Corporate Finance Puzzle 2: Family Group Corporate Governance

In much of Asia and Latin America, businesses are run and controlled by family groups. Until a few decades ago, these family groups remained privately owned but many have listed their companies publicly, and today investors can and do buy shares in their companies, even though the "corporate governance" is flawed. Specifically, these companies are run and completely controlled by families, often with less than 10% of the shares, using cross holdings and pyramid holding structures to exercise control. Why? The answer is that family group companies also have continuity and sometimes culture that allows them to be more "long term" in their decision making, and many of the companies control the crown jewels of the economies that they operate in.


Start this puzzle with a post that I wrote a long time ago, where trouble was brewing at the Tata Group, the family group controlling Tata Motors:

I note the pluses and minuses for shareholders from investing in family group companies.


One of India's most successful family group companies in recent years has been the Adani Group, a first-generation family group company founded by Gautam Adani. It is heavily focused on infrastructure business, is connected strongly to political power in India and has seen its market cap zoom over the last two years in particular. In the post below, I look at the Adani Group's growth over time, and examine how it has become the focus of a US-based short seller in Hindenburg, which contends that the group has indulged in earnings and price manipulation, and that institutions have looked away.


In the post, I also look at the ownership structure for the Adani Group and note that not only does the group control 73% of the shares outstanding in the company, but that statistic has barely budged over the last decade, even as the company has grown massively. There is a valuation in the post, but I would like your focus to stay on corporate governance at Adani specifically and at family group companies, in general.


  1. In terms of mechanics, how does a family keep its ownership stake intact as a company is growing?
  2. The Hindenburg report points to shell companies in the Mauritius that own shares in the Adani Group but are controlled by the family? How do these shell companies play out in the corporate governance game?
  3. As a shareholder in the Adani Group, do you think that you as a shareholder had any say in how the company was run just a few months?
  4. Are you more likely to be listened to now, and why?
  5. In family group companies, what are the risks that you are exposed to as a shareholder, and how you factor that in, when investing in these companies?
  6. In family group companies, is it a given that shareholders have no power? In other words, if you are a member of a family group that controls publicly traded companies, how would you go about fostering corporate governance (giving shareholders more power in the company) and why might you do it?