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<ul><li>PriceWaterhouseCoopers resigned as Reliance Capital and Reliance Home Finance’s auditor effective on June 11.</li><li>PwC said the company prevented it from exercising independent judgment.</li><li>PwC noted some observations and transactions and did not receive satisfactory response to queries.</li></ul> Top accounting firm PriceWaterhouseCoopers (PwC) resigned as Reliance Capital and Reliance Home Finance’s auditor effective on June 11. In a letter, PwC said that the company prevented it from performing its duties as statutory auditors. The stock of Reliance Capital fell as much as 7% in early trade on Tuesday (June 12) before recovering. As per a letter by PwC which was a part of BSE filing by Reliance Capital, the company prevented it from exercising independent judgment in making a report to the members of the company. “And impaired its independence and hence it is no longer in a position to complete the audit and instead feels compelled to withdraw from the audit engagement and resign,” the letter said. The dispute started when PwC noted some observations and transactions which in its assessment if not resolved satisfactorily might be significant or material to the financial statements. And, that it did not receive satisfactory response to its queries. The Anil Dhirubhai Ambani Group company also did not convene an audit committee meeting within the expected time, PWC said in a letter. Instead, it said that it will initiate legal proceedings against the firm. “PWC’s observations are completely baseless and unjustified. PWC has acted prematurely without even statutory discussions with the Audit Committee. There is no question of ‘diversion’; zero loans and / or liquidity have been provided by any lender in the PWC audit period,” Reliance Capital said in a statement on June 13. “Reliance Capital is by law required to fund only group entities, being a Core Investment Company (CIC). All resources have been utilised purely to support group debt servicing of Rs 35,000 crore in past 14 months,” the statement said. The other auditor Pathak H D A Associates will continue as the sole statutory auditor. This comes after a confidence-building conference call by Anil Ambani, the chairman of the ADA group on June 11. He had claimed to service all the group’s debt obligations and spoke about how he was ‘personally anguished’ by rumour mongering which has hammered his group companies’ stock. SEE ALSO: <a href="https://www.businessinsider.in/business/billionaire-anil-ambani-ready-to-pay-all-debts-of-reliance-goup/articleshow/69738912.cms" data-type="tilCustomLink" target="_blank">High on debt troubled billionaire Anil Ambani blames everyone but himself</a>

The auditor to Anil Ambani firm Reliance Capital says it wasn't allowed to do its job

<ul><li>Reliance Capital board took note of views from legal experts and other auditors to conclude that it did not violate any laws.</li><li>PwC quit as company’s statutory auditor alleging that it wasn’t allowed to work independently.</li><li>In June, yet another group company Reliance Infrastructure’s auditor too said that it did not receive enough evidence to complete its audit. </li></ul> Almost two months after PriceWaterhouseCoopers (PwC) quit as the auditor of Reliance Capital, the company’s Board of Directors gave a clean chit to the management. In a special review meeting, the board of Reliance Capital took note of views from legal experts and other joint auditors to arrive at the conclusion that it did not violate any laws, as <a href="https://www.businessinsider.in/anil-ambani-reliance-capital-auditor-pwc-resigns/articleshow/69750766.cms">alleged by PwC</a>. Reliance Capital’s share price closed the day 2% lower and the board decision was announced after market close. The stock has lost nearly half its value since PwC quit as the auditor nearly two months ago. It’s down over 47% since that day. “The Board also noted that PWC had duly audited the accounts for the financial year 2017 – 2018, as also limited review of financial results of three consecutive quarters ended December 2018, without any qualifications or raising any concerns,” Reliance Capital said in a media release. On June 11, PwC shot off a letter quitting as the statutory auditor of the company alleging that the company disallowed it from making an independent judgment in its report. “The PWC letter is devoid of any rationale or basis and is invalid,” RCap said. In its letter, PwC said, “RCap impaired its independence and hence it is no longer in a position to complete the audit and instead feels compelled to withdraw from the audit engagement and resign.” The dispute started when PwC noted some observations and transactions, which according to its auditor, had to resolved satisfactorily. If not done so, it would be “significant or material” to the financial statements. When it questioned the company, PwC did not receive satisfactory response to its queries. “PWC had chosen not to attend the audit committee meeting on June 12, 2019 despite being invited to do so. It abruptly resigned at the unearthly hour of 4.32 am on June 11,” RCap said in today’s statement. However, PwC is not the only company which had found discrepancies in with the highly indebted Anil Dhirubhai Group. In the very same month of PwC’s exit, Reliance Infrastructure’s auditor said that they did not receive enough evidence to complete the audit. Pathak H D&amp; Associates could not find any ‘evidence’ of Rs 8,858 crore which were listed as receivables and inter-corporate deposits like interests and advances. SEE ALSO <a href="https://www.businessinsider.in/anil-ambani-reliance-capital-auditor-pwc-resigns/articleshow/69750766.cms">The auditor to Anil Ambani firm Reliance Capital says it wasn't allowed to do its job</a> <a href="https://www.businessinsider.in/anil-ambani-owned-rel-infra-auditor-says-money-missing/articleshow/69819256.cms">Anil Ambani company Reliance Infra's auditors reveal all, say there is missing money on balance sheet</a>

