International Sociology 2005 Kiong 45 70

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Feuds and Legacies

Conflict and Inheritance in Chinese Family Businesses
Tong Chee Kiong
National University of Singapore
abstract: The remarkable economic performance of the
Southeast Asian region has provoked debates among social
scientists. One key area of contention is whether there is a
particular form of capitalism to account for the East Asian
phenomenon. Most of the studies conducted, however, have
focused either on national industrial policies and market
forces or on a broad cultural explanatory view, such as
recourse to Confucianism or Asian values. This article,
building on work done by these scholars, seeks to look at
not only the effectiveness of business networks in the expansion of businesses, but more importantly, and an area that
has been largely unexplored, the drawbacks of Asian
business networking. Some questions that the article sets out
to answer include: Are there any issues of conflict and inheritance that are exclusive to Chinese family business? If yes,
what are they and why are these issues unique to Chinese
family business? Is there a particular way that Chinese businesses deal with these issues? Most studies on Chinese
family firms and business networks have focused on success.
This article seeks to study business failures, focusing on
issues of conflict and inheritance. In a sense, it looks at the
dark side or dysfunctions of family business, filling an
important gap in the current research literature. Using extensive case study interviews conducted in Singapore and
Malaysia, as well as fieldwork in China, the article examines
the intricate processes in running a family enterprise as well
as the nature and management of conflicts.
keywords: business China family firms guanxi
personalism Singapore
International Sociology March 2005 Vol 20(1): 4570

SAGE (London, Thousand Oaks, CA and New Delhi)
DOI: 10.1177/0268580905049909
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International Sociology Vol. 20 No. 1
Introduction
The remarkable economic performance, and the subsequent meltdown,
of the East Asian region have provoked debates among social scientists.
One key area of contention is whether there is a particular form of capitalism to account for the East Asian phenomenon. Most of the studies
conducted have focused on either national industrial policies and market
forces or a broad cultural explanatory view, such as recourse to Confucianism or Asian values. Economists, for example, have tried to explain
the success of these economies by pointing to good government policies,
consistently implemented in an environment of political stability.
However, as Clegg et al. (1986: 12) pointed out, it is a statement of
economic growth rather than an explanation. Sociologists have delved
into cultural elements, especially the post-Confucian hypothesis, to explicate economic success (Kahn, 1979; Berger, 1987; Clegg et al., 1990; Clegg,
1990; Redding, 1990). However, as Hamilton and Biggart (1986: 23)
correctly criticized, the post-Confucian explanation is not very useful
because it is a broadly-based underlying cognitive factor which feeds
the society in general and for that reason explains nothing in particular.
Mackie (2000) calls it the essentialist fallacy.
Scholars have also taken up the study of the significance of Asian
business networks (Hamilton, 1996; Low, 2000). Some of these have
focused on mainly one or two factors to account for business success, such
as the emphasis on the importance of guanxi (Redding, 1990; Clegg, 1990).
What most of all these studies have in common, which I see as a source
of the problem of understanding Chinese business, is that they were all
trying to explain success. They fail to analyse the dark side of family
business and ethnicity, that guanxi may be dysfunctional, or that there are
limitations to business networks.
This article seeks to look at not only the effectiveness of business
networks in the expansion of Asian businesses but, just as importantly,
the drawbacks of Asian business networking, which is an area that has
been largely unexplored. Some of the questions the article sets out to
answer include: Are there issues of conflict and inheritance that are
exclusive to Chinese family business? If yes, what are they and why are
these issues unique to Chinese family business? Is there a particular way
in which these issues are handled? An analysis of the flip side of Chinese
family business, that is, failure rather than success, I feel, will provide a
more comprehensive picture and understanding of the nature and institutional foundations of Chinese business.
There is a popular Chinese adage: The first generation lays the
foundation for a thriving business; the second builds on it, and the third
squanders it. This adage highlights the enduring problem of succession
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Tong Feuds and Legacies

in Chinese family businesses. The central argument of this article is that
the very nature and make-up of a Chinese family firm its centrality of
decision-making; personalism and paternalism; and the emphasis on
guanxi relations valuing the informal over the formal, result in conflicts
and disputes within the firm. These internal factors, which are seen as the
essential social foundations of Chinese family businesses, are the very
same factors that create problems of succession and inheritance and
often the eventual dissolution of the family business if they are not
resolved. In the article, these internal factors are examined from both
structural and processual points of view. In terms of the structural
features, the article seeks to analyse the organizational and management
principles of the family firm. The processual aspects will include features
such as social relationships and the nature of the social conflicts among
family members in the firm.
Just as the strong family bond in Chinese society enables the development of successful family business enterprises, it is also the source of
conflicts, especially after the death of the founding patriarch. However,
much of what has been written on Chinese family firms has emphasized
the advantages of a strong family unit in Chinese business (Redding, 1990;
Weidenbaum and Hughes, 1996; Butler et al., 2000). As such, there is a
dearth in the current literature on how Chinese family businesses manage
conflicts and issues of inheritance.1 This may be partly attributable to the
fact that the Chinese tend not to disclose conflicts publicly as it is regarded
as a loss of face. This article attempts to fill in some of the gaps in the
current literature and argues that the study of conflicts can reveal a great
deal about the organizational foundations of Chinese family firms.
Methodology/Data Collection
The study was conducted using face-to-face interviews with an unstructured questionnaire. Interviews were carried out with 96 managers, directors and owners of Chinese family firms. These were carried out in
English, Mandarin and several Chinese dialects. In total, 43 Chinese
family firms, varying in the size and age of the firm, formed the basis of
this study. Most of the informants were obtained through personal
recommendations. Subsequent interviews were snowballed from initial
contacts. It should be noted here that given the often secretive nature of
Chinese business people, personal recommendations were an important
source of interviews and paved the way for access to informants. The
interviews lasted from one to several hours each. Several informants were
interviewed more than once to obtain more details and to verify certain
facts. When new areas emerged in the course of data collection, relevant
informants were reinterviewed for information.
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Fieldtrips were conducted in Malaysia to gather additional data for
comparative purposes. This was important as many companies had
subsidiaries in Malaysia. In drawing up the sample for the case studies,
special care was taken to ensure a fair representation of Chinese businesses. Key variables that were considered included the size of the firm,
and these ranged from small businesses with a few employees to large
conglomerates with multinational linkages; age of the firms, including
newly formed companies; firms which have been in existence for a
number of years; as well as those which are in the process of liquidation.
In addition, I thought that it was important to select businesses from a
range of industries, including those in the service sector, such as banks
and financial firms, and in manufacturing, construction and textiles.
In this article, three case studies, CB Bank, Kong Construction and Yeo
Hiap Seng, are discussed in some detail to illustrate the processes and key
arguments. Data and findings from the other family businesses interviewed are used throughout the analysis. Secondary sources of data
supplemented the primary face-to-face interviews. Available interview
transcripts conducted by the Oral History Unit and published biographies
provided more details on the family firms. An important source of data
was the Registry of Companies and Businesses (ROCB), which provided
background information on the companies, as well as a record of boards
of directors and subsidiaries of companies.
Organizational Dynamics and Institutional

