When EVA Airways Corp chairman Chang Kuo-wei (張國煒), the youngest son of Evergreen Group founder Chang Yung-fa (張榮發), announced his father’s will, according to which Chang Kuo-wei is to inherit all his father’s assets and take over as president of the Evergreen Group, his brothers were not happy.
The eldest son, Chang Kuo-hua (張國華), and the other brothers, who hold the majority of shares, called an emergency meeting to dissolve the operational headquarters and abolish the position of president only one day after Chang Kuo-wei succeeded to the position. He will also face a battle to maintain his position as chairman of EVA Airways as the inheritance battle turns into a soap opera.
The court battle over the inheritance of late Formosa Plastics Group chairman Wang Yung-ching (王永慶) is still unresolved and the fight among four brothers over the division of Mayfull Group resulted in the shooting deaths of three of the brothers. The fight over Evergreen once again makes it clear that the operation of family businesses has become the biggest problem of domestic business groups and is turning into a nightmare in terms of the sustainable operation of publicly traded companies.
Three-quarters of publicly traded Taiwanese companies are controlled by families and 10 families control one-quarter of the value of the TAIEX. The death of a company’s founder can jeopardize the existence of that company: Only one-third of family businesses survive the second generation of family operations, and a mere one-10th survive the third generation. Businesses owned and run by ethnic Chinese families remain in the hands of the family even when they are publicly traded. Infighting among heirs is one of the main reasons for fluctuation in these companies’ market value.
These inheritance problems can be divided into two categories: Battles over ownership and battles over operational control. In Taiwan, a generational change often involves not only ownership, but also the appointment of a chief executive among the heirs to continue the family’s control over operations. The ability and charisma of the heir frequently falls far behind that of the founder, but it is still very uncommon that operational risk is minimized by passing power on to a professional manager.
Passing the baton to a child involves complex emotions and family relations, and regardless of whether the founder of a big company hands power to a son or a daughter, they should make clear plans ahead of time and give their successor systematic training. The later powers are handed down, the more difficult it is for the next generation and the heavier the impact on the company. That Chang Yung-fa could treat a publicly traded company as his private property and decide who should inherit ownership is not compatible with the law. In addition, while Chang appointed a successor in his will, failure to divide share ownership in time has meant that his final will cannot be fulfilled.
Unlike the inheritance problems in traditional businesses, Taiwan’s high-tech industry is not suffering from the problems of family ownership. Despite that, it is proving difficult to pass power on to professional managers. Taiwan Semiconductor Manufacturing Co’s first attempt at a transfer of power failed, with its chairman, Morris Chang (張忠謀), being forced to remain in control although he is 84. The increasing age of managers also has a negative effect on Taiwan’s ability to respond to globalization and embrace transformation to adapt to the creative economy. Acer Inc founder and former chairman Stan Shih (施振榮) set an example by handing power to professional managers to help build a sustainable domestic high-tech industry.
Exceptions aside, selecting and training professional managers to take over remains a serious challenge for Taiwan’s major businesses.
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