Control of a conglomerate passes by inheritance while the capability to run it does not, so ownership and competence separate over generations.
Korean industrial groups combined family ownership with cross-shareholdings that let a small direct stake control a large structure. The arrangement concentrated decisions where speed was an advantage during rapid industrialisation, and produced a succession problem the same structure makes hard to solve, since the controlling family cannot be outvoted.
In practice
- A founder's grandchild takes a chief executive role that eleven internal candidates were better qualified for.
- A family firm's board cannot remove the chief executive because the shares that would do it are the chief executive's.