Foundations of Chinese Family Firms
Before we proceed, it would be useful to list in detail what the key features
of Chinese family firms are. Chinese family firms are generally characterized by three features: personalism, paternalism and centralized authority structures. The Chinese have a tendency to incorporate personal
relationships in decision-making (see Tong, 1996; Hamilton and Kao, 1987;
Wong, 1985). Business relationships tend to be highly personalized, built
on personal trust, and with personal control of the business enterprise.
The head of the household, who is also often the boss of the business,
makes all the decisions. Termed as paternalism, decision-making is thus
highly centralized with a minimal degree of delegation of authority and
responsibility. Moreover, because the business is also considered a family
activity, the authority of the Chinese father extends beyond the family
unit and into the business (Tong, 1996; Redding and Wong, 1986).
In economic and business transactions among the Chinese, there is an
emphasis on guanxi relations (see Fan, 2002; Lin, 2001; Luo, 2000). Guanxi
refers to interpersonal relationships which are seen to be crucial for facilitating smooth business transactions (Yang, 2002; Tong and Yong, 1998;
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Jacobs, 1979). Positions of trust are given to close relatives, and jobs that
require the handling of money are assigned to close kin (Tong, 1996;
Hofstede, 1980). Ownership of the business is effectively passed on to
family members, thus restricting the entry of outsiders into the inner
circle. In addition, interpersonal trustworthiness (xinyong) is of utmost
importance, and Chinese business people usually prefer to deal with those
whom they are familiar with. Chinese business people are of the view
that interpersonal trust minimizes fraud. In addition, it ensures certainty
and order. These same values that the Chinese hold true in their business
personalism, paternalism and centralized authority structure contain
the seeds for the conflict and inheritance problems that also characterize
many Chinese businesses.
The Interlinkage between Business

and the Family
Many of the conflicts that arise in a Chinese business stem from the close
interlinkage between the business and the family (Ward, 1987; Cohn,
1990). One informant, the owner of a family firm specializing in textiles,
summed up the problem as follows:
Among friends, all these problems can happen too, but it hurts more in a family.
Disputes in the family are messy, more personal, and more complicated.
Because you are a family, you know one another so well, mistakes that each
other have committed in the past, so in a quarrel, all these things are brought
up. The wounds caused are more deeply felt.
This is due, in part, to the lack of formality in Chinese family firms. They
do not operate on explicit rules, because family members are employees
who manage the firm through the personal control of the proprietor. This
lack of formality causes problems in management. As one informant, who
founded a family-run engineering company, noted:
Sometimes you scold them a little, but how often can you scold them? With
outsiders, it is easier. If they do not do well, you can scold them, fire them.
With [your] own people, scold[ing] too much [is] not nice. When I pressed on
[chastizing the family employee], he got offended and was displeased that I
did not trust him. He did not like being asked too many questions. What could
I do? I did not want to break up our relationship.
In addition to the lack of formality, there is also the problem of the

distribution of ownership and control. The Chinese, for cultural reasons,
often avoid the subject of death (see Yang, 1994). As such, many Chinese
often fail to leave a will upon death. A case study of the Chong family,
owners of the Commercial Business Bank (CBB) provides a good example
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of how the inherent structure of Chinese firms, through power that is
concentrated on a single person, leads to the likelihood of the disintegration of the family firm upon his death.
The Chong family business began in the 1930s when T. C. Chong started
a granite quarry and a building construction company. In 1954, he established CBB. When T. C. Chong decided to distribute his family wealth,
he wanted to ensure that the bulk of the inheritance would be passed on
to his eldest son (see Figure 1). Thus, P. A. and his family were given the
more valuable assets, such as the sawmill and the construction and
building companies, which, at the time, were more valuable than CBB
shares. The younger siblings were given larger proportions of ST Realty
shares, the family investment company. This company operated a number
of subsidiaries, and it is through this company that the family controlled
the CB Bank. The way the shares were distributed among the descendants, however, set the scene for an eventual struggle among siblings for
the control of the boardroom.
As Singapores financial centre became more developed, the banks
shares became more valuable. When CBB was listed in 1978, the value of
the stockholdings soared. In the process, the sons of the second and third
wives, who together owned more than 50 percent of ST Realty shares,
gained effective control of CBB. In 1974, T. C. Chong passed the chairmanship of CBB to P. A. This resulted in a situation where P. A. attained
power in the bank, but was not on the board of ST Realty, which effectively
owned the bank. This led to the unusual circumstance in which the shareholders of the bank, effectively the children of the second and third wives,
T. C. Chong
First Wife
Second Wife
P. A.
P. B.
P. E.
P. F.
P. G.
P. H.
P. L.
Figure 1 The Chong Family
50
Third Wife
P. M.
P. N.
P. R.
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were able to decide on the sale of the bank without the knowledge of the
chairman and its executive directors, who were children of the first wife.
In 1985, a family feud broke out into the open when P. M. and P. N.
(sons of the third wife) were nominated by ST Realty to compete for seats
on the board of CBB. At the same time, P. A. announced the boards
recommendation to remove P. H. (son of the second wife) as a director
for infringing the Central Provident Fund (CPF) Act. The timing of this
recommendation intensified the family feud. The ST board retaliated by
demanding the replacement of the banks executive director, P. B. (son of
the first wife), by P. M., and the appointment of P. N. as bank director.
Their inclusion would have, in the process, seriously threatened the
position of P. A.
When this move failed, the sons of the second and third wives
proceeded to unload S$4.3 million worth of CBB shares onto the market.
The persistent selling of CBB shares reduced ST Realtys direct and
indirect interest in the bank to 41.13 percent. The disintegration of the
bank was hastened by negotiations by P. A.s brothers to sell their remaining stake in CBB to UB Bank. As P. A. held only 12 percent of CBB shares,
he was not in a position to resist the UB Bank bid. By October 1987, the
takeover was completed, and CBB became a subsidiary of UB Bank.
Interviews with sources that were close to the family revealed that all
the major companies of the family have gone into liquidation. One informant commented:
The family was too big, too complex. When you have a big family, it is very
difficult. After T. C. Chong died, there was no leader in the family. There was
no single controlling shareholder, so it was very difficult, especially when
everyone wants to be the leader. So it is better to liquidate and let each go their
own way.
This case shows that a Chinese family business is often held together
by the dominant control of one person. Personal power over the family,
supported by economic power in terms of large shareholdings, as well as
political power as chair of the board of directors, cements the entire family
business network. When there is a failure to transfer the leadership
smoothly, especially in ensuring that the chosen successor has the
resources to maintain control of the company, it will portend the disintegration of the business grouping. As one director of CBB noted:
When you have many sons in the company, one person must lead. One person
must have the most say. He must have more powers in terms of shares. He
must have control so that when conflicts and jealousies emerge, he is strong
enough to make decisions and avoid polarization.
In the case of CBB, the leadership succession, especially given the many
wives, brothers and half-brothers, was not sufficiently centralized. The
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successor, P. A., did not have adequate economic or personal power to
bring the family business through to the next generation. As such, the
only way to resolve the family conflict was to liquidate the business and
divide the family wealth that had been built up by T. C. Chong.
Authority Structures and Sibling Disputes

