At Formosa Chemicals & Fibre Corp’s annual general meeting last week, chairman William Wong (王文淵) unexpectedly announced his intention to step down following a re-election of the board of directors. He also unveiled his succession plan, in which vice chairman Hung Fu-yuan (洪福源) is to take over as chairman.
Many people were surprised by Wong’s announcement, until realizing that it had just been a matter of time. After all, Formosa Plastics Group’s (FPG) other major units — Formosa Plastics Corp, Nan Ya Plastics Corp and Formosa Petrochemical Corp — have taken on professional managers to run the day-to-day business.
There has been a growing consensus among FPG shareholders and clients that the conglomerate — which was founded about six decades ago by Wong’s uncle, the late tycoon Wang Yung-ching (王永慶) — should smoothly transition from a family business to a team of professional managers.
Even so, Wong is to remain as head of the group, which is likely to ensure that its business plans and operations do not markedly deviate. Without managing Formosa Chemicals’ day-to-day operations, Wong could spend more time on FPG’s long-term development and investment strategies.
The conglomerate is one of a few family empires remaining in Taiwan; they are active mainly in finance, infrastructure and traditional industries. The family’s gradual withdrawal from the FPG business shows that a carefully thought out succession plan can contribute to stable operations and sustainable development.
However, are Taiwanese family businesses prepared to put succession plans in place? A survey by PricewaterhouseCoopers (PwC) Taiwan found that the leaders of most family businesses expect the next generation to take over the business in the next five years, while 14 percent of Taiwanese family businesses are being run by professional managers, a figure likely to rise to 32 percent in five years.
While family businesses typically become successful thanks to the founder’s charisma and management skill, families tend to drift apart as they grow, and sibling rivalries or other feuds emerge over the wealth, business or management. News tends to follow soon about a split in the family business, shares secured by outside investors, an exit of experienced professionals, the business’ decline or serious damage to its reputation.
The elder owners of family businesses not only want to pass down the wealth and assets, but also their business philosophy, family spirit, corporate values and sustainable development goals so that the business continues to thrive. Time and communication are needed to effect a smooth transition, but successful transitions in leadership can equip Taiwanese companies with competitive advantages in the face of increasing global competition and challenging business environments.
In FPG’s case, the Wang family’s withdrawal from managing the subsidiaries is not expected to adversely affect operations, but it remains to be seen whether professional managers can navigate them through volatile petrochemical markets, as the industry comes under increasing pressure to protect the environment, reduce greenhouse gases and participate in carbon pricing.
Nevertheless, reducing and resolving family conflicts is key to achieving sustainability in family businesses, PwC said. A family business’ core decisionmakers should set in place an operational succession plan in advance and establish a corporate governance mechanism that accommodates family members and professional managers, as studies have shown that the quality of such efforts affect not only the efficiency and flexibility of business decisions, but also management turnover during a leadership transition.
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