Anil Ambani’s Reliance Capital gets a clean chit from the Board on audit violations

<keyword id="1492983" type="PERSON" weightage="100" keywordseo="Shinjini-Kumar">Shinjini Kumar</keyword>, a former Reserve Bank of India (RBI) executive and PricewaterhouseCoopers (PwC) executive director, is all set to join <keyword id="6357120" type="UNKNOWN" weightage="100" keywordseo="PayTM">Paytm</keyword>'s payments bank as the CEO, multiple sources with direct knowledge of the matter told TOI. In the past, Kumar has also had a stint at Bank of America Merrill Lynch. 
 
She is expected to join Paytm in March, as the company gets ready to start its payments bank operations after June this year. While they had earlier planned to start operations in the first quarter, there has been some delay in the operation. 
 
The Noida-headquartered company is looking for fresh capital and discussions with investors are said to be at an early stage. 
 
At PwC Mumbai, Kumar led the banking, capital market and financial services regulatory practice for 5 years. It was in 2010 that she had quit Bank of America's investment division, where she was heading the India compliance, managing regulatory and compliance risk across product lines, including corporate and investment banking, global markets, equities and private banking. 
 
Paytm is funded by Chinese e-commerce giant Alibaba, and is one of the 11 entities to have got a license from the RBI to establish a payments bank. The list also includes Reliance Industries, Aditya Birla Group, Airtel and Vodafone. 
 
To make the launch a grand and successful affair, Paytm has been making key senior-level appointments from companies like Amazon, Airtel and ITC. Presently, it is in the process of hiring about 3,000 people for handling the operation of its payments bank. 
 
<a href="https://pbs.twimg.com/profile_images/378800000738982431/41322cf9beaebab3a1fb58cdf8226eea_400x400.jpeg">Image source</a>

