Korean has already belonged to aging society since 2000 and is expected to fall under the aged society in 2018. According to such tendency, the average age of small and medium business enterprisers also increased from 48.2 years old in 1993 to 52.7years old in 2004. The rate of CEO over 60years old at the end of 2005 was 14.5% and it shows increase as much as 3% comparing to that of ten years ago.

The trend of such aging society means that the business succession will be one of the most important business challenge as a necessary consequencein the fact that most of small and medium business in Korea has the type of family business. At this point of time, in national point of view, it is necessary that the Government shows its interest and take measures, such as drawing the social agreement on the question of business succession and arranging the systems in accordance with the trend.

There are some views on business succession as an unfair heredity of property,but it is necessary for us to change the social recognition on business succession in the small and medium business from an unfair heredity to the aspect of social asset’s taking over, such as the strengthening of company competitiveness, employment stability / creation, management techniques, etc.

In order to create the environment for stable economicgrowth and sustainable growth of business, it is necessary for constructing success friendly tax system. That is to say, it is necessary to improve the tax system toward the direction so that company may not have trouble in its business due to an inheritance and gift tax on the succeeded business property. Fortunately, in accordance with this alteration in environment, the government recently announced the amendment bill of inheritance and gift tax law that expands tax support to facilitate the succession of family business. This study suggests some matters to be supplement to heighten the actual effect in the amendment bill. Relaxation in the terms related to the qualification of successor and inheritor; acknowledging multiple successors in the stock advance succession system; alleviating the provisions of
maintaining the number of employee, maintaining share-ownership rate, etc in the post management act. As the new suggestion reflecting the public interest, this study also suggests the discount evaluation system for the inherited property of small and medium business, reduction and exemption of succession tax according to the performance in family succession, adjustment of the tax bracket on highest tax rate, etc.

While family owned and controlled firms dominate most economies they have largely been ignored by researchers, educators, and policy makers. Most governments think that their national policies address this vitally important sector by piecemeal approaches that focus on small and medium sized enterprises (SMEs). However national policies that are driven from these size imperatives fail to recognise that many of the needs and issues associated with family firms transcend size.

The purpose of this presentation is to propose pathways for developing sustainable family firm resources independent of firm size. The pathways are based on an integrated framework for policy identification and development and an implementation approach that relies upon knowledge and understanding of the unique characteristics and challenges of firms in the family business sector.

The proposed framework integrates evidence and ideas from two influential streams in contemporary family business research:
1.Resource-based views that seek to identify the uniqueness of “familiness” as a distinguishing resource in these firms (Habbershon and Williams, 1999); and
2.The work that has distilled the essence of long lasting, highly successful family firms that have learned to manage for the long run (Miller and Le Breton Miller, 2004).

The implementation approach proceeds from the notion that we must describe before we prescribe. Successfully implementing policies necessitates both thorough knowledge of the family firm sector and a deep understanding of the unique issues and challenges these firms confront. While the framework as proposed provides a basis for developing understanding, implementation still requires accurate description of the sector by the creation of valid and reliable databases. We briefly highlight and illustrate how such data could be compiled and used in policy development by citing a particular national approach.

To highlight the utility of the policy pathways as a more holistic approach to the creation of an environment conducive to the successful operation of family firms over the long run, we indicate and discuss selected policy initiatives. Specifically we consider national policies that can be directed at building and strengthening the resource base of family firms in ways that will sustain them over the long run: policies that:
~Promote Continuity through Physical Capital Resources
~Promote Courageous Leadership (Command) through Human Capital Resources
~Promote Community Relationships through Organizational Resources
~Promote greater Connection through Process Resources.

