen had come from fee-paying schools, nine of them from the top echelons, and only 18 had been educated in the state school system. By 1989 the emphasis was reversed: 12 chairmen had been privately educated, only one at a top public school, while 35 had come from the maintained sector.

The higher education of the chairmen concerned reinforces this evidence of a trend towards meritocracy. Though Oxbridge continued to be heavily represented, more chairmen had taken the red-brick route and more, indeed, had attended university. In 1979, 19 chairmen did not have university degrees. By 1989 the figure was down to 14.

Yet, if the pool of potential successors is larger than ever before, and the criteria for their selection different, it would be stupid to suggest that family influence is finished. In private concerns the transfer of power from parent to child may actually be the most appropriate course, though the statistics suggest that it frequently is not. A London Business School study of family firms shows that only 30% outlast their founder, while a mere 13% survive the tenure of grandchildren. The reason is not hard to detect: entrepreneurial ability, like blue eyes, has a habit of skipping generations.

Several of Britain's biggest family firms illustrate the range of possibilities. For a lesson in how to get it horribly wrong The Littlewoods Organisation must surely come top of the list. A first attempt at the succession, with John Moores Mark 2, saw the start of a family feud spanning two generations. Earlier this year Leonard van Geest, a non-executive director of Littlewoods since 1988, was appointed caretaker chairman while the rival factions thrash things out.

Robert Maxwell has been rather more fortunate in his progeny: three of his seven children have joined the business. However, the Maxwell succession is as nothing to the genealogy of the Sainsbury family, with a fourth-generation scion already rehearsing his part.

But what happens when the stock runs out? It is a problem that Tesco has already addressed. Sir Jack Cohen, pioneer of the "pile 'em high, sell 'em cheap" philosophy, had no sons - suitable or otherwise - to inherit. The marriage of his daughters initially solved the dilemma: sons-in-law Hyman Kreitman and Sir Leslie Porter both had a turn at the top. But, in 1985, Sir Ian MacLaurin's appointment and Porter's promotion to a non-executive presidency heralded a break with the bloodline which is now well established.

In a small family firm it may be right to pass the reins from parent to child. After all, only the interests of the family are at stake. But it is a very different matter when the firm concerned is a publicly quoted company. Then nepotism is not merely an invidious exercise of power; it also puts at risk the wider interests of shareholders and staff.

This is one reason for the unease which attended Lord Weinstock's admission, last October, that he would like to see his son succeed him as head of GEC. Lord Weinstock was himself the beneficiary of such patronage, but the enterprise which he took over was a privately owned company.

Simon Weinstock is reputed to be more interested in his bloodstock than in his stock at GEC, but his voting power, as by far and away the biggest shareholder on the board, definitely gives him a good head start. With a beneficial shareholding of 31.35 million shares which makes even his father's nearly nine million stake look paltry, Simon has almost 1.2% of the whole issued capital of GEC. Furthermore, as Financial Weekly points out, his shareholding represents more than three quarters of all of the shares beneficially held by the board and, together with his father's shares, 96.5% of the board's beneficial holding. It is a block vote which any trade union might envy.

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