The world's their oyster - and Lees aim to keep it that way

Some of the group's sauces and marinades. PHOTO: LEE KUM KEE
The Lee Kum Kee group bought London’s Walkie Talkie tower (above) in a record-breaking US$1.7 billion deal in 2017.PHOTO: REUTERS, AGENCE FRANCE-PRESSE, BLOOMBERG
The Lee Kum Kee group bought London's Walkie Talkie tower (above) in a record-breaking US$1.7 billion deal in 2017. Investments by the group's venture capital arm, Happiness Capital, include Beyond Meat (far left) and Omnipork. PHOTOS: REUTERS, AGENC
Investments by the group's venture capital arm, Happiness Capital, include Beyond Meat (above) and Omnipork. PHOTO: REUTERS, AGENCE FRANCE-PRESSE, BLOOMBERG
The Lee Kum Kee group bought London's Walkie Talkie tower (above) in a record-breaking US$1.7 billion deal in 2017. Investments by the group's venture capital arm, Happiness Capital, include Beyond Meat (far left) and Omnipork. PHOTOS: REUTERS, AGENC
Investments by the group's venture capital arm, Happiness Capital, include Beyond Meat and Omnipork. PHOTOS: REUTERS, AGENCE FRANCE-PRESSE, BLOOMBERG
Lee Kum Sheung (left) invented oyster sauce by accident 130 years ago, coming up with the sweet-and-salty condiment that is now a staple of Cantonese cuisine. Current patriarch Lee Man Tat (right) first took the helm almost 50 years ago.
Lee Kum Sheung (left) invented oyster sauce by accident 130 years ago, coming up with the sweet-and-salty condiment that is now a staple of Cantonese cuisine. Current patriarch Lee Man Tat (right) first took the helm almost 50 years ago. PHOTO: LEE KUM KEE
Lee Kum Sheung (left) invented oyster sauce by accident 130 years ago, coming up with the sweet-and-salty condiment that is now a staple of Cantonese cuisine. Current patriarch Lee Man Tat (right) first took the helm almost 50 years ago.
Some of the group’s sauces and marinades.PHOTOS: LEE KUM KEE

Family behind $21b Lee Kum Kee group aims to keep business thriving for 1,000 years

HONG KONG • Lee Kum Sheung invented oyster sauce by accident when he overcooked some bivalves 130 years ago, conjuring the sweet-and-salty condiment that would become a staple of Cantonese cuisine.

His heirs are not leaving anything to chance as they work to succession-proof one of Asia's wealthiest family dynasties.

Now stretching into its fifth generation, Hong Kong's Lee Kum Kee group has become an instructive case study for ultra-rich Asian families who have amassed unprecedented fortunes in recent years. Many are dealing with succession issues for the first time, trying to avoid the Chinese adage that "wealth does not go beyond the third generation".

The Lee family introduced an unusually comprehensive governance system in the early 2000s after the current patriarch, Mr Lee Man Tat, endured battles for control with his uncles and later his brother. The clan nearly split for a third time in the late 1990s after Mr Lee's youngest son threatened to strike out on his own.

Family leaders, who sit atop a fortune of about US$15 billion (S$21 billion), are now adapting their governance system to appeal to a younger generation of 14 scions. Recent initiatives include turning business units, including the group's venture capital arm, into a training ground and taking family members on "innovation trips" to places such as Silicon Valley and Israel. The lofty goal: keep the business thriving for 1,000 years.

The group's efforts "resulted in their survival into the fifth generation, a feat unmatched in all but a rare few family businesses", said Dr Jennifer Pendergast, executive director of the Centre for Family Enterprises at Northwestern University's Kellogg School of Management, which published a case study on the Lees in 2016 and provided training to some family members.

Mr Lee Man Tat, 89, first took the helm almost 50 years ago. After settling the dispute with his uncles, he gave his brother equity and invited him to help lead the company. But their corporate visions diverged in the 1980s and Mr Lee ultimately regained full ownership, according to the Kellogg School case study. His children joined the business around the same time, after earning degrees in the United States, including in food science, chemical engineering, marketing and finance.

EVOLVING TASTES

They are facing a succession, but it's not just succession in terms of inheritance, because they also have to diversify and expand the business. They have to meet the needs of the market as things change.

RETIRED PROFESSOR LEE CHACK FAN, who wrote a foreword to the Lee Man Tat biography.

The family governance push took on fresh urgency after dual crises in the late 1990s, when Asia was mired in a financial meltdown and Mr Lee's youngest son, Sammy, threatened to leave the family business, according to a biography, with a foreword by the older Mr Lee. The group created a family council in 2002 that set the groundwork for a family office, a family charter, a family foundation as well as a family learning centre.

Among the charter's rules: Only those in the bloodline can own shares; the group cannot hire in-laws; and younger heirs are required to work outside of the family business before returning. An electronic display at the headquarters of one of the group's units recently showed the council had met 65 times over the past 16 years, 215 days and 17 hours.

Today, Lee Kum Kee group's businesses span much more than sauces, a unit that has involved leadership of Mr Lee's sons Charlie and Eddy. The group is involved in everything from real estate to healthcare to venture capital. It bought London's Walkie Talkie tower in a record-breaking US$1.7 billion deal in 2017, and is developing a headquarters in Guangzhou designed by the late Iraqi-British architect Zaha Hadid, the first woman to receive the Pritzker Architecture Prize.

LKK Health Products Group, led by Mr Sammy Lee, has arguably surpassed the main sauce business to become the group's crown jewel. Its Infinitus unit has revenue of about US$4.5 billion, making it the largest direct-selling business in the world after Amway, Avon and Herbalife Nutrition, according to Direct Selling News. Its offerings include health tonics, tea mixes and skincare products.

It is also the largest such business of its kind in China, which can bring risks. Chinese state media this year reported that the authorities had ordered an investigation into false advertising by a dealer of Infinitus products whose client suffered a heart attack. The company was not charged. In another case, in 2016, however, a court ordered Infinitus and one dealer to compensate a man whose wife died.

The real test for Lee Kum Kee will be whether the new generation can sustain the business once Mr Lee Man Tat retires, said finance professor Joseph Fan of Chinese University of Hong Kong. His research shows that Chinese family succession issues are associated with the loss of more than half of the value of publicly traded businesses.

According to the Kellogg School study, which focused on the period around 2013, Lee Kum Kee's fifth generation showed waning interest in the business, with few taking advantage of internships or mentoring. Several even asked to be removed from the mailing list for company updates. In 2011, the family retreats were suspended owing to lack of interest.

However, the past few years have seen signs of a pickup in engagement by the younger family members, according to Mr Eric Ng, managing director at the group's venture capital arm, Happiness Capital, whose investments include Beyond Meat and Omnipork of Green Monday, a Hong Kong-based group.

Fifth-generation members sit in on meetings at the venture arm as part of a board trainee programme, Mr Ng said in an interview. The G5, as they are known, join deal-sourcing trips, talk to start-ups and pitch investments to a team that includes Mr Sammy Lee, who leads the unit.

Mr Ng is taking several family members on an upcoming innovation trip to Berlin, and some will stay on in Germany for the family retreat, which has been revived.

"They are facing a succession, but it's not just succession in terms of inheritance, because they also have to diversify and expand the business," said Mr Lee Chack Fan, a retired professor from the University of Hong Kong, who also wrote a foreword to the Lee Man Tat biography. "They have to meet the needs of the market as things change."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 31, 2019, with the headline 'The world's their oyster - and Lees aim to keep it that way'. Print Edition | Subscribe