Many listed companies over the past weeks have held their annual general meetings to present to shareholders their financial performance and business outlook, as well as to answer shareholder questions ranging from the economic climate and dividend payouts to share prices and succession plans.
Many successful companies run by strongman founders have done everything possible to reassure shareholders about how the companies would perform after their founders step down or die, but they remain as vague as ever about succession plans.
Most local companies are known to regard succession planning as a top priority for their sustainable development, but only a few do it. For instance, at this year’s general meeting, Teco Electric & Machinery Co, the nation’s largest maker of industrial motors, made wide-ranging leadership changes in its board and elected Sophia Chiu (邱純枝) as the company’s first chairwoman since its establishment in 1956.
Some have said that successful companies do know there is a problem regarding succession planning, but the key issues facing them are how and when to tackle the issue, as well as if a potential successor can stand the test of time. Take for example Kinsus Interconnect Technology Corp chairman Tung Tsu-hsien (童子賢), who took five years to pass the baton on to chief executive officer Peter Kuo (郭明棟) at the company’s shareholders’ meeting this year. Tung had served as chairman for 15 years and last week said it was time to let the next person lead Kinsus to expand and improve competitiveness, while he focuses on plans to grow and diversify the firm’s parent, Pegatron Group.
Few investors have expressed doubts about the managerial skill and entrepreneurial spirit of the top executives at the nation’s two largest convenience store chain operators. However, both President Chain Store Corp and Taiwan FamilyMart Co last week reshuffled their boards and made management changes, as the companies hope fresh blood can help develop long-term growth opportunities; after all, the convenience store market has become saturated. New management is now concerned about ever-growing competition in product offerings and store formats, as well as the challenge posed by rising online retailing demand.
There is a unanimous consensus that training a successor requires years of planning and execution, but the longer the problem is left unaddressed, the more painful and expensive the solution.
Investors sometimes feel like they are caught in a difficult position. On one hand, they are often impressed by the success of strongman founders and far less confident in those who follow in their footsteps. On the other hand, what makes investors more nervous about those successful companies is a lack of clear succession plans as their founders grow older.
The difficulties Asian technology heavyweights experience in finding successors were mentioned in a Wall Street Journal story published on Nov. 26 last year, which concluded that, for strongman founders, letting go of their companies is apparently as difficult as building their empires. As for Taiwanese firms, the Journal raised questions about whether it would be individuals or collective leadership taking the helm after aging Taiwan Semiconductor Manufacturing Co chairman Morris Chang (張忠謀) and Hon Hai Precision Industry Co chairman Terry Gou (郭台銘) are no longer there.
It is never an easy task to find good, reliable successors in the corporate world. However, the consequences of not having a well-articulated succession plan could be disastrous for companies and shareholders. At this year’s shareholders’ meetings, many local companies demonstrated how good they are at supplying quality goods and services, but it is also time to pay attention to their succession plans.
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