Taiwanese family businesses assign great importance to succession and most have adopted informal mechanisms, accounting firm Ernst & Young Taiwan said on Thursday, as it released its first such survey at a news conference in Taipei.
A solid and healthy succession scheme tops the list of concerns among 33 percent of family businesses in Taiwan, while 75 percent believe that governance via informal mechanisms, such as family gatherings, render a positive influence, it said.
Others approach the issue the formal corporate way, namely through board and shareholder meetings that have a legally binding effect, it said.
Photo: Clare Cheng, Taipei Times
It is better for family businesses to tackle the succession issue as early and actively as possible, as successful governance is critical to sustainable family businesses, Ernst & Young Taiwan managing partner Andrew Fuh (傅文芳) said.
The company would like to share successful examples abroad with local customers, Fuh added.
Several guests invited by Ernst & Young Taiwan, including Investment Media Ltd (財信傳媒) chairman Hsieh Chin-ho (謝金河), Chong Hong Construction Co (長虹建設) president Lee Yao-chung (李耀中), KMC Kuei Meng International Inc (桂盟國際) chairman Robert Wu (吳盈進) and Chiu Yi-chia (邱奕嘉), vice dean of the College of Commerce at National Chengchi University, also shared their views regarding business succession at the conference.
Based on the survey, the consultancy firm found that only 9.8 percent of family businesses have enacted equity transfer restrictions to ensure boardroom stability.
Yet, 63.9 percent of family businesses express satisfaction at existing share structure designs, it said.
To stay competitive, family businesses believe it is important to groom competent successors and 62.3 percent have succession programs, the survey found.
The survey also showed that 57.4 percent have arranged positions for potential successors, while another 42.6 percent conveyed hope that successors would have external work experience.
Family businesses value integrity as the utmost important quality for potential successors, followed by innovation and adaptability, and profitability, it said.
Ernst & Young Taiwan suggested that family businesses hire professional managers if the younger generation is not keen about running the business.
A total of 48 percent said they would like to have majority control in the boardroom and allow professional managers to run companies, the survey showed.
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