Because of the paternalistic nature of Chinese family firms, the father, as
the head of the business as well as the family, assumes leadership. It leads
to a structure that is highly centralized and where communication is based
on a top-down approach. Dependence on the leader is encouraged and
cooperation depends on an authoritarian leader (Bond and Hwang, 1986).
This paternalistic tendency creates personalistic relations that are based
on the flow of centralized authority and control. In particular, recruitment
of personnel into the business, especially in strategic positions, is mainly
reserved for trusted family members. It should be noted that the institutionalization of authority and trust of family members has a taken-forgranted quality. It is the way things are, and the way things are done
(Zucker, 1983). Moreover, there is a lack of structure in the organization
with a degree of structural fluidity. As one informant, a manager in a
family-owned manufacturing company, noted:
There are no fixed rules and regulations regarding sick leave, annual leave,
terms of employment, etc. Lower level staff, such as clerks, applies to the
personnel manager who grants or deny requests according to what he feels.
Upper level staff speak to the chairman directly. There are no guidelines for
salary increments. Many things are just left to the chairmans discretion.
In a sense, the whole organization depends largely on the founder.

When he retires or passes away, the succeeding generation does not enjoy
the authority and legitimacy of the founder. The founder can get away
with an autocratic style of management because he derives his authority
first as the founder member and second, as head of the household who
controls the majority of the companys shares. His successors, however,
do not enjoy the same unquestioned authority. Often, these disputes arise
because it is a competition among equals.
This example of internal conflicts within the company, arising out of
disputes among siblings, is clearly illustrated in the case of the Kong
family business, which was, at one time, one of the largest construction
companies in Singapore. The founder, K. Y. was born in Kwangtung,
China, and at the age of 16, came to Malaya to work as a carpenter and
clerk. After saving up some money, he, in partnership with a friend,
started a company called Chop KW, which focused on house repairs and
small building contracts. In 1923, the chief engineer of the Public Works
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Department (PWD) in Seremban asked K. Y. to tender for a small job. As
his quotation was attractive and his work excellent, the PWD director was
very pleased and, subsequently, most of the contracts for construction
work by the Seremban government were awarded to K. Y. K. Y.s luck
continued to hold when, in 1926, the PWD director was promoted to
colonial secretary of the Straits Settlements. Having shifted to Singapore,
he persuaded K. Y. to expand his business to Singapore. K. Y. borrowed
some money and with his savings from the Seremban office, moved to
Singapore to set up KWY Company, with a staff strength of five to seven
people and a paid up capital of S$30004000.
K. Y. was not a qualified engineer, and although his business was doing
well, he kept to smaller and simpler projects those that he was familiar
with. When K. Y. was asked to bid for a large pier-building project, his
first inclination was to say no. After persuasion by the PWD director, he
agreed, and hired three former PWD engineers to join the firm, with the
promise of a better salary and subsequent shares in the company. Thus in
1940, KWY became a limited company, with about 4050 staff. K. Y. became
chairman of the new company and the staff he recruited from PWD were
offered directorships in the company. His cousin, who was the book-keeper
in the previous company, was appointed the managing director, while the
accounting was managed by his brother-in-law, C. Y. According to an
informant, even though outsiders were invited to join the company, they
were not involved in financial matters: Chinese never trust outsiders with
money. Our own people are always entrusted with that. He elaborated:
When it was a sole proprietorship, K. Y. made all the major decisions. When
it became KWY, as a limited company, there was a board of directors, but only
in name. In actuality, K. Y. made most of the decisions himself, especially on
investments, borrowing from banks, dealing with suppliers and so on. Thus,
the directors were more like executives than directors.
By 1949, K. Y.s two eldest sons, M. A. and M. B. had completed their

secondary education and were initiated into the firm as directors and
given shares in the company. As one of them noted:
My father always intended for us to continue the business. When I was young,
I used to follow him around the worksite. In the beginning, it was necessary
to include outsiders because my father had few kin and he lacks the experience to tackle correspondence in English to handle the technical aspects of the
firm. But now that we are old enough, we can help out. My father intends to
set up affiliated companies for each son to take charge of. He dreamt of building
his own empire, but he died suddenly.
In 1950, K. Y. passed away. Since he left no will, his entire estate was
bequeathed to his first wife. Mrs K. Y. distributed what was given to her
to all the children, including those of secondary wives, but kept the shares
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in the firm for her own sons (daughters were not included). During the
1950s, three of the directors who were non-kin retired and their shares
were sold to Mrs K. Y., who gave them to her third, fourth and sixth sons
(the fifth son had passed away). Thus, while the firm had started out as
a partnership between K. Y. and friends, it had now become a familyowned firm, with all the seats on the board of directors occupied by family
members.
Not long after, external auditors discovered that funds were being
misused by the chairman, K. C. The board decided against pressing legal
charges as, after all, K. C. was a relative. However, K. C. voluntarily
resigned and surrendered his shares to repay the misappropriated money.
With K. C. out of the firm, Mrs K. Y. took over the chairmanship of the
firm, and made her second son, M. B., managing director. In 1962, Mrs
K. Y. passed away, and M. B. took over the chairmanship of the company.
According to an informant, that was when the problems started.
M. B. appointed his wife to sit on the board of directors. In addition,
M. B.s son, Y. A., was also given shares and a directorship position. Thus,
the voting power of M. B. became even stronger. This caused a lot of
unhappiness, especially since M. B. led the company in an autocratic
manner. As one of the other sons indicated:
In name, the board made the decisions. Actually the chairman, my second
brother, made all the decisions. In the beginning, we had some sort of voting
system. Gradually he just decided on things without consulting us or even
informing us. When P. A. [wife] and Y. A. [son] came in, it became worse. He
just made us sign contracts. The three of them practically owned the firm. As
a result, many disputes erupted.
Another informant recounted:

