The Wrong Plan

On Friday, the Financial Times examined the succession troubles at Tata (see our post yesterday.) On Saturday, it turned to the Del Vecchio heirs and the paralysis affecting Delfin, the €55 billion holding company at the centre of their family fortune.

The two stories belong together, but the second adds an important lesson. Family paralysis does not arise only because a founder failed to plan. It can also arise because he planned for the wrong problem.

Leonardo Del Vecchio appears to have planned carefully. Ownership was divided equally among eight heirs, the assets were protected from fragmentation, and trusted executives were left to preserve his industrial vision. Yet the structure protected the fortune without creating a workable system of authority.

Eight equal shareholders may appear fair. But equality of ownership does not produce clarity of government. When major decisions require broad agreement, everyone gains the power to prevent action, while no one receives sufficient authority to lead. The family can preserve everything and still become unable to decide anything.

The dispute over dividends reveals the deeper fault. Some heirs see Delfin as an institution whose capital should remain invested. Others see inherited wealth from which they should be able to draw greater value or build independently. Neither view is illegitimate. The problem is that the structure never established how these competing expectations would be reconciled.

The founder also appointed a custodian, not a successor. His trusted adviser carries the moral authority of the founder, while the heirs hold the legal rights of ownership. As long as the family remains divided, the custodian becomes more powerful than the owners because he is the only functioning centre.

This is where estate planning, ownership planning and dynastic planning separate. Estate planning determines who receives the wealth. Ownership planning determines how it is held. Dynastic planning determines how authority moves, how disagreements are resolved, and how the institution changes direction without breaking the family.

The safeguards did not fail. They are doing exactly what they were designed to do: prevent any heir from acting alone. The mistake was to confuse restraint with governance.

A founder can preserve an empire so carefully that the next generation becomes unable to govern it.

W.