Singapore's family-owned firms least ready for succession in S-E Asia

Singapore

FAMILY-owned businesses in Singapore are laggards in the region in two respects - in planning for leadership succession and in using formal structures and wealth-management solutions to manage succession issues and ensure wealth preservation.

A report by The Economist Intelligence Unit has found that fewer than six in 10 Singapore companies (58 per cent) have a succession plan in place.

And just 35 per cent have set up formal wealth-management structures such as private foundations; 41 per cent have trusts to manage inter-generational wealth transfer.

The report, commissioned by Labuan International Business & Financial Centre (Labuan IBFC) and titled Building Legacies: Family Business Succession in South-east Asia, surveyed 250 majority family-owned businesses from Indonesia, Malaysia, Singapore, Thailand and the Philippines.

Indonesian family-owned companies emerged the most prepared in succession planning, with 78 per cent of respondents indicating that they had formal plans in place.

A further 57 per cent had set up private foundations, and 53 per cent, trusts to manage wealth and succession.

Among South-east Asian businesses overall, 67 per cent said they had succession plans in place; 71 per cent said they have had their plans reviewed by their boards.

This being said, formal governance structures have not been widely adopted among family businesses, and the use of external advisors has largely been limited to areas such as estate planning (41 per cent) and tax liabilities (48 per cent).

Only 34 per cent of executives polled said they had sought external advice about family governance issues; 18 per cent said they had used advisors to resolve conflict between family members.

There is surprisingly little differentiation among the five countries surveyed in terms of succession-planning preferences; whether they undertake this depends on the amount of resources and years of experience they have at hand, said the report.

Even some of the region's most successful companies still hesitate to bring in external advisors to formalise succession plans through a contract or to erect lasting structures such as a trust or foundation.

This is surprising, given respondents' generally positive attitude towards succession planning: 71 per cent said it is easier to attract investment with a formal succession plan in place; 66 per cent said customers and investors have more trust and confidence when such a plan is in the picture.

For business families, unsurprisingly, retaining control is paramount.

Three-quarters of families surveyed (76 per cent) have family members as chairman or in C-level executive roles; only 2 per cent said their management would choose a successor from outside the family.

And while the survey found that attitudes towards women heading family businesses were, in theory, progressive, there was little evidence of this in reality - there remains a strong propensity to appoint the first-born son as successor.

Of the respondents, 97 per cent of companies no longer led by the founder are run by a family member, and of the children now heading the business, 92 per cent are sons.