The main decision-makers were M. B. and M. C. The dispute revolves around
them. One wants to liquidate while another wants to hold on. They could not
come to any agreement. And as no one is the majority shareholder, they all try
to force their will. But it was not about policy or business decisions. It was
about one side of the family trying to gain control of the firm.
He then blurted out: It is the wives that play a more important role than
the brothers. They are the cause of the strains in the relationship.
Things came to a head, and according to the informant, M. C. became
really fed up. He decided to sell all his shares in the company and wanted
to start his own business. The two youngest brothers also decided to sell
their shares so as to also branch out. Only the sixth son, M. F., decided to
stay with the company:
M. B. and P. A. made a lot of noise. They were very angry. They didnt have
enough money to buy out the shares of the younger brothers. As such, the
stability of the firm was greatly threatened.
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Another interviewee, with a sense of resignation, noted:
You know, the company was started by my father. It will go to the dogs if the
dispute is not settled. When a family breaks, it cant get together again as
before. There is always a vacuum.
Negotiations went on for over two years. Finally, an outsider but trusted
friend of the founder of the company was asked to mediate. It was decided
that another family company, PT Development Ltd, would be sold to the
public (a finance company bought it over) in order to raise sufficient funds
to buy out the younger brothers. According to the informant:
It was such a waste. We had to sell PT to save KWY. PT is worth much more
than KWY. But to resolve the conflict, we had to sell PT. In my fathers time,
KWY was one of the biggest construction companies around. Now, it is just
another construction company.
In Chinese family firms, there is often a lack of documentation regarding inheritance and succession issues. This often results in feuds among
siblings upon the death of the head of the family, especially in cases where
the deceased had many wives. Moreover, a Chinese firm is often started
by a strong entrepreneurial founder with a particular management style.
The very succession principles in Chinese society, where inheritance is
divided among sons, often result in a situation where the new chair of the
firm does not get a controlling share or block votes in the business, unlike
the original founder. This is clearly exemplified in the case of KWY. Structurally, the successor is invested with the position, but not the power. This
often leads to disputes in the running of the firm, and the new chair does
not have the clout or the legitimacy to overrule these disputes. Furthermore, the management or policy disputes that are related to the firm are
reinforced by sibling rivalries and jealousies that may have started from
childhood, or are related to familial rather than business matters. These
conflated problems have very little differentiation between familial and
business matters, and end up exacerbating the conflicts. In the end, when
there is no agreement or if the differences are so severe, it often results in
the dissolution of the business, where each son takes his share of the money.
Role of Wives, Secondary Wives and

Daughters-in-Law
As can be seen from the previous case studies, the centripetal tendency
of focusing power and control on a single person often results in a vacuum
upon his death. This is exacerbated by the predilection of wealthy Chinese
businessmen who have many wives (Chung, 2002). This creates a situation
where different interest groups, wives, brothers, half-brothers and other
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so-called relatives, compete for power and control of the family firm.
Failure to deal with these problems often results in the breakup of the
firm that the founder had spent years building up. It would seem that
wives play a significant role in conflict and inheritance issues. Chinese
society is polygynous, and it is not uncommon for successful and wealthy
Chinese businessmen to have several wives. While this practice is
becoming less common in Singapore today, many Chinese family firms
in Singapore still have to confront this problem. For example, in the case
study discussed earlier, T. C. Chong had three wives, 10 sons and nine
daughters. Wives would compete for power and resources through their
husbands and sons. As one informant puts it,
The Chinese have a saying, you le xi fu, mei le hai (when you gain a daughterin-law, you lose your son). It all depends on the wives. I think we women are
pettier than men. I think wives play a very large part. It is always the wives
who tell their husbands, You should get more. Maybe he has never thought
about it, was contented. But the wife comes in and says this and that. Wives
are outsiders but they play an important part in the family and business. They
are the ones that instigate. This is especially true when there are many family
units. They would compete with other family units in the extended family.
It should be noted here that second and third wives are commonly
considered inferior to the primary wife in the formal family structure,
which makes their position less stable. The key to strengthening their
position is to produce sons. Informally, there is fierce competition between
the different family units for control. Often, different groups will create
alliances to protect their positions. Bourdieu (1977: 39) points out that
although people are genealogically closely related, proximity does not
guarantee unificatory efficacy. In fact, the closest genealogical relationship, that between brothers, is also the point of greatest contention. In
short, genealogical relationship is not strong enough on its own to
reinforce and unite the relationships between relatives and kindred, and
it has such predictive value only when it is combined with shared interests that are produced by the common possession of a material and
symbolic patrimony. As such, the family becomes fertile ground for
competition and conflict. Since the business is regarded as a family enterprise, these familial differences spill over into the business arena. When
the founder and head of the family is still around, these conflicts seldom
lead to the fragmentation or dissolution of the business. He is the force
that holds the network together. Once he passes away, things fall apart.
Sometimes, these differences are so severe that they get dragged into
court, as the following case study of the Yeo Hiap Seng family business
shows. More often than not, however, the conflicts are resolved internally, as there is a belief among the Chinese that there is a loss of face if
the matter becomes public.
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The Yeo Hiap Seng Group began as a small shop selling soy sauce, set
up by Yeo Keng Lian in Zhang Zhou, China, in 1900. In 1935, the eldest
son, Yeo Thian In migrated to Singapore and opened their first soy sauce
factory. Two other sons migrated with their families soon after, and by
the 1950s all five sons, Tian Hwa, Thian In, Thian Soo, Thian Kiew and
Thian Seng were based in Singapore.
In 1951, the factory moved to Bukit Timah Road. This period also saw
the rapid development of the family business, not only in the production
and sale of soy sauce, but the expansion into canning operations that
included the popular Yeos curry chicken as well as the bottling of the
famous Yeos soy bean drink. In addition, the family business grew to
encompass the development and production of many consumable
products. In 1955, the business was incorporated into Yeo Hiap Seng
Canning and Sauce Factory Ltd. The next stage saw the internationalization of the business, with the setting up of a branch in Malaysia in 1959,
and a Hong Kong office in 1962. In 1969, Yeo Hiap Seng became a publicly
listed company, and was traded on both the Singapore and Malaysia stock
exchanges. In addition, a holding company, Yeo Hiap Seng Holdings Pte
Ltd was set up. This company, where all shareholders were family
members, owned shares in all the publicly listed companies of the family
(see Figure 2). There was a process of diversification beyond food and
drinks to property holdings and development, prawn and mussel
farming, and trading. Business continued to grow, especially when Yeo
Hiap Seng managed, in 1970, to secure the very profitable franchises for
packing and distributing American soft drinks such as Pepsi, 7Up,
Schweppes and Gatorade. At its peak, Yeo Hiap Seng employed nearly
4000 staff and had offices all around the world, including the US, London,
Canada, Indonesia and Mauritius; exporting its products to over 35 countries that included Europe and the Middle East.
All along, the company was run by Yeo Thian In, who was chairman
of the holding company as well as Yeo Hiap Seng Pte Ltd. The four other
brothers and their children were on the board of the holding company
and held managerial positions in the family business. Mr Yeo Thian In
died in 1985, and the reins of the family business were passed on to the
third generation. Alan Yeo, the third son of Yeo Thian In, assumed leadership of the family business. In 1988, Alan Yeo won the Businessman of
the Year award, and was appointed chair of the Trade Development Board,
which was a statutory agency of the Singapore government. This added
to his personal stature, but, to some extent, it also caused resentment
among the other Yeo family members.
However, it was Alan Yeos decision to invest in Chun King, a North
American food canning company, that brought the familial disputes to a
head. In 1989, Yeo Hiap Seng invested a hefty US$26 million for a half
57
58
Yeo Hiap Seng