Paytm payments bank to be headed by former RBI and PwC executive Shinjini Kumar

<ul><li>Insurance regulator IRDAI warns insurance firms to make “prudent” decisions when investing in companies whose credit ratings have been downgraded. </li><li>IRDAI had recently allowed <keyword id="6367143" type="UNKNOWN" weightage="20" keywordseo="LIC">LIC</keyword> to vastly exceed the maximum of 15% stake an insurer can hold in any one company. </li><li>Policyholders’ funds potentially at risk with large exposure to the investments.</li></ul> Amid an escalating bad loans crisis, India appears to be <a href="https://www.businessinsider.in/after-idbi-bank-lic-now-has-to-bail-a-huge-infrastructure-lender-out/articleshow/65840416.cms">relying heavily</a> on the capital of state insurance giant Life Insurance Corporation (LIC) to bail out some of its troubled lenders, leading to experts worrying about a dangerous precedent being set by the insurer. The country’s bad debt crisis involving its state-owned <keyword id="6368751" type="UNKNOWN" weightage="20" keywordseo="banks">banks</keyword> had largely been believed to have had manageable systemic risk with fairly low liquidity concerns –- until now. India is in the midst of its worst <a href="https://timesofindia.indiatimes.com/business/india-business/worst-liquidity-crunch-in-two-years-spooks-indian-financiers/articleshow/65935292.cms">liquidity crisis</a> in two years triggered by the potential bankruptcy of infrastructure finance company <a href="https://www.livemint.com/Money/QBX7Nlk3SmtboyZPExoKtN/ILFS-Its-time-for-a-surgery-not-bandaid.html">Infrastructure Leasing and Financial Services Ltd</a> (<keyword id="6357293" type="UNKNOWN" weightage="20" keywordseo="ILFS">IL&amp;FS</keyword>), which has defaulted on a series of loan repayments, raising alarm in the country’s shadow banking sector and spooking financial markets. LIC, the largest shareholder in IL&amp;FS with a 25.3% stake, is <a href="https://www.businessinsider.in/after-idbi-bank-lic-now-has-to-bail-a-huge-infrastructure-lender-out/articleshow/65840416.cms">reportedly</a> investing close to ₹40 billion ($550 million) into IL&amp;FS non-convertible debentures and also expected to subscribe to a ₹45 billion rights issue later this year. It is reportedly in the process of <a href="https://www.livemint.com/Companies/7sWf4fZDJAagLyFgyWemuN/ILFS-may-move-NCLT-against-admitting-bankruptcy-case.html">requesting</a> India’s insolvency court National Company Law Tribunal to allow it time to resolve its current situation through its capital raising efforts and hold off on admitting a bankruptcy suit. The news of IL&amp;FS comes weeks after LIC stepped in to also bailout state-owned <keyword id="67881" type="CITY" weightage="20" keywordseo="IDBI">IDBI</keyword> Bank by increasing its stake from 8% to 51% for upto ₹130 billion. Regulatory exceptionalism India’s regulators restrict investments by insurance organisations to a maximum of 15% stake in any one company. In the IDBI case, LIC sought special clearance from India’s insurance regulator Insurance Regulatory and Development Authority of India (IRDA), which reportedly <a href="https://www.livemint.com/Companies/XY6tlJMDpBAKAlhv2dPczJ/IDBI-Bank-says-no-discussion-on-investment-by-LIC.html">waived the threshold</a> “based on market conditions and the larger interest of the market and shareholders,” Mint reported in June. Additionally, out of the investment LIC made in IDBI, less than 1% or only about ₹1 billion has come from LIC’s shareholders with the remaining being policyholders’ money, according to the Mint report. That shows the extent of how risky the move can be. While LIC has indicated it will pare down its stake in IDBI in the coming years, no timeframe has been set by the insurer. LIC had earlier made an <a href="https://economictimes.indiatimes.com/markets/stocks/news/will-lic-follow-the-corp-bank-model-to-pare-stake-in-idbi/articleshow/64957202.cms">investment</a> in Corporation Bank exceeding the threshold limit of 15% to buy a 27% stake, which took about 16 years for LIC to pare down, experts point out. A case of throwing good money after bad? Following the news of LIC investing in IL&amp;FS, a subtle warning has come from the Insurance Regulatory and Development Authority of India (Irdai), which has asked insurance firms to make “prudent” decisions when investing in companies whose credit ratings have been downgraded. Subhash C Khuntia, chairman of IRDAI, has <a href="https://www.business-standard.com/article/markets/i-m-sure-lic-will-take-a-prudent-decision-on-il-fs-says-irdai-chairman-118091200040_1.html">said</a>, “Normally, when there is a downgrade, insurers should withdraw their investment and place it somewhere else,” Khuntia said, adding it is up to the insurer to derive maximum value from its investments. The National Organisation of Insurance Workers (NOIW), has also opposed LIC’s move to invest in IL&amp;FS, with NOIW organising secretary Milind Ballal <a href="https://mumbaimirror.indiatimes.com/mumbai/other/sangh-union-opposes-lic-investment-in-ilfs-group/articleshow/65894098.cms">stating</a> “thousands of crores of rupees collected by the LIC from ordinary Indians as premium is at stake.” Joydeep K. Roy, partner and leader, insurance sector, PwC, had termed LIC’s investment in IDBI an <a href="https://www.livemint.com/Companies/XY6tlJMDpBAKAlhv2dPczJ/IDBI-Bank-says-no-discussion-on-investment-by-LIC.html">“extraordinary event</a>” that “should not be allowed as a precedent.” “Insurers holding a larger share of any one company for policyholders’ funds can increase the entire risk profile of the portfolio. However, this is ultimately an equity transaction for policyholder funds and can result in profits or losses,” Roy said. While Sanket Kawatkar, Principal and Consulting Actuary, Life Insurance, Milliman India, has <a href="https://economictimes.indiatimes.com/wealth/insure/lic-idbi-bank-deal-how-life-insurance-companies-invest-your-money/articleshow/64894026.cms">warned </a>LIC policyholders’ benefits would be adversely impacted if LIC incurs a loss on its investment. Elsewhere, insurers’ exposure to bad debt has led to dire consequences. In the 2008 credit crisis in the US, for instance, insurance giant American Insurance Group (AIG) had a near collapse because of the insurer’s exposure to soured loans through its investment in risky credit default swaps. That led to the US Federal Reserve bailing out AIG by giving a crucial loan of $85 billion that kept it from going under.

Why India’s reliance on state insurance giant LIC to bailout troubled lenders is worrying