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Management succession has emerged as the key issue among SMEs with the rapid aging of the SME owners. As more and more SME owners reach their sixties, they are keen on formulating a management succession plan so that their children may take over the family business smoothly.
A smooth inheritance is not as easy as it sounds due to several stumbling blocks such as heavy inheritance and gift taxes and a lack of strategies and preparation regarding management succession. The IBK Economic Research Institute has recently found that excessive inheritance and gift taxes, lack of confidence in the heir’s management capability, complicated administrative procedures, and the absence of a well-organized grooming program for the next generation are the major reasons that are making smooth takeovers difficult.
Failure in selecting a successor at the right time undermines the company’s competitiveness, making it impossible to survive through to the next generation. The average life span of Korean SMEs, in particular, is only about 10.6 years; with only 12.6% of Korean SMEs surviving more than 20 years. This is a stark contrast to global family businesses that boast long life spans.
The national economy also has a lot to lose if an SME vanishes due to an unsuccessful management succession plan as valuable intangible assets of the company such as the accumulated know-how and expertise as well as jobs and production facilities will also be lost with the demise of the company.
Understanding the smooth succession of family-owned businesses is important for the stabilization of the national economy, job security, and the company’s competitiveness. The advanced economies are making dramatic changes in policies on the inheritance tax system and the grooming of successors. However, the Korean government has yet to hammer out special measures to support the management succession of SMEs due largely to the negative public sentiment toward the inheritance of wealth. The difference between Korea and the advanced economies may be in part due to Korea’s relatively short history of industrialization.
Given the large role SMEs play both socially and economically, we need to take a more positive attitude toward management succession.
The importance of the successful management succession, as a first step toward building a long-lasting company, cannot be underestimated. We need to recognize how crucial the successful management succession is to ensure the sustained growth of SMES and the national economy.
Management succession has the potential to make or break a company. Of course it is very important to boost the entrepreneurial spirit, but it is equally important if not more important to find the right heir to pass along the business.
The key to the thriving management succession is to make thorough preparations and minimize errors. An owner of a family business needs to understand the importance of a well-organized succession plan and take enough time to formulate one. Successful management succession planning cannot be established overnight; rather, they require several years of hard work and planning.
Systematic management of the risk factors in the succession process is also necessary. The company’s management could be disrupted during the succession process without an internal/external control system in place. The company may suffer a downgraded credit rating at financial institutions, losing customers. A family dispute over inheritance cannot be ruled out. Children of the owners may also decline to inherit the family business.
A step-by-step grooming program for the next generation should be put into place. Grooming a capable heir to the family business takes a long time. Therefore, a company needs to develop various preparation programs to prepare for successful management succession.
Passing down management know-how to the next generation is especially important. The heir should be given enough opportuni

When we talk about family business, it is important to define what is meant. Family businesses are large and small and size is not what makes them a family business, it has far more to do with the relationship of the family with the business. When I talk about family business I mean any business where the family has effective control over the strategic direction of the business and where the business contributes significantly to the family’s income, wealth or identity.

Because family businesse3s have a family and a business character, two things which often have vastly different needs, it is a little like keeping a bomb from exploding. There is great emotional and financial energy in a family and these things can be particularly volatile. Like a nuclear reaction, a family’s energy when contained is a powerful source of energy and productivity, and when uncontained, it can create chaos.

Using this definition of family business, the numbers are staggering. Family business contributes 57% of the GDP in the United States and around the planet from 45% to 85% of the GDP in any given country. They provide most of the employment; 45% to 80% around the world. There are more of them than any other form of business.

Yet only 3% survive to the third generation, and this number is pretty stable internationally. The main reason for this is that they have the family issues overlaid on the business issues. In addition, only 37% have a written strategic plan, and most do not have agreements about buy and selling the company or even who can work in the company from the family and who cannot.

We have done an incredible amount of research at our university on family business over more than the last 20 years and what we find as the one central most important lesson is that family unity and business results are inextricably linked. The more you have of one, the more you have of the other. As a family and business you should do everything you can to create unity and good business results in balance.

Going a little deeper in our research, we have found that succession planning is unrelated, in general, to successful succession. Now having done research on more than 18,000 companies around the world we know that there are three things that are consistently linked with successful succession as well as with better performing and older businesses: 1) A board of directors, 2) strategic planning, and 3) frequent family meetings. They are mechanisms in which family and business leaders can make decisions about critical topics as decisions are needed and in a manner that can take into account all information as it arises. One problem with plans is that they are made with limited information, under conditions of great uncertainty and cannot account for rapidly unfolding and changing circumstances. These things are shock absorbers and succession is one of the greatest shock a family business can face.

Families are best a business owners for many reaso0ns. Among these are that family businesses are essentially non-political (ownership is determined by bloodline and not by political maneuvering), family cares about more than money (so profits can be secondary to survival and doing good for others), and family values can be strong behavioral rules that can help employees make autonomous and correct decisions even in conditions of great uncertainty.

Creating family unity adds even greater benefit to a family business because satisfied shareholders are supportive, promote the business, and encourage business decisions that are oriented to the future, even when that means sacrificing current payments to owners. Businesses that have been successful at this (based on a study of multiple multi-century family businesses) have focused on family emotional, family financial, business financial, and business emotional mechanisms. All four create the strongest bonds in families.

In summary, family unity is essential. To achieve