International Limited
(100%)
YHS Holdings (Delaware) Inc
YHS (Delaware) Inc
YHS (USA) Inc
Ranko Way Limited
Sure Achieve Limited
YHS Trading (USA) Inc
YHS Ontario Ltd
YHS Beverages North

America Inc (100%)
YHS Investments (Canada)

Lt d (100%)
YHS Trading (Canada) Ltd

(100%)
Boa Shan Company

Limited
Figure 2 Yeo Hiap Seng Holdings Pte Ltd (Yeo Hiap Seng Holdings Limiteds Subsidiary Companies)
Jin Xing Express Pte Ltd

(100%)
YHS Foods (International) Pte

Ltd (100%)
YHS Beverage (International)

Pte Ltd (100%)
YHS Vending Pte Ltd (100%)
YHS Trading (International)

Pte Ltd (100%)
YHS Exports Pte Ltd (100%)
International
Beverages Company
Limited
Seven-up Bottling
Company (Hong
Kong) Ltd
Yeo Hiap Seng (Hong

Kong) Limited (100%)
10:33 am
YHS Sales Pte Ltd (100%)
Thong Ye Pte Ltd
YHS Canning Pte Ltd (100%)
YHS Foods Pte Ltd

YHS Trading Pte Ltd
Yeo Hiap Seng (Guangzhou)

Limited (51%)
YHS Private Limited (100%)
YHS Beverage Pte Ltd
YHS Manufacturing Pte Ltd

(100%)
Flowell Industries Pte Ltd (51%)
19/1/05
Pacific Computer Sys Pte Ltd

(100%)
Ye o H i a p Sen g L i m i t ed
03 Kiong (bc/t)
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share of Chun King. It turned out to be a bad investment because in 1991,
for example, Chun King suffered an annual loss of US$13.4 million. The
other family members blamed Alan Yeo for leading Yeo Hiap Seng into
such a bad investment. In addition, they were also dissatisfied with his
management style. In fact, disagreements had reached a point where Alan
Yeo admitted publicly that there was no longer any common ground
among the six different families of the Yeo clan (see Figure 3).
Charles Yeo (Alans nephew) and his supporters in the family felt that
Alan Yeo was holding the reins too tightly and they wanted a bigger say
in the running of the company. Another problem, according to Alan Yeo,
was his inability to find a suitable successor. He claimed to have tried to
groom Charles Yeo. However, other family members felt that he showed
favouritism to his son, Timothy, who moved rapidly through the ranks in
the company, thus causing dissatisfaction from other branches of the Yeo
clan. As one informant puts it, Father and son think they rule the whole
company.
The family feud broke out into the open in March 1994. One faction,
said to be led by Charles Yeo the company secretary and Alans nephew
together with Michael and Benjamin Yeo (children of Thian Kiew, who
were also Alans cousins) and Thian Seng (Alan Yeos uncle), called for
an extraordinary general meeting (EGM) and proposed to elect four new
members to the board. A few days later, Wing Tai Holdings, a property
and textile group, made a surprise bid to take over Yeo Hiap Seng. It later
emerged that it was Alan Yeo who had encouraged the Wing Tai takeover
because he refused to sell his shares to the other family members who
had sought to remove him as chair of Yeo Hiap Seng.
If the matter had been put to a vote, Alan Yeo would have been removed
as the faction led by Charles Yeo controlled 53 percent of the shares in the
holding company. In any case, because of Charles Yeos factions controlling shares, the bid by Wing Tai was foiled. In the meantime, while all the
internal squabbling continued, several other external companies became
interested in a takeover of the family business. Ng Teng Fong, a property
magnate, began buying shares and acquired 11 percent of the shares in
Yeo Hiap Seng. However, any takeover bid would have failed as the
majority of Yeo Hiap Seng shares were held in the Yeo holding company,
which only comprised Yeo family members. However, despite the family
dispute, and the rival factions attempts to remove Alan Yeo as the chair
of the company, a twist in the Yeo saga occurred when Alan Yeo petitioned the High Court in Singapore to dissolve the Yeo holding company.
Alan Yeo felt that since the family could no longer cooperate on business
matters, there was no longer any basis to maintain the holding company.
In the end, the High Court ruled that Yeo Hiap Seng Holdings should
be dissolved and Alan Yeo was to become a non-executive chair of Yeo
59
60
Ser en e
Sylvia
John
Robert
Yehudi
Oliver
Jonathan
Vincent
Patricia
David
Evangeline
Charles
Mabel
Wee Yong
Wee Tsan
Chee
Kiat*
Stanley
Chee
Kian*
Henry
Chee
Ming#
Samuel
Figure 3 Yeos Family Structure
(* d ec eased , # el d est )
Chee Nan
Chee Shuh
Chee Kah
Timothy
Alfred
T h i an So o *
Grace
Joyce
Mark
Michael
T h i an K i ew
Anna
Andy
Harold
Gordon
Chee Hee
Chee Hong
Chee Kai
Chee Sin
Chee Seet
Peggy
Mary
Benjamin
Samuel
T h i an Sen g
10:33 am
Chee Lip
Alan
T h i an I n * #
19/1/05
Chee Yan
T i an H w a
Ye o K en g L i an *
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Hiap Seng Pte Ltd, while Charles and Henry Yeo were asked to leave the
board altogether. However, Alan Yeo announced his retirement from Yeo
Hiap Seng and sold all his direct shares in the business. This allowed Ng
Teng Fong to increase his shares in Yeo Hiap Seng, and eventually to take
over the company. Today, Yeo Hiap Seng forms the food and beverage
arm of Ng Teng Fongs Orchard Parade Hotel Group. What had been a
successful family business that had been built up over two generations
had, because of familial conflicts, ended up being taken over and managed
by non-family members.
Succession Problems and Generational

