Mukesh Ambani had set the ball rolling on his succession plan three years ago; so Monday’s announcement of his three children, Isha, Akash, and Anant becoming non-executive directors of Reliance Industries Ltd (RIL) was on expected lines. Anyway, that’s the right way to go, as no listed company—let alone India’s largest private sector firm—should spring a surprise on succession issues. There are enough examples of large companies going off course because of the promoter’s failure on this front, leading to family squabbles over ownership later on. Ambani’s move is also being seen as part of his effort to avoid repeating the tumultuous split that roiled the group. More than a decade ago, his father died without a will or a clear leadership transition, stirring a bitter feud between Mukesh and his younger brother, Anil. The company was eventually divided up following the intervention of their mother.
What will add to the comfort is that Ambani will spend the next five years of his chairmanship, preparing his children to take charge of the conglomerate’s transformation into a digital, consumer and green energy behemoth. At the RIL annual general meeting on Monday, Ambani reminisced about his own induction to the board at the age of 20, by his father Dhirubhai. That allowed him the time and space to transform into a formidable business leader who stepped out of his father’s long shadow. Three years ago, Ambani began including his children in major family businesses decisions. Formal roles have also been carved out for them in RIL’s telecom, retail, digital services and energy arms. So the roles for the next generation have been clearly spelt out. In fact, at 31, the twins Akash and Isha Ambani are a decade older than their father when he joined the RIL board in 1977.
There isn’t any doubt that a smooth transition to the next generation is important. The real issue, however, is whether appointing children as natural successors is the right way to go about succession plan. While it’s not necessary that outside professionals would always do better than the promoter’s family members (there are examples galore to the contrary), the perception would always be that the conglomerate has given preference to lineage rather than real talent. That’s the biggest challenge for the Ambani siblings. They have to win this perception game just like their famous father did. They will also have to build on the successes they have had so far and continue demonstrating that they are chips of the old block to sustain shareholders’ faith in their abilities.
It would have perhaps been better if the Ambani children had not been catapulted straightaway to board positions. JRD Tata chose Ratan as his successor only after the latter had spent a considerable amount of time and proved his mettle. Admittedly, there is no one-size-fits-all strategy on such issues. Research does show that the older generation hanging on for too long tends to lead to disruption and destruction of value of the businesses. Indeed, in today’s incredibly dynamic scenario of tech- and sustainability-shaped businesses, the next-gen perspective has become imperative to evolution of conglomerates and continued prosperity. At the same time, 25% of failed transitions also result from an unready heir, as succession-planning professionals Amy Castoro and Fred Krawchuck pointed out in their 2022 article in the Harvard Business Review. So the jury is out on that.