Somewhere in Hong Kong there is a family document that says, in effect: take a second wife and you lose your board seat. Divorce, and you lose the board seat and the right to ever work in the company...
Somewhere in Hong Kong there is a family document that says, in effect: take a second wife and you lose your board seat. Divorce, and you lose the board seat and the right to ever work in the company again, though you may keep your shares, stripped of any say. It is not a sermon. It does not ask family members to be good. It names an action and prices it, the way a contract does, and every adult in the family signed it.
The family is the Lee family of Lee Kum Kee, the oyster sauce dynasty founded in 1888, which by 2004 held 88 percent of the American oyster sauce market and had carried family control into a fifth generation, a run so rare that Jean Lee and Hong Li open their case on it by noting that the old proverb about wealth failing in three generations "seems inefficacious" here. Their book, Wealth Doesn't Last 3 Generations: How Family Businesses Can Maintain Prosperity, is a study of family enterprises across China, Japan, Korea, and Southeast Asia, built from documents like this one, and this essay is about what that document can teach any family drafting its own rules. Our stance first, as always at LegacyPot: this is another family's tradition, Chinese and Cantonese, studied by Chinese scholars, and we read it to learn from it, not to claim it or to hold it up as scripture. Most of our readers lead African families, at home and in the diaspora, where questions of second households and board seats are not theoretical, and every application we make to those families is our translation, flagged as such. The book stops at the Chinese cases. We go further, and we will say so when we do.
Here is the essay's one idea. Most families that write anything write a values statement, and values statements do not govern. The Lee Kum Kee constitution governs, because for every rule it answers three questions a values poster never touches: what exactly is required, what exactly happens if you break it, and who verified that you signed. If your family is ever going to write its own rulebook, that document, clause by clause, is the best template we have found in any tradition.
Understand first where the document came from, because its precision was purchased, not invented. The Lee family's history reads like a warning label. After founder Lee Kam Sheung died, the enterprise was split evenly among his three sons, who promptly deadlocked over strategy. The eldest, the book's Lee Shiu Tang, believed in aggressive expansion; his brothers did not; and the deadlock ended only when he bought them out at crushing financial cost, for which, the book records, the angry brothers ostracized him for the rest of his life. One generation later it happened again, sharpened. Lee Man Tat, the third-generation leader who took control in 1972, transferred a large block of stock to his own younger brother and invited him to help run the company. They fell out over direction. The brother sued him for control. Lee Man Tat won, regaining all the stock, but, in the book's words, he "had already paid huge costs economically and emotionally."
Twice, then, the same lesson at full price: goodwill between brothers is not a governance system. So in 2003 Lee Man Tat built one. He established a family body, which the book calls the Family Committee, and a written family constitution to rule it. The committee took in nearly all twenty-six family members, shareholders or not, with the seven stockholding members at its core. It met every quarter, for four to five days at a time, hosted in rotation, with pre-assigned reading before each session, and business operations were deliberately kept off its agenda. Company decisions stayed with the board; family matters lived in the family forum. The book's summary of the effect is worth quoting whole, because it is the entire theory of the document in two sentences: "the enterprise affairs and the family affairs were effectively separated. Moreover, the same person was divided in his different roles as a family member, a shareholder, a director and a manager, thus avoiding abuses."
That last clause is the quiet masterpiece. The constitution's deepest move is not any single rule. It is the recognition that a family business's troubles come from role-blur, one person being simultaneously brother, owner, director, and boss, and cashing the privileges of each role against the duties of the others. The constitution splits the person into their roles and writes rules for each. Which brings us to the famous clauses.
The personal-conduct provisions are the ones outsiders always quote, and they deserve close reading. The constitution stipulates, first, that everyone can have only one family and one wife, and a member who takes another family after marriage "will have to quit from the board." Second, anyone who divorces "will have to quit from the board and will never be allowed to join the company," though he may keep his stock without any part in decision-making.
Set aside, for a moment, your view of the morality being enforced; we will come back to it. Look purely at the drafting. The rule does not say the family "values marital fidelity." It defines a trigger (a second family, a divorce) and a consequence (the board seat, the job), and it calibrates the consequence with care: the offender loses power, not property. He keeps his shares. That calibration is what makes the rule enforceable in the real world, because a family will flinch from a rule that impoverishes a son, and a rule the family flinches from enforcing is worse than no rule, since its first breach proves the whole document optional. The Lee drafting takes the temptation to flinch away. Nobody starves. Somebody merely stops voting.
