Lee Kum Kee started as a small family business focused on oyster-flavored sauce and shrimp sauce.
After 128 years of growth, it has become a world-renowned brand offering a wide range of Chinese and Asian sauces.
The Lee family has paramount impact over the business.
“Family first before business,” company chairman Charlie Lee Wai-chung (李惠中) said in an interview. “If family members work together, the business will thrive naturally.
“As a family business, we’ve gone through several transitions within our family. And the two key transitions in the 1970s and 1980s have exerted huge shock on our family governance,” he said.
In 2002 the family decided to set up a family council as part of efforts to bolster business growth.
Lee Wai-chung, the fourth-generation heir, said involving all family members in the business may not necessarily be a good thing.
“It’s a common belief that you are a part of the family unless you join the family business, or you become an outsider. But that idea is outdated and has to be changed,” he said.
A traditional family values harmony and tries to avoid infighting. So even if there are issues, they tend not to confront them for fear of causing disharmony in the family.
However, those issues have to be tackled, Lee said, adding that it’s normal for family members to have different views.
That’s where the family council comes in.
Two years ago, the council met and Lee’s mother took the opportunity to retire. The council also decided to appoint three fifth-generation members into the board.
That marks a major step in giving the next generation a bigger voice in decision-making in the company.
These young members are able to take part in the top-level decision-making process, rather than merely veto proposals.
The company was founded by Lee Kum-sheung (李錦裳), a chef at a small eatery that sold cooked oysters.
He is credited with having invented oyster sauce in Zhuhai in Guangdong province in 1888.
However, the family moved to Macau in 1902 after his production lines were razed by fire.
His third son Lee Siu-nam (李兆南) took over the business in 1920, and opened a branch office in Hong Kong in 1932. He later moved the headquarters to Hong Kong.
In 1972, Lee Man-tat (李文達), the oldest son of Lee Siu-nam, suggested tapping the mass market to expand their oyster sauce business.
But his proposal was opposed by his two uncles. So the following year, Lee Man-tat bought back all the shares of the company with his father’s support and became the third-generation heir.
He introduced Panda oyster sauce, a more affordable version of their traditional product, into the US market in 1972. That came after then US President Richard Nixon was presented with a panda as a gift by the Chinese government.
Lee Man-tat wanted to expand the factory in 1986, but his younger brother, who had a 40 percent stake in the business, was against the idea.
As a result, he spent HK$80 million to buy his brother’s shares.
After going through these two major corporate battles, he gained better control of the business. His five children then joined the company one after another.
In 2002 the Lees agreed to set up a family council and draft a family constitution. Lee Wai-chung joined the business in 1985.
“There is an old Chinese saying that ‘wealth does not pass through three generations’. And there’s a similar saying in the West that says ‘shirtsleeves to shirtsleeves in three generations’.”
Throwing the dice
Currently, there are nine members in the family council board, including Lee Man-tat, his five children and three grandchildren.
Major decisions are decided by a 29-member family assembly, which includes Lee Man-tat and his wife, their children and children’s spouses, as well as 14 grandchildren and their spouses.
The family council is in charge of the family business, family office, family investment firm, family charity fund and family training center.
All family members have to work at least three to five years in other companies after graduating from college if they want to join the family business.
They are not allowed to have late marriage, divorce or extramarital affairs.
If family members quit the board or company for personal reasons, they can sell their shares to the company and remain as family council members.
The next generation are allowed to inherit shares even if they are not involved in the daily business operations.
Lee Wai-chung admitted that the family council and the family constitution are not sufficient to solve all problems and sometimes he needs to throw the dice to make a decision.
That’s an old method the family started using when the business was still based in Macau.
“When there is a deadlock, moving ahead is the most important thing, no matter what direction it is heading,” he said.
This article appeared in the Hong Kong Private Banking Journal on Nov. 16.
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