<ul><li><keyword id="78512" type="ORGANIZATION" weightage="20" keywordseo="IIM-Calcutta">IIM Calcutta</keyword> records its highest ever average starting salary at ₹28 lakh this placement season. </li><li>As many as 136 companies visited the campus this year, extending 492 offers. </li><li>Of the total of 439 students, nearly 43 graduates secured job offers with an annual compensation of ₹54.5 lakh. </li><li>One in four offers that were rolled out this year received the starting salaries at ₹41.8 lakh per annum. </li></ul>The placement season brought cheer to the students of top management institute — Indian Institute of Management (IIM) Calcutta. The institute has recorded its highest ever average starting salary at ₹28 lakh this placement season. Of the total of 439 students, nearly 43 graduates secured job offers with an annual compensation of ₹54.5 lakh. In fact, one in four offers that were rolled out this year received the starting salaries at ₹41.8 lakh per annum. As many as 136 companies visited the campus this year, extending 492 offers. “I congratulate our graduating students on receiving such coveted employment offers. These demonstrate the high value of the education imparted at IIM Calcutta and our students' remarkable skills and capabilities,” said Professor Anju Seth, director at IIM Calcutta. <a href="https://www.businessinsider.in/careers/news/indias-best-minds-from-iim-ahmedabad-xlri-mdi-gurgaon-are-heading-to-consulting-firms/articleshow/74055916.cms">IIM-C joins IIM-A, XLRI and MDI securing maximum offers from the consulting sector</a> Consulting firms emerged as the largest recruiters at IIM Calcutta, making up for over 30% of the offers. The top recruiters include Boston Consulting Group (BCG), McKinsey &amp; Co, which also rolled out as many as 50 offers at IIM Ahmedabad. “Introduction of Superset has made our processes even more transparent and efficient. We remain committed to providing better outcomes for our students and recruiters through policy and process changes,” added Abhishek Goel, chairperson CDPO at IIM Calcutta. Other top recruiters were Bain &amp; Co., Kearney, PricewaterhouseCoopers (PwC) and Accenture. This has become a common trend across B-schools. XLRI also attracted the highest number of offers from the consulting domain at 26%, this year. Global multinationals KPMG and PwC were the top most recruiters, rolling out the highest number of offers. This simply mirrored last year’s trend wherein Boston Consulting Group was the leading recruiter. On the other hand, more than half (57%) of the offers at MDI came from companies in the consulting sector. Finance, General Management, Sales and Marketing IIM Calcutta students received 83 job offers from PE firms and other finance companies — accounting for 17% of the total offers. General management and sales and marketing roles added up to 30% of the total offers. These offers came from Aditya Birla Group, Mahindra &amp; Mahindra, Reliance, Vedanta, TrueNorth, Hindustan Unilever, Colgate-Palmolive, ITC, Mondelez, and FIITJEE. Recruiters hiring for finance roles were Bank of America Merrill Lynch, Barclays, Goldman Sachs, Arga Investment Management, Gaja Capital and JP Morgan Chase. In addition to this, 22% of overall offers were rolled out in product management, analytics and operations. Top recruiters included Microsoft, Google, Salesforce, Amazon, Flipkart, Udaan, EXL Service, American Express, HCL, UnitedHealth Group (Optum) and Mastercard. See also: <a href="https://www.businessinsider.in/careers/news/indias-best-minds-from-iim-ahmedabad-xlri-mdi-gurgaon-are-heading-to-consulting-firms/articleshow/74055916.cms">India’s best minds from IIM Ahmedabad, XLRI are heading to consulting firms</a> <a href="https://www.businessinsider.in/careers/news/xlri-students-bag-domestic-and-international-job-offers-with-salaries-over-50-lakhs/articleshow/73974506.cms">XLRI students bag domestic and international job offers with salaries over ₹50 lakh</a> <a href="https://www.businessinsider.in/careers/news/iim-lucknow-iim-kozhikode-mdi-gurgaon-secure-100-placements-offering-2-5-million-as-the-starting-pay/articleshow/73722200.cms">Indian B-schools are beating the slowdown with average salary offers at ₹2.5 million</a>

