TODAY

Work Experience

Academic Director,
HKUST-NYU MS in Global Finance
HKUST Business School
January 2015 – Present

Associate Professor
HKUST Business School
July 2013 – Present
(2 years 2 months)

Assistant Professor
HKUST Business School
July 2010 – June 2013 (3 years)

Assistant Professor
The Chinese University of
Hong Kong
August 2007 – June 2010
(2 years 11 months)

Assistant Professor
Copenhagen Business School
August 2005 – July 2007
(2 years)

Why should there be a succession plan in a family business and when should it be made?
This and post-AEC issues are discussed by Professor Kasper Nielsen.

Family Business’ definition . . .
Family Business means the ownership of majority stock by a family member, or more. To control a Private Firm, unlisted at Stock Exchange, needs an ownership of 50 % plus shares. A Large Firm listed at Stock Exchange should need a 20 % shares only for its control.

Then many firms have a Founder only. For examples, Bill Gates’s Microsoft is a Business but it is not hereditary and not meant for Family Succession. Therefore, for a criterion more than one family member are into the firm.
Next, family Business is family business. The founder transits the firm to his offspring, the second generation.

Some Firms, like, Ayala, uses Family Name. Its use or non-use, what is the difference?
Family Name begets value creation. Suppose you are doing business in Southeast Asia, into the seventh generation. Then Family Name makes for trust in customter. It is much evident in Food Industry. We buy foods based on our belief in Brand, like, they do not use much chemical in the food. Similarly, Quality as well as Trust are important in other sectors. So the use of Family Name is the same as creating value.

Good Examples in the Region . . .
Lee Kum Kee’ company, a sauce maker in Hong Kong, is over a century old and into its fourth generation. Their oyster sauce is Premier Brand in food industry. It is a family firm enjoying trust and persistent Ownership. Over time the Ayala Corporation of Philippines has, from agriculture, added to itself real estate, banking and telecommunication. Chang Beer is over a century old.

In Family Business they would diversity in the first generation or the second. Is it important?
They were born in traditional trade-import, export, and marketing. Later on, some partner-ship with the producer or a regular supplier. Next stage is Expand, usually in second Gene -ration. That is Natural Progression. Then they risk Different Industry, also in Second Gene-ration.

In Digital Age, how could Family Busi-ness of second or third generation diversify?
Diversification at Firm Level is also value creation. Family view is for lessening Risk of Exposure. Investor view is industry integration for a suitable reason. If the firm’s visions are well-connected, more value creation will be possible than in a Non Family Business. Then Refocus of Family Business will follow to produce a reason for economic up skill.

When Should Succession Plan be initiated?
The succession plan may well be initialed when the Main Issue crops up, i.e. how the firm could be sustainable afterwards of the Founder. There are two reasons to succession, a long-term plan. The first reason is to know of what the company will be like in 5-10 years’ to 20 years’ time, and also needs of Leadership and Management. Then the Succession Plan would be about being a guide on how to satisfy those needs.

The other reason is Succession Plan makes for lessening of personal shock, which is unexpected death or hospitalization of Founder. The Founder has Strategic Plan, and the whole company is endangered when he falls down. It will be against his best wishes of sustainability. One’s health and life are contingencies; all will be lost without Succession Plan. For these two reasons Succession Plan may be initiated as soon as a business operates.

A company begins to diversify, but how to know of which division to drop . . .
That is concerned with Overall Strategic Plan, and many paths are possible. Say you want to keep Ownership, so there is no need to go into Management. Next, there is Ownership as well as Management, and you need a Plan what to do about Ownership. Without any plan, your children may inherit by sharing Ownership among themselves. But over time, there is the inconvenience of less stakeholders in the family. That is why businessmen have Structure and Succession Plan under consideration. A later challenge is competition, which entails the need to increase investment.

Please elaborate on Family Foundation Trust is vital to business. It may be permanent or limited in time. Some Firm would turn Foundation, to work for Family or the social community like Charity. For example, Kasper Founder Burey set up a Foundation because he could not transit the business to his son who is his competitor. Then Bill Gates, Warren Buffett, etc have created programs to outlive them.

Another is Foundation oriented towards Family. The best example is Henry Ford’s, with a Structure of the vote among family members. Such family unity leads to unsalability of their shares, and lessening of disagreements as long as they exist together.

What about Pyramid Structure?
Pyramid Structure is in great favour in Asia _ a type where a company administers more companies born out of it. This structure makes for a lot of businesses to own but the share system needs a change. The structures’ advan-tage is: Investors pay attention to it. Share price lower than normal is to be expected. Therefore Control means acceptability of Lower Growth. In any Pyramid Structure, Control and Growth cannot be had at the same time. So it is personal choice.

In 2-3 years’ time which Family Business sectors will be of interest to investors?
Myanmar’s economic advantages are natural resource and agricultural produce. They make for Tourism opportunities. Family Business may ill suit some industries. Oil and Gas sector needs big inputs in a short time. As the business grows, more and more investments are needed. There Family Business may find it hard to compete. Other than Gas & Oil, Family Busi-ness may well take up Natural Resource and agricultural produce.

Myanmar prospects post-AEC . . .
Prospects are good, but government reforms need time to materialize. Government perfor-mance and economic liberalization should make Myanmar’s future bright.

Translated by Khin Aung (Eng)