Differences
At the other extreme, instead of having many wives and children fighting
over the inheritance of a family-owned business, the major problem faced
by family firms is the lack of offspring to continue the business. According to informants, many Chinese family firms have folded because of
succession problems. As one informant, who managed a ship repair
company, noted:
Many Chinese businessmen, like my father, are self-made, came up from
nothing. When the children are not interested, as it is a family business, they
will not bring in other people to run the business. They might try to sell the
company, but . . . They will not take in other people to run the business with
him. They would rather close the business.
One young informant, working with his father, commented on the

general attitude of the younger generation:
If the business is viable, people from my generation will come in and
continue. . . . But many are already professionals in other fields. For example,
doctors, engineers, teachers, journalists . . . they are not likely to be interested.
This generational gap in terms of how the older generation deal with
the family business and their children, many of whom were sent overseas
for an education often results in conflicts in terms of management practices within the company. It is not simply the difference in management
principles that may result in conflicts between the different generations.
One key problem is that the working relationship between the father and
the son is not merely economic, but an emotional one. Differences in
opinions are often complicated by personal differences. Given that family
relationships are already fraught with problems, these are carried over
into business dealings. As one elderly manager of a construction and
trading company commented:
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The younger generations have their own thinking. With further education,
there is even less chance of them coming back into the family business. This
is the problem with Chinese companies now. The children, after studying
abroad, their way of thinking is different.
Many informants also mentioned the difficulties in identifying or

training a successor to take over the business. There are several reasons
for this. First, because of the desire to keep the firm within the family, the
number of people who can succeed the founder is limited. This is
especially true in present-day Singapore because the institutionalization
of monogamy and family planning policies has ensured that families are
naturally smaller. Moreover, many successful families tend to send their
children for an overseas education, often to be trained in professions such
as medicine or engineering. Upon their return to Singapore, many take
up jobs in sectors that are often unrelated to the family business. In
addition, many talented staff who are outsiders are often not given key
appointments.
While it is possible for non-family members to end up as potential
successors, it is not considered desirable. Even in cases where the appointment of an outsider is made, it does not affect the ownership of the firm
because although he or she may be given shares within the firm, ownership is usually retained by family members. Thus, non-family members
do not see an opportunity to advance in the firm as the top jobs are generally reserved for family members. Most of them leave the firm or set up
their own businesses. As such, the pool of talent for succession in familyowned businesses is often very limited. Fukuyama (1995) posits that part
of the problem is the inability of Chinese businesses to make the transition from entrepreneurial control to professional management, a prerequisite step for a firm to establish itself beyond one or two generations.
While true to some extent, in the interviews, I found several companies
that had in fact hired professional managers, but still fragmented because
of conflicts and inheritance problems. The issue, in my view, is not
whether professional managers were hired, but rather of ownership and
control. Even with professional managers, the ownership of the firm still
rests within the family, which, as the article argues, is the source of the
problems.
Some deal with the problem of succession by grooming younger
brothers or nephews to take over the business. There is little evidence that
successors are non-kin. Marrying off daughters to capable employees is
another alternative, although this is not widely practised today. A third
option would be to groom capable employees who have proven their
loyalty over the years to act as regents, so that when sons are ready to
take over the reins of the company, the regents are expected to step down.
In the course of my fieldwork, several such cases were encountered.
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However, being non-kin, the loyalty and xinyong of such a person are
often held in suspicion. Thus, even though where a close guanxi exists a
person may be trusted sufficiently to be given positions of responsibility,
there is still quite a high degree of distrust and insecurity as far as ones
own (or family) interests are concerned. Informants mentioned the many
dangers of trusting outsiders. Since Chinese business people place their
family interests first, they believe that their employees will also give
priority to the interests of their own respective families. There is a fear
that employees may steal the contacts for their own businesses. This
distrust of non-kin creates a problem that is particular to Chinese businesses, that of centripetal tendencies and the fission of the company. This
is discussed in the next section.
Centripetal Tendencies and Fission in