One in four job offers at IIM Calcutta pays over ₹41.8 lakh per annum

Good morning and welcome to <keyword id="11420569" type="UNKNOWN" weightage="60" keywordseo="insider-finance">Insider Finance</keyword>. I'm Dan DeFrancesco, and here's what's on the agenda today:<ul><li>Robinhood's IPO paperwork is public. We broke down everything from its <a href="https://www.businessinsider.com/robinhood-ipo-risk-factors-regulation-harm-brand-hacks-2021-7">risk factors,</a> to its <a href="https://markets.businessinsider.com/news/stocks/robinhood-says-dogecoin-accounted-for-34-of-its-crypto-trading-revenue-in-the-1st-quarter-and-lists-declining-interest-in-the-meme-token-as-a-risk-in-its-highly-anticipated-ipo-filing-1030573103">reliance on Dogecoin trading</a> and <a href="https://www.businessinsider.com/robinhood-customer-acquisition-costs-details-marketing-budget-ipo-filing-hood-2021-7">how much it spends to get new customers</a>. </li><li>Branch banking is rapidly evolving. Executives overseeing more than 24,000 locations at top US banks <a href="https://www.businessinsider.com/bank-branch-strategy-future-bank-of-america-chase-wells-fargo-2021-6">share their predictions for the future</a>. </li><li>An elderly couple is suing JPMorgan over claims they were <a href="https://www.businessinsider.com/elderly-couple-sues-jpmorgan-over-advisory-misled-on-investments-2021-6">pressured into risky investments</a>. </li></ul>We've opened up nominations for our next class of <keyword id="42111" type="COMPANY" weightage="60" keywordseo="Wall-Street">Wall Street</keyword> rising stars. We want to spotlight the standouts in investment banking, investing as well as sales and trading. <a href="https://www.businessinsider.com/insider-nominations-rising-stars-wall-street-how-to-apply-list-2021-6">Here's how to nominate someone</a>. You're invited: Join us Tuesday at 12 p.m ET for a virtual event presented by PwC, spotlighting the biggest trends CEOs will focus on in the next 12 months. <a href="https://event.on24.com/eventRegistration/EventLobbyServlet?target=reg30.jsp&amp;partnerref=editorial_newsletter&amp;eventid=3133937&amp;sessionid=1&amp;key=7A1B1FC73859D6F335A5645AA0F68725&amp;regTag=&amp;V2=false&amp;sourcepage=registeralse&amp;sourcepage=register" target="_blank" rel="noopener noreferrer">Register here</a>.<a style="font-weight: bold;" href="http://newsletter.businessinsider.com/join/4np/insider-finance">If you're not yet a subscriber, you can sign up here to get your daily dose of the stories dominating banking, business, and big deals.</a>Like the <keyword id="621414" type="PERSON" weightage="60" keywordseo="Newsletter">newsletter</keyword>? Hate the newsletter? Feel free to drop me a line at <a href="mailto:ddefrancesco@businessinsider.com">ddefrancesco@businessinsider.com</a> or on Twitter <a href="https://twitter.com/dandefrancesco">@DanDeFrancesco</a>. <h3>Inside Robinhood's IPO filing</h3><div type="image" title="Vlad Tenev, Robinhood" height="2690" width="3586" msid="84062991" hostid="261"></div>Robinhood's paperwork for its highly anticipated IPO was published Thursday.Here's everything you need to know:<ul><li><a href="https://www.businessinsider.com/robinhood-ipo-risk-factors-regulation-harm-brand-hacks-2021-7">Robinhood warns that a Dogecoin crash, 'limited operating experience,' and any new regulations could hurt its stock price</a></li><li><a href="https://www.businessinsider.com/robinhood-customer-acquisition-costs-details-marketing-budget-ipo-filing-hood-2021-7">Robinhood slashed how much it spends to nab each new customer. Here's how it did it.</a></li><li><a href="https://www.businessinsider.com/robinhood-ceo-cell-phone-search-warrant-ipo-filing-vlad-tenev-2021-7">Robinhood's IPO filing reveals the US Attorney's Office executed a search warrant for CEO Vlad Tenev's cell phone</a></li><li><a href="https://www.businessinsider.com/robinhood-ipo-public-stock-founder-letter-to-investors-2021-7">Robinhood has filed for an IPO. Read its cofounders' letter to future investors.</a></li><li><a href="https://markets.businessinsider.com/news/stocks/robinhood-says-dogecoin-accounted-for-34-of-its-crypto-trading-revenue-in-the-1st-quarter-and-lists-declining-interest-in-the-meme-token-as-a-risk-in-its-highly-anticipated-ipo-filing-1030573103">Robinhood says dogecoin accounted for 34% of its crypto-trading revenue in the 1st quarter, and lists declining interest in the meme token as a risk in its highly anticipated IPO filing</a></li><li><a href="https://markets.businessinsider.com/news/stocks/retail-traders-were-outraged-when-robinhood-restricted-trading-in-memes-stocks-but-the-company-s-ipo-filing-shows-active-users-still-grew-by-6-million-in-the-1st-quarter-1030573153">Retail traders were outraged when Robinhood restricted trading in memes stocks, but the company's IPO filing shows active users still grew by 6 million in the 1st quarter</a></li><li><a href="https://www.businessinsider.com/sofi-robinhood-ipo-allocation-retail-investors-stock-trading-underwriting-brokerages-2021-3">Robinhood is reserving up to 35% of shares in its IPO for its own users. Here's how the fintech is trying to disrupt a market dominated by Wall Street's elite.