Report: Succession plan in Malaysian corporate giants under scrutiny

PETALING JAYA: The issue of succession has been raised in the Malaysian corporate world following the death of construction tycoon Yeoh Tiong Lay last month.

What would previously have been thought a natural takeover of the family conglomerate by his eldest son Francis Yeoh, is now up for discussion say some people close to the family and YTL Corp’s business activities, The Straits Times reported.

“The old man held the family management together. Whether the rest will agree to Francis continuing in the lead role, or if there could be devolution, is going to be the next big challenge,” the Singapore daily quoted the chief executive officer of a local bank who has enjoyed a long business relationship with the Yeoh family.

The reach of YTL Corp’s business covers Malaysia, Singapore, Indonesia and Britain across a variety of businesses, including construction, power generation, property development, manufacturing and telecommunications.

However, according to ST, it is the control of the private family-owned Yeoh Tiong Lay and Sons Holdings, which has a commanding 52% stake in YTL Corp, that now allows for a more equitable distribution of power over the company as no single party has a dominant position.

Francis, 63, who is the eldest of seven, currently heads the public listed YTL Corp as its managing director.

The Yeoh family issue has brought into focus the families and succession plans at other local conglomerates, including the Genting group, Hong Leong Group, Public Bank and Hap Seng Consolidated.

The main cause of any current and possible future disputes lies with the reluctance of first-generation tycoons to deal squarely with the prospect of handing over control.

This issue, ST reports, could also affect the future prospects of several of Malaysia’s large businesses, especially those under ethnic Chinese Malaysians, that generally attract a strong following among local and foreign investors.

“The succession challenge facing many Malaysian corporates is a major parameter guiding our investment decisions,” Manulife Asset Management CEO Jason Chong told ST.

He added that the reluctance of domineering owners to loosen their grip and empower their likely heirs only dulls investor sentiment.

However, this is not only an issue in Malaysia, as it is common in other Asian nations as well, though seldom discussed openly.

Bitter court battles

Meanwhile, recent court battles showed how the recent death of the family matriarch, and widow to Genting founder the late Lim Goh Tong, had affected the battle for more say, if not control, in the Malaysian-based gaming and resorts giant.

The same goes for Hap Seng, a diversified plantation and property development company based in Sabah, where rival family factions are locked in bitter court battles over ownership.

Two other Chinese Malaysian tycoons whose leadership of public listed companies may see some tussle for control in the future are Quek Leng Chan of Hong Leong Group and Public Bank’s Teh Hong Piow.

A source in Hong Leong was quoted by ST as saying that Quek, 76, is still hands on when it comes to his corporate activities but has still not named a direct successor from among his two brothers and two sons.

When it comes to Public Bank, it is believed that while Teh remains head of the local banking giant, neither he nor his two sons have shown any interest in running the business.

“Currently, the most likely successor is Chang Kat Kiam, deputy to Teh’s long-time confidant, managing director and CEO, Tay Ah Lek, 74,” ST said in its report, speculating that Public Bank may even be a takeover target owing to how the shareholding is currently structured.

Bank Negara Malaysia (BNM), which governs Malaysian financial institutions imposes a cap of 10% on individual shareholding. However, Teh is among the few owners of Malaysian banks who have been given a special dispensation from the requirement because he held his commanding interest in Public Bank before the new rules were introduced in 1989.

That special privilege is likely to expire when Teh exits as the controlling shareholder, bankers were quoted as saying by ST.

Speculation is now rife that BNM may force the trust entity, which owns Teh’s interest, to pare down its holdings in the bank to below 10%. -FMT