Chinese Business
The strong overlap that comes with the ownership and management of
Chinese businesses facilitates the paternalistic style in the control of firms.
This characteristic style of authority in Chinese management has been
documented by several studies (Hofstede, 1980; Hwang, 1983; Redding,
1990; Redding and Wong, 1986). Redding and Wong, for example, suggest
that the leader holds information, and thus power, and doles it out in
small pieces to subordinates, who thus remain more or less dependent
(Redding and Wong, 1986: 278). Moreover, there is a lack of delegation of
authority. As one informant noted, For every decision, we have to go
back to the boss. Sometimes even the approval of $200 to buy something
has to go all the way up to the chairman. The authority of the boss largely
hinges on the fact that he is the owner of the firm. Thus, the strong overlapping of ownership and management in turn facilitates the authoritarian style of management and in particular, it propagates personalism.
As one director of a finance company remarked of his chairman:
After all, the company is his. So there is no need for board meetings. No such
thing as voting. He and his family own more than 70 percent of the shares. He
alone is the majority. If he wants to promote his son, he can. No need to ask
the board. We only meet when he wants to tell us things, or to get information
from us.
This personal and highly centralized authorial structure creates a

problem in the firm when it comes to succession and inheritance. I suggest
that it leads to a developmental pattern that has centripetal tendencies
and the eventual fissioning of the company (see Tam, 1990). Since the top
positions in the business are reserved for family members, the career path
for non-kin employees will always be blocked. As one informant remarked,
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If you are a non-family member, the highest you can go is the second
man, never the top. As key positions are ultimately reserved for family
members only, capable and ambitious employees find it more attractive
to set up their own businesses. This thus creates a problem for the family
firm as many of these employees, after they have learnt the trade, will
become business competitors. It increasingly forces the boss to reduce his
knowledge-sharing tendencies with his subordinates, and to tighten his
control over the firm. This further exacerbates the fragmentation of the
firm. Informants suggested that one way to deal with the new competition
arising from newly fissioned companies is for the boss to enter into some
kind of business cooperation with his ex-employees. In fact, the extent to
which pain is inflicted on the firm by the breakaway companies is partially
dependent on its ability to integrate them into its orbit.
Contrary to popular belief many, if not most, Chinese family firms did
not start out as family businesses (Chan, 1992; Redding, 2000). More often
than not, and partly because of the lack of capital, they began as partnerships with friends, co-workers, or with people with guanxi relations.
However, there is always the desire to convert them into family firms.
Generally, over time, family members will buy out the shares of nonfamily members. In this sense, Chinese family businesses are family
oriented entrepreneurs work towards the establishment of family ownership, and eventually, they aim to keep succession within the family, thus
retaining ultimate control of the business. This family-orientedness
characterizes the fabric of the development of Chinese firms, and it allows
the family to retain complete control of the firm.
The nepotistic nature of Chinese businesses facilitates the fission of the
business. However, it should be noted that the Chinese themselves are
wary of these nepotistic tendencies. For example, one informant talked
about trusting ones own people more, but also lamented that he had to
keep his kin employed in the family business, even though he [a relative]
had made a mistake that cost us [the company] $700,000. What did we
do? Nothing. We still employ him. I quote this as our management
attitude. Another informant pointed to the burden of social obligations:
Of course you trust your own people more. But it is difficult to correct your
own people when they do not perform well. You can tell them once or twice.
But too many times, it is not so nice. It makes it very difficult. You may want
them to leave, but it is difficult to fire your own people.
Hence, the fieldwork suggests that there is a great deal of ambivalence