</a></li><li><a href="https://www.businessinsider.com/robinhood-lawyers-lawsuit-legal-sec-regulations-fintech-claims-trading-app-2021-1">Robinhood settled with FINRA and the SEC, but still faces legal risks as it prepares to IPO. Here are 14 lawyers it's hired for help.</a></li></ul><h3><a href="https://www.businessinsider.com/bank-branch-strategy-future-bank-of-america-chase-wells-fargo-2021-6">These 10 execs will determine the future of branches at the biggest US banks. Here's how they're thinking about more than 24,000 locations.</a></h3><a href="https://www.businessinsider.com/bank-branch-strategy-future-bank-of-america-chase-wells-fargo-2021-6"><div type="image" title="Illustration of a futuristic glass bank with a large illuminated dollar sign logo above the entrance, surrounded by logos of Wells Fargo, Bank of America, and Chase Bank" height="1685" width="2247" msid="84062996" hostid="261"></div></a>Executives at the top US banks - including JPMorgan Chase, Citi, and Wells Fargo - share their thoughts on the future of branch banking. <a href="https://www.businessinsider.com/bank-branch-strategy-future-bank-of-america-chase-wells-fargo-2021-6">Click here to read the entire story.</a><h3><a href="https://www.businessinsider.com/elderly-couple-sues-jpmorgan-over-advisory-misled-on-investments-2021-6">An elderly couple is suing JPMorgan for $20 million over claims they were misled on risky investments</a></h3><a href="https://www.businessinsider.com/elderly-couple-sues-jpmorgan-over-advisory-misled-on-investments-2021-6"><div type="image" title="JPMorgan" height="1333" width="1777" msid="84063003" hostid="261"></div></a>The Doelgers say JPMorgan and investment manager Chickasaw Capital Management, which specializes in master limited partnership investments, pushed them to make complex investments without adequately explaining the risks involved. <a href="https://www.businessinsider.com/elderly-couple-sues-jpmorgan-over-advisory-misled-on-investments-2021-6">Learn more about the suit here</a>.<h3><a href="https://www.businessinsider.com/plaid-portal-hiring-investing-users-connections-financial-data-2021-7">Plaid is hiring like crazy and investing big in a new portal giving consumers control of their financial data</a></h3><a href="https://www.businessinsider.com/plaid-portal-hiring-investing-users-connections-financial-data-2021-7"><div type="image" title="Headshot of Plaid’s CTO Jean-Denis Greze" height="3010" width="4006" msid="84063009" hostid="261"></div></a>Plaid's consumer privacy group is one of the fastest growing teams at the company. <a href="https://www.businessinsider.com/plaid-portal-hiring-investing-users-connections-financial-data-2021-7">Here's a look at their its plans</a>. <h3><a href="https://www.businessinsider.com/kkrs-new-york-dealmakers-are-going-back-to-office-on-july-12-2021-7">KKR wants its New York staff back in office this month. The return comes as the private-equity giant unveils a wealth of new deals.</a></h3><a href="https://www.businessinsider.com/kkrs-new-york-dealmakers-are-going-back-to-office-on-july-12-2021-7"><div type="image" title="KKR" height="1332" width="1776" msid="84063011" hostid="261"></div></a>The private-equity firm expects New York staff to be vaccinated before returning to the office. <a href="https://www.businessinsider.com/kkrs-new-york-dealmakers-are-going-back-to-office-on-july-12-2021-7">Here's what we know.</a><h3><a href="https://www.businessinsider.com/rich-americans-tax-domicile-clarfeld-citizens-2021-6">Rich snowbirds want to make their pandemic moves permanent and lower their tax bills. A family office director walks through the process of establishing a new residence.</a></h3><a href="https://www.businessinsider.com/rich-americans-tax-domicile-clarfeld-citizens-2021-6"><div type="image" title="Headshot of Clarfeld executive Donna Ciuffo" height="2646" width="3529" msid="84063012" hostid="261"></div></a>Clarfeld's Donna Cuiffo says it takes a lot more than spending more than half a year in a new abode. <a href="https://www.businessinsider.com/rich-americans-tax-domicile-clarfeld-citizens-2021-6">Here's her advice</a>.<h3><a href="https://www.businessinsider.com/tiger-globals-portfolio-private-venture-startup-investments-ipo-2021-5">Tiger Global just netted $1 billion on a ride-hailing app bet. 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Inside Robinhood's IPO filing

