Mon, Oct 09, 2017 - Page 6 News List

EDITORIAL: Succession plans lead to success

After Taiwan Semiconductor Manufacturing Co’s (TSMC) annual meeting last week, chairman Morris Chang (張忠謀) unexpectedly announced his intention to retire in June next year. He also unveiled his succession plan, in which co-CEO Mark Liu (劉德音) is to step up to become chairman following Chang’s retirement, leaving co-CEO C.C. Wei (魏哲家) as the sole CEO.

Many people were initially surprised by Chang’s announcement, before it sank in that it had just been a matter of time — after all, Chang is 86 years old.

Moreover, the past few days have shown a growing consensus among investors and major clients that the company should smoothly transition from the “Morris era,” as both Liu and Wei have ably served as co-CEOs since 2013.

TSMC celebrates its 30th anniversary later this month. Under Chang’s leadership, the company has become a dominant “pure-play” foundry, leaving its competitors behind as it claims more than 50 percent of the market share worldwide. The company has become one of the most prestigious Taiwanese firms in terms of finances, long-term investments, business vision, talent cultivation and ability to innovate, while it also garners praise for its efforts in corporate governance and social responsibility.

Chang’s succession plan has two goals: He plans to leave a legacy behind, and he wants to ensure that TSMC’s governance structure will continue to make it a champion of the semiconductor industry.

The company’s dual-leadership model is a unique style of governance that holds Wei, the designated CEO, accountable to TSMC’s shareholders and Liu, the future chairman, responsible for navigating the firm’s long-term development. In the meantime, TSMC’s board of directors are tasked with helping to mediate between Liu and Wei should disputes arise and with retaining good corporate governance, which is crucial to the company’s sustainable development.

The announcement highlights how most Taiwanese companies have long been complacent about succession planning. In a 104 Job Bank survey released last week, about 86.1 percent of the companies polled are not prepared for any succession scenario — only 13.9 percent have thought about enacting a succession plan.

Studies have shown that an operational succession plan affects the efficiency and flexibility of business decisions, as well as management turnover during a company’s leadership transition. It also helps to lower volatility in a company’s stock price in the short term and assures its prospects and governance for the long term.

That a relatively low proportion of local companies are committed to succession planning poses a serious threat to corporate health — especially because many founding chairpeople are getting old and companies struggle to recover from a loss of leadership as they face rapid change in the economic environment.

Not having a feasible succession plan in place could have devastating consequences for companies — from a lack of cohesion among members of the management team to serious effects on the company’s reputation and a departure of experienced professionals, which is especially obvious in Taiwan, where most family business leaders still expect next-generation family members, rather than professional managers, to take over the business.

In TSMC’s case, it remains to be seen whether Liu and Wei will handle their new roles competently as the company faces challenges from expanding its mobile, high-performance computing, automotive and Internet of Things platforms and creates value-added services for customers.

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