towards kin. On the one hand, there is a belief that guanxi relations are
important and there is a desire to trust close kin. On the other hand, obligations towards kin will inevitably cause burdens in the smooth functioning of the firm.
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Conclusion
Most studies on Chinese businesses have focused on the success rather
than the failure of the firm (Haley et al., 1998; East Asia Analytical Unit,
1995). This article, however, has aimed to analyse the failure of Chinese
business practices. In a sense, it looks at the dark side or dysfunctions
of Chinese business practices. The article has sought to identify issues of
conflict and conflict management, and succession and inheritance in
Chinese businesses, thus suggesting that internal rather than external
factors are largely responsible for the failure of Chinese family firms.
There are, of course, external factors that influence the success or failure
of Chinese family firms. Changes in the political and socioeconomic
environments of Asian countries have challenged many traditional practices and methods of doing business within the Asian context. The increasing permeation of legal rationalism that accompanies the rise of the
nation-state has led to increasing emphases in the market on issues such
as meritocracy, professionalism and credentialism. This is particularly true
if the Chinese firm is publicly listed, and there are increasing demands
for greater accountability and the need to justify decisions to the board
and its shareholders. In addition, there are mandatory requirements by
the state regarding reporting and accounting procedures. In an increasingly globalized environment, and the need to do business with multinational corporations, more demands are placed on formal relationships.
Chinese firms that are resistant to change will face increasing competition
and problems in this new globalized environment.
Many Chinese businesses are undergoing changes. This is especially
true of the younger generation of Chinese entrepreneurs. But in many
Chinese family firms, changes have been gradual and incremental, rather
than revolutionary. And it has not included the wholesale adoption of
market practices or western models of management. Changes can only
occur when the taken-for-granted assumptions are challenged. For
example, one of the key trends that has been observed has been the hiring
of trained professional managers for family firms (Tong, 1996). This is
especially true when family firms become very large enterprises, or are
publicly listed. But the recruitment of outsiders in management positions
and even to seats on the board of directors has not resulted in a loss of
control of the family business. Rather, there is a bifurcation of ownership
and management. Very often, these professional managers and executives
do not exercise enough control compared to core family members because
their control is limited to one section of the group business only. Moreover,
control of the family business is not diluted because, often, the family will
set up a holding company that has majority control over company shares
which are restricted to family members.
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This prerogative of trust of family members on the one hand, and the
distrust of non-family members on the other, takes us away from the
presupposition of the market approach where profit maximization is of
paramount importance. While the employment of kin does offer some
economic savings, it is not the main motivational factor for employment.
It must be emphasized that informants are aware of the dark side that
guanxi and dependence on family and kin have on businesses. It is not as
if they are cultural automatons that are driven by cultural principles. This
has always been one of the key problems of the cultural approach in
understanding Chinese businesses. In the interviews, for example,
informants were aware that problems could arise when businesses
depended solely on family members. Thus, there is a basic tension in
Chinese family firms. On the one hand, there is a sense that family staff
members cannot be assessed objectively, or that they cannot be reprimanded if they make mistakes because such actions may threaten family
unity. On the other hand, there is also the belief that relatives are more
dependable and trustworthy as compared to outsiders. Moreover, informants are aware that as businesses, profit-making and efficiency are important ingredients for business success. At the same time, there is an
obligatory feeling that providing jobs and a stable income for family
members is a moral responsibility that is equally, if not more important,
than business success.
It is interesting to note that many scholars who study Chinese businesses tend to have an idealized notion that personalism, paternalism and
guanxi relations are desirable elements in Chinese business culture
(Weidenbaum and Hughes, 1996; Kao, 1993; Redding, 1990). This
contrasts sharply with the conventional view in international management techniques, derived primarily from research on western business
firms, which argues that the key to business success rests on the ideas of
efficiency, accountability and transparency (see, for example, El Kahal,
2001; Child, 2001). Recent literature after the 1997 financial crisis seems
to promote the view that the crisis was caused by certain elements pertaining to Chinese business practices, except that instead of personalism and
guanxi relations, the terms used now are nepotism and cronyism (see, for
example, Backman, 1999).
It is too simplistic to pin the causes of the crisis on Chinese business
practices, and in any case, there are multiple causes for the financial
meltdown. The issue, in my view, is not whether personalism or guanxi
relations are good or bad. Rather, these business values and ideas were
developed within an institutional environment (China, East and Southeast
Asia) in which there was a high degree of distrust due to uncertainties in
environments that had unreliable legal, political and other institutions.
Given these environments, Chinese business people developed an aptitude
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towards personal trust that relied on guanxi and xinyong (see Tong and
Yong, 1998). Moreover, once these institutions of personalism and reliance
on guanxi are established, they are resistant to change. Their persistence
goes beyond simple functional necessity, but is nevertheless preserved
because this is the way things are done.
This is not to say that Chinese business practices do not undergo
change. Personalism and guanxi are dynamic, not static concepts. The
interview data suggest that informants are aware of both the benefits and
problems of having to deal with family members. In spite of this, given
the years of coping with an unreliable and often volatile environment,
business transactions based on personalism have come to be institutionalized and are still seen as appropriate and necessary behaviours.
However, as this article has demonstrated, these same principles of
personalism, familism and guanxi relations, if they are not managed
correctly, will engender conflicts within the family business and give rise
to succession problems.
Note
1. Interestingly, there is copious literature on western family firms (see, for
example, Dyer, 1986). Most of these studies, however, were carried out by
management studies and business administration specialists, and as such are
practical-oriented and dealing with management strategies, and so often
lacking in sociological analysis (see, for example, Ward, 1987; Rosenblatt et al.,
1985; Cohn, 1990).
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Family in Business. San Francisco, CA: Jossey-Bass.
Tam, Simon (1990) Centrifugal Versus Centripetal Growth Process: Contrasting
the Ideal Types for Conceptualizing the Development Patterns of Chinese and
Japanese Firms, in S. R. Clegg and S. G. Redding (eds) Capitalism in Contrasting Cultures, pp. 15383. Berlin and New York: de Gruyter.
Tong Chee Kiong (1996) Centripetal Authority, Differentiated Networks: The
Social Organization of Chinese Firms in Singapore, in Gary Hamilton (ed.)
Asian Business Networks, pp. 13356. Berlin and New York: de Gruyter.
Tong Chee Kiong and Yong, P. K. (1998) Guanxi Bases, Xinyong and Chinese
Business Networks, British Journal of Sociology 49(1): 7596.
Ward, J. L. (1987) Keeping the Family Business Healthy: How to Plan for Continuing
Growth, Profitability, and Family Leadership. San Francisco, CA: Jossey-Bass.
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Chinese Entrepreneurs are Creating a New Economic Superpower in Asia. New York:
Free Press.
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Sociology 36: 5872.
Yang, Mayfair M. H. (1994) Gifts, Favors and Banquets: The Art of Social Relationships in China. Ithaca, NY: Cornell University Press.
Yang, Mayfair M. H. (2002) The Resilience of Guanxi and its New Deployment:
A Critique of Some New Guanxi Scholarship, The China Quarterly 170: 45976.
Zucker, Lynne G. (1983) Organizations as Institutions, in S. B. Bacharach (ed.)
Research in the Sociology of Organizations, pp. 147. Greenwich, CT: JAI Press.
Biographical Note: Tong Chee Kiong teaches at the Department of Sociology,
National University of Singapore. He completed his undergraduate training at
the University of Singapore and obtained his MA and PhD from Cornell
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University, USA. Tong Chee Kiongs research interests focus on ethnicity, religion
and Chinese business in East Asia. His publications include Chinese Death Rituals
in Singapore (Routledge, 2004) and Alternate Identities: The Chinese of Contemporary
Thailand (Brill, 2001). Tong Chee Kiong has also published papers in the British
Journal of Sociology, Diaspora and International Migration Review.
Address: Department of Sociology, National University of Singapore, 11 Arts Link,
Singapore 117570, Singapore. [email: soctck@nus.edu.sg]
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03 Kiong (bc/t)

Feuds and Legacies

International Sociology March 2005 Vol 20(1): 4570

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International Sociology Vol. 20 No. 1

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Tong Feuds and Legacies

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International Sociology Vol. 20 No. 1

Organizational Dynamics and Institutional

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Tong Feuds and Legacies

The Interlinkage between Business

In addition to the lack of formality, there is also the problem of the

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International Sociology Vol. 20 No. 1

Figure 1 The Chong Family

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Tong Feuds and Legacies

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International Sociology Vol. 20 No. 1

Authority Structures and Sibling Disputes

In a sense, the whole organization depends largely on the founder.

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Tong Feuds and Legacies

By 1949, K. Y.s two eldest sons, M. A. and M. B. had completed their

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International Sociology Vol. 20 No. 1

Another informant recounted:

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Tong Feuds and Legacies

Role of Wives, Secondary Wives and

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Tong Feuds and Legacies

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Yeo Hiap Seng

YHS Holdings (Delaware) Inc

YHS (Delaware) Inc

YHS (USA) Inc

Ranko Way Limited

Sure Achieve Limited

YHS Trading (USA) Inc

YHS Ontario Ltd

YHS Beverages North

YHS Investments (Canada)

YHS Trading (Canada) Ltd

Boa Shan Company

Jin Xing Express Pte Ltd

YHS Foods (International) Pte

YHS Beverage (International)

YHS Vending Pte Ltd (100%)

YHS Trading (International)

YHS Exports Pte Ltd (100%)

Yeo Hiap Seng (Hong

YHS Sales Pte Ltd (100%)

Thong Ye Pte Ltd

YHS Canning Pte Ltd (100%)

YHS Foods Pte Ltd

Yeo Hiap Seng (Guangzhou)

YHS Private Limited (100%)

YHS Beverage Pte Ltd