Need A Successor? Why Not Adopt A Son?

You’ve worked hard these past 30 years and have built up a nice little company. You’d like to retire but you don’t have a son or daughter to run the family jewel. Selling your company might be one option. Another might be adopting a son who could run it for you!

Sound strange? Well, it’s common practice in Japan. Take Osamu Matsuda for example. Born in Gero, Japan in 1930 and a graduate of Chuo University in 1953, Matsuda was on track for a very normal banking career: he became a loan officer in a local bank. His life took a dramatic turn when he married Shoko Suzuki, the grand daughter of Suzuki auto company patriarch, Michio Suzuki. The Suzuki’s had no son of their own and thus no one to run the family business, so they adopted Osamu. Osamu Suzuki, as he is called today, is the forth-adopted son to run the Suzuki Company.

There are roughly 5,600 companies in the world that are 200 years or older. Of these, 3,146 are located in Japan. The Hoshi Ryokan Hotel opened its doors in the year 718 and is the eldest family owned business in the world. It is currently in its 46th generation. The oldest American family owned business, Shirley Plantation in Dover, NH, made it through 11 generations. In 2010, after 40 years, Lucy Tuttle and her brother Will called it quits and put Shirley Plantation up for sale. They had no family member(s) who wanted to continue running the farm.

So why are Japanese family businesses so successful with their longevity? The surprising answer lies in their practice of adoption! In a typical year there are about 136,000 adoptions in the U.S.A. (population 321 mill.); Japan adoptions are in the magnitude of 90,000 annually (population 65 mill.). Almost all of the U.S. adoptions are of young children; in Japan 98% of the adoptions are of adults in their 20s and 30s. You heard right: 98% of all adoptions in Japan are of adults!

Japanese family business owners only want a son to take over the reins of the company if they have business acumen, are hard working and don’t have an entitlement mentality. If junior has a flawed character or lacks the mental horsepower that the patriarch is looking for, they will be overlooked and the parents will turn to adoption. Usually, this adoption comes from within the company and a talented manager is selected to not only take on the leadership of the company but also the family name. Other well-known Japanese family businesses that practice management-by-adoption are Toyota, Canon and Kikkoman.

Adoption as a business practice has the following benefits:

  1. It gives families options if they don’t have a suitable son to lead the family business.
  2. The threat of adoption improves the work ethic of biological sons who want to climb the career ladder in their family’s business.
  3. It gives opportunity to talented managers who might not have the opportunity to ever run a family owned business.

The newly adopted son receives a new name and swears allegiance to his new ancestors. And, if the family has a daughter, the newly adopted son usually picks up a wife in the transaction. With a fertility rate of only 1.41 births per woman, Japanese families are very eager to find a son-in-law for their daughter.

There has been external criticism of Japan’s adoption practice and some groups have voiced their opposition to the Japanese practice of “omiai”, or arranged marriages. We westerners might say that it is not fair that women don’t have the same business opportunities as men do and may be forced to marry a man based on purely business motives. Change might be coming to Japanese business, but don’t hold your breath. It could take another two to three generations.

Sources:

Talentierte Führungskraft als Sohn gesucht, Zeit-Online, Sept. 19, 2015

Child Welfare Information Gateway, U.S. Dept. of Health and Human Services, Sept. 2011

After 378 years, NH family goes up for sale, The Guardian, Aug. 1, 2010

Adoptive Expectations: Rising Sons in Japanese Family Firms, Insead Paper, Sept. 28, 2009

Oldest Firms in the World

Contact:  Burt@Lohoff-Gaida.com  www.Lohoff-Gaida.com  704.380.0405