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"></div></div></div>THE "Lucky Sperm Club", as Warren Buffett likes to call it, is still going strong in the commanding heights of business. On opposite sides of the Atlantic, Ana Botín and Abigail Johnson have recently succeeded their fathers in filling two of the most powerful jobs in finance, as chairman of Banco Santander and chief executive of Fidelity Investments, respectively.
Founding dynasties run, or wield significant clout at, some of the world's largest multinationals, from Walmart to Mars, Samsung to BMW. Half a century ago management experts expected the hereditary principle to fade fast, because of the greater ability of professionally-run public firms to raise capital and attract top talent. In fact, family firms have held their ground and, in recent years have increased their presence among global businesses.
Family-controlled firms now make up 19% of the companies in the Fortune Global 500, which tracks the world's largest firms by sales. That is up from 15% in 2005, according to new research by McKinsey, a consulting firm (which defines such firms as ones whose founders or their families have the biggest stake, of at least 18%, plus the power to appoint the chief executive). Since 2008 sales by these firms have grown by 7% a year, slightly ahead of the 6.2% a year by non-family firms in the list. McKinsey sees these trends continuing for the foreseeable future.
This is largely because of rapid growth in big developing economies where family ownership is the norm among large businesses. Since 2005 the countries that have most increased their share of the Fortune Global 500 are Brazil, China, Russia, South Korea and Taiwan. By 2025, McKinsey forecasts, there will be more than 15,000 companies worldwide with at least $1 billion in annual revenues, of which 37% will be emerging-market family firms. In 2010 there were only 8,000 firms worldwide of this size, and only 16% of them were family-controlled and from emerging markets.
Around 85% of $1 billion-plus businesses in South-East Asia are family-run, around 75% in Latin America, 67% in India and around 65% in the Middle East. China (where the proportion is about 40%) and Sub-Saharan Africa (35%) stand out for their relatively low share of family firms, because in both cases many large firms are state-owned.
However, even in the rich world, big family firms are defying expectations of their demise. The tendency for founders and their heirs to abandon control to faceless institutional shareholders seems to have reached a limit. Of the American firms in the Fortune Global 500, 15% are family ones, only slightly less than in 2005. Among them is the world's largest family firm, Walmart, in which the children of the late founder, Sam Walton (pictured, third from left) are still big shareholders. His eldest son, Rob, is the chairman, another son, Jim, is also on the board and their sister, Alice, also inherited a huge stake. In Europe, 40% of big stockmarket-listed companies still have a controlling family.
Until recently many emerging economies lacked the large, liquid capital markets that rich countries enjoy. So local firms could not rely on them to provide funds for expansion, and depended instead on founding families reinvesting their profits. As such firms' access to domestic and global stock and bond markets continues to improve, it is possible to imagine this situation changing; family owners could seize the opportunity to make a lucrative exit, as happened for a time in the rich world.
However, one reason why the experts' predictions of 50 years ago have proved wrong is that stockmarkets and regulators have been so accommodating in letting founding families retain a fair degree of control despite selling large stakes to outside investors. One way they have done so is through special classes of shares--a trend that has lately featured in a number of technology-firm flotations: who knows, perhaps in future Facebook will be controlled by the Zuckerberg dynasty and Google by the Page and Brin clans.
Investors have accepted such arrangements as the price of getting a slice of these firms' profits, but they rarely like them. Some institutional investors were unhappy, for example, when a deal struck years ago by her father allowed Ms Botín to succeed him in the chair at Santander shortly after his death in September, even though the family owned only 2% of the bank.
Besides being able to access capital markets without losing control, there are at least four other reasons why so many big firms have defied expectations and stayed under family control. One is that they are often the product of a superbly talented entrepreneur like Sam Walton. While such founders are alive and on form, the combination of their abilities and the freedom they have as controlling shareholder to run by their own rules often gives them a strong competitive advantage. Even after they are gone, their heirs can keep up the firm's success, simply by continuing to follow the founder's successful principles.
Whether private or public, family firms also tend to take a longer-term perspective. As Heinrich Liechtenstein of IESE business school in Barcelona observes, this is true both relative to non-family-controlled public companies, which tend to be obsessed with meeting the demands of investors to maximise short-term profits, and companies owned by private-equity firms, which although able to take a longer view than public firms must still cater to investors who want to sell up for a juicy profit within a few years.
Family firms are also less likely to load up on debt. An obvious exception, and an illustration of why most family capitalists fear debt, is the recent collapse of Espírito Santo. Massive debts turned the family-owned Portuguese financial conglomerate into one of Europe's largest corporate failures, ending in a state bail-out of the bank at the group's core. A reluctance to borrow may limit growth in good times, but it can make family firms more resilient when the going is tough.
They also tend to have better labour relations, according to studies by Holger Mueler and Thomas Philippon of New York University's Stern business school. This may be because workers are readier to believe promises that they will be rewarded for delivering in the long run, if such pledges are made by founding families rather than outsider bosses who may be gone in a few years. And in situations where businesses have to push through efficiency improvements, family owners may be more willing to act firmly when dealing with labour unions, because of their significant stake in the business, than salaried outsider bosses, the studies suggest. These are advantages especially in countries with generally hostile relations between workers and management, say the two economists.
