Comfort Living Private Limited (CLPL) - An Indian Case Study on Family Business

Abstract

The family business started on 15th October 1990 with the founder Managing Director, Om Prakash engaging into construction and subsequently adding financial services. He further diversified by adding a paper mill business.

The first business in construction was conceived as result of childhood dream, a result of three brothers joining together and initiating after pooling in seed money in equal proportions along with a friend. Since, the focus was more into site management as a construction agency, little technical expertise was desired. Meanwhile, the youngest brother took up service in a housing finance firm (HFF). The day time was used for the assignment with HFF, while evenings and holidays were engaged at the construction sites.

An unprecedented split between the non family partner and the three brothers came in as a surprise, as the next generation demanded higher share of business based upon the contribution by each partner, which was unfortunately skewed un-proportionately. Each business partner started loosing the bonds of brother hood and family friendship. Each intended to push their next generation to heir ship, as a result of altruism.

Meanwhile, the connection with HFF came in for a surprise. Om Prakash was given a franchisee for the new business in the financial services by HFF. While it progressed, the lust of money transformed the founder MD to start siphoning the additional funds into private accounts that were primarily meant for the welfare of the business. As a result of bad governance, the firm, ruptured its entire books and is now in the process of being liquidated.

The family business is undergoing downfall as a result of opportunism, altruism, bounded rationality, moral hazard, adverse selection and goal dissonance.

Keywords: Altruism, Opportunism, Self Control, Moral Hazard, Adverse Selection, Goal Dissonance, Bounded Rationality, agency issues, family business