Why put private conduct in a business constitution at all? Because the drafters had watched what actually destroys family firms, and it is rarely the market. A second household eventually means a second set of heirs with claims; a bitter divorce eventually means a hostile party inside the shareholder register. The clauses are not piety. They are structural risk management for the cap table, priced in board seats. That is the transferable lesson, quite apart from the specific conduct any family chooses to regulate: find the private events that create structural risk to the common asset, and attach public, pre-agreed, survivable consequences to them, in writing, before anyone is in breach.
The constitution's other half regulates not conduct but entry: how a young Lee gets into the company at all. For the fifth generation, the book lays out the sequence exactly. Graduate from college. Work at another company, not the family's, for at least three years. Then pass the same entrance examination as any outside candidate, and start from the bottom. And if a family member proves incompetent in a role, he may be given one more chance in a different position; if he fails again, "he will be fired as well," like anyone. These stipulations, the book notes, were settled "with the consent and signing of all the family members and written into the pages of the family constitution."
On the shop floor, the same law: "when a member of the Lee family enters the enterprise, he should be treated like any other employee and start from the bottom. He may be rewarded for good deeds and punished for bad ones." The company's dragon boat team, the book adds with a smile, is captained by an ordinary employee whom family members on the crew must obey.
Read the ladder's steps as design decisions. The outside years mean a young Lee's first professional identity is earned where the family name buys nothing, so the company receives an employee with a track record instead of a prince with a birthright. The examination makes entry legible to every non-family employee watching: he passed what you passed. Starting at the bottom means authority, when it comes, arrives with an explanation. And the codified second chance is the most humane line in the document, because it admits in advance that some family members will fail, and decides, calmly and in writing, what happens then, so that the firing, when it comes, executes a rule rather than opens a feud. Compare all this with the constitution the document replaced, which was silence, and silence's ladder: the founder's son starts near the top, unexamined, unremovable, resented.
And the honest coda, which the book does not hide: rules cannot manufacture desire. In 2006 the company's own president, of the fourth generation, told the press the fifth generation showed little interest in running the enterprise, and the family was weighing a non-family president. The book leaves that question open, and so must we; no ending should be invented for a story still being lived. But note what the constitution had already accomplished: a family able to consider handing its president's chair to an outsider without fracturing is a family whose document has separated the firm's survival from any one member's ambition. That is the point of the whole apparatus.
Now our translation, ours alone, into the families we serve. In much of Africa, and in African families abroad, the risks the Lee constitution prices are not exotic. Succession disputes between the children of different mothers are among the most common ways family enterprises and family land are lost; a second household discovered at a funeral rewrites more estates than any market crash. And the entry problem is universal: the son parked in the family shop because nothing else was arranged, the daughter-in-law resented by staff because her authority arrived by marriage, the brilliant niece who left because promotion clearly ran on blood.
We are not proposing that your family copy the Lee family's conduct clauses; a family constitution must be argued into being by the family it will govern, in its own faith and law, and a family whose structure already includes several houses needs rules that deal justly with the houses that exist, not rules that pretend they do not. What we are proposing is that you copy the drafting standard. Whatever your family decides to require, write it so that a stranger could enforce it: trigger, consequence, calibration, signature. "We expect family members to earn their place" is a poster. "College, three years outside, the same exam as everyone, start at the bottom, one second chance" is a law. The first sentence has never prevented a single succession war. Sentences of the second kind, the book's evidence suggests, are how one family in Hong Kong got to five generations.
One more borrowed lesson, small and vital: every clause in the Lee constitution was signed by all members, and the signing is part of the rule. An unsigned rule is an opinion. When your family writes its own, gather the signatures while the founder is alive to ask for them, and keep the signed document where no single branch controls it. This is precisely what the Document Vault in LegacyPot exists for: a family constitution, signed, dated, amendable, stored where every branch on two continents can read it and none can quietly lose it.
Here is the one thing to do this quarter. Draft one clause. Not a constitution, one clause, of the enforceable kind, on the single issue most likely to break your family's common asset: entry into the business, sale of shares outside the family, second households, or what happens to a seat on the family's decision-making table when a marriage ends. Write the trigger, the consequence, and the calibration that leaves the loser fed but not in charge. Then bring it to the family's next gathering, argue it honestly, amend it, and collect every adult signature, and file the signed page in your Document Vault.
Lee Man Tat wrote his family's rulebook only after his own brother had taken him to court, and the book is blunt about what the delay cost him. The template is now public. The tuition has been paid, in another family, in another tradition, two generations of lawsuits ago. Your family can enroll after the price or before it. One clause, this quarter, is how you enroll before.