Overall, those family firms that get big tend to have a superior corporate culture to their non-family peers, reckons Heinz-Peter Elstrodt of McKinsey. The firm has applied its index of "organisational health" to 114 family firms and around 1,200 other large companies. Family firms scored significantly higher on their culture, worker motivation and leadership, though they lagged slightly on innovation and being too internally focused.
The presence of a founding family seems to be good for a business's image. In a recent survey in 12 big economies by Edelman, a (family-run) PR firm, 73% of people said they trusted family-owned companies, compared with 64% who trusted publicly-traded companies in general, and 61% for both private-equity-owned and state-owned firms. This is no doubt why S.C. Johnson, a household-products maker, has as its slogan, "A Family Company".
There is evidence of a positive "family effect" on financial performance, according to a new study by Cristina Cruz Serrano and Laura Nuñez Letamendia of IE business school in Madrid. They calculated that EUR1,000 invested in 2001 in a portfolio of publicly traded family firms in Europe, weighted by market capitalisation, would have generated EUR3,533 by the end of the decade, compared with EUR2,241 from a portfolio of non-family firms. The difference is equivalent to five percentage points of extra return per year.
All this may be why, for all his professed disapproval of the Lucky Sperm Club, Mr Buffett wants his son, Howard (pictured, left, with his son, Howard Warren Buffett, an academic) to succeed him as chairman, and guardian of the firm's culture. The elder Mr Buffett is such a big fan of family firms that he likes to buy them: in October he bought Van Tuyl Group, America's largest family-owned car dealership chain. As with LVMH and Kering, two family-run French luxury-goods giants that have bought a number of European fashion houses, Mr Buffett's spiel to founding families is: if you want to sell up but want your business's culture preserved, it will be in safe hands with us.
Ultimately, whether big family firms will continue to defy expectations of their demise will depend on their ability to negotiate the rocks on which family businesses have a unique propensity to founder. One is the risk of squabbles among relatives. This summer, for example, a family feud nearly destroyed Market Basket, an American supermarket chain. Workers went on strike when their popular boss, Arthur T. Demoulas, was fired at the behest of his cousin, Arthur S. Demoulas. Disaster was only averted after pleas to the family by the governors of Massachusetts and New Hampshire.
No issue is potentially more toxic than the transition from one generation of a family to the next. In India, an epic feud began in 2002 after Dhirubhai Ambani, the founder of Reliance Industries, died without naming a sole heir. The battle between his sons, Mukesh and Anil, eventually led to the group being split in two.
In some cases even strong and successful firms can implode soon after a generational succession, which is why so many countries have some variation of the saying, "from shirtsleeves to shirtsleeves in three generations" (clogs to clogs, kimono to kimono). Edelman's survey found that the public's trust in family firms falls once the baton is passed from the founder to the next generation. Alarmingly, a study of 2,400 family firms in 40 countries published last month by PwC, a consulting firm, found that only 16% of them had a "discussed and documented" succession plan in place.
The families that do best are those which understand that their interests and those of their business can diverge, and put in place processes to manage the consequences of these differences, says John Davis of Harvard Business School, the author of several books about family firms.
Some families are adept at training the next generation to work in the family firm. Illycaffé, a coffee-maker now run by a third-generation Illy family member, has a pact setting the rules for when an Illy can go into the business: competence for the job is paramount. Sweden's Wallenberg business empire is run by a fifth generation of the founding family: two cousins, Jacob and Marcus Wallenberg, were groomed from an early age to run the group's industrial and financial sides respectively.
However, sometimes children do not want to join the family business, or turn out not to have inherited the entrepreneurial genes of the founder. It may then be in the best interests of the firm for a professional to run it, rather than a reluctant or incompetent scion, even if the family retains some control. Letting professionals take over can make a lot of sense. Talented managers are more likely to join a firm where there is a chance of getting to the very top, or at least where they do not have to work under a useless heir. Some 40% of the family firms interviewed by PwC said that professionalising their business was among the main challenges they face in the next five years.
Even when they have agreed to let an outside manager run their businesses, families sometimes find it hard to keep their hands away from the wheel. Luxottica, an Italian maker of sunglasses, was well run by a professional chief executive for ten years, but recently lost him, and six weeks later his successor, reportedly following differences of opinion with the founder, Leonardo Del Vecchio, and his wife, Nicoletta Zampillo.
Even when independent outsiders are brought in to serve on a family company's board, they can often fail to make the impact they should, notes Mr Davis. Outsiders often refuse to get involved in managing tensions within the family and assume their job is just to oversee the running of the business, when in reality they may be the last line of defence against a family breakdown destabilising the firm, he says.
In the rich world there is a strong contingent of firms which have demonstrated an ability to get the best out of being both family-controlled and professionally run. In some emerging markets, however, things are not so clear. Many of their big firms are still run by a founder with strong links to those in power, and only time will tell if they have what it takes to survive the passing of either the founder or the regime. However, the positive examples of Tata in India and Samsung in South Korea suggest that it is possible, even in places with a strong tradition of crony capitalism, for world-class, professionally run family firms to emerge.
As big emerging-market firms pass from the founders to their heirs, the challenge will be, as it has been in the rich world, to reconcile the family's needs and desires with the demands of running a successful business. They will need to learn that when it comes to company matters, as Michael Corleone put it in "The Godfather", that great study of a family firm, "It's not personal...it's strictly business."
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