For Russia's Entrepreneurs, Inheritance Is Open Question
- By Alex Anishyuk
- May. 28 2010 00:00
- Last edited 17:51
Most Russian entrepreneurs have not thought seriously about what to do with their businesses when they retire, but many say they want to give their potential heirs both a Russian and a Western education to ensure that they would be up to the job.
Twenty-one businessmen and four businesswomen — each with a personal net worth of more than $50 million or owning a business that is worth at least $100 million — were surveyed in the summer and fall of 2009 by Swiss bank UBS and Campden Research. The respondents were interviewed for about two hours on condition of anonymity on a number of wealth management issues, the companies said.
The issue of inheritance gained prominence in February when Vladimir Potanin, ranked by Forbes as Russia's 19th-richest person with a fortune of $2.1 billion, told the Financial Times that he would leave most of his fortune to charity instead of his three children.
“An inherited million allows one to … realize your goals," he told Bloomberg at the time. "An inherited billion kills a person, depriving him of a meaning in life.”
But not everyone shares his sentiment. Sixty percent of those polled said they would involve their family in their business in some capacity, while 64 percent said they would take on close relations in managerial roles.
Still, only 32 percent said they would create incentives for their children to take up the family business, while 68 percent plan to support them as they follow their own careers.
Informal ties play a big role in business relations, as most entrepreneurs trust their money to people they know personally, the survey found.
“It is important to find the right person as your relationship in a large bank,” said a 41-year-old entrepreneur. “I think people are more important than the bank.”
“I only work with local banks, these are banks of friends, who own them, and therefore I have a lot of confidence,” another entrepreneur explained.
But other results of the survey go against the stereotype of Russian society being a clannish community where family connections are vital for a successful business.
In 72 percent of cases, the entrepreneurs said their family members hold no stake in their company and would not be entitled to one in the future.
“I don't have succession planning, and I am the only one in the family who has the overview of the wealth: My kids are still too young, and my wife is not involved so as not to expose my business to additional risks,” one of the respondents said. “Just look at some of the high-profile divorce cases, and you will understand me.”
Lack of family involvement is expected, because children of most Russian businessmen are still very young, the researchers wrote in their report, although the question could become more important in the next five to 10 years.
Giving children both a Russian and a Western education is considered essential by 80 percent of respondents. Only 12 percent think a local college or university will suffice, while 8 percent were in favor of an exclusively Western education.
“I want my kids to get their basic education and first degree in Russia,” said one of the entrepreneurs polled. “If they want to continue, then it should be at an international school abroad. I want my kids to feel and understand our own culture before I send them abroad.”
The main goal of the survey was to get a better understanding of Russian business leaders, virtually none of whom have inherited significant wealth, Dominic Samuelson, managing director of Campden Research, said in a statement.
“A lot has been written about Western entrepreneurs over the years, however, little is properly understood about the Russian businessmen and women who have been in the driving seat of developing businesses in Russia since the fall of communism over two decades ago,” he said.