Promoter Run Firms and Inheritance Laws

Inspired by discussions, and not factually verified, but Inheritance Laws seem to be an important reason why such a large number of Indian firms continue to be promoter controlled. Laws in the US cap what can be bequeathed to offspring/relatives, and force excess possessions to be governed by trust. Because of this, capital returns to the system instead of being at the mercy of someone born with a silver spoon in his/her mouth. A sizable portion of Indian cos. are promoter run, and barring some big names, most have stunted growth/existence because of the same reason. Promoters are weary of letting go of their share of the pie, seldom realizing the pie can grow very large with more brains, eyes, hands and vested interests managing/ governing/ monitoring, from different vantage points, the health of the organization.

Compare this with US firms. Even small/mid sized firms have more professional processes/ standards/ practices/ protocols than some large firms in India. It's because ownership and control are properly separated, the shareholders dutifully play their role and the management plays its. ESOPs were used to align management/ employee and shareholder interest and came by virtue of service/ performance and not birth or lineage.