SINGAPORE: Property giant City Developments Limited’s (CDL’s) public boardroom dispute between father and son has sparked calls for tighter rules on family-owned businesses. An analyst said regulators should require family-owned companies in Singapore to disclose their governance frameworks to help prevent future succession conflicts.
Balagopal Vissa, a professor of entrepreneurship and family enterprise at INSEAD, said family governance disclosures are a “structured approach to managing family dynamics, wealth, and legacy” and told the Singapore Business Review that such disclosures could supplement the same requirements in the corporate world.
He added that this usually includes creating a family constitution that outlines the family’s vision, mission, values, and policies on how family members take part in the business. He noted that family governance also covers practical processes like family meetings, family councils, succession rules, and ways to handle disputes.
According to Forbes, tensions in CDL’s boardroom reportedly surfaced after the company’s net profit dropped 37% to S$201.3 million. Earlier in February, Singapore real estate billionaire and CDL’s executive chairman Kwek Leng Beng filed court papers against his son, Sherman Kwek, CDL’s group chief executive officer, due to an alleged “attempted coup”.
However, the younger Mr Kwek denied it was an attempt to oust the chairman, saying it was to ensure CDL’s highest standards of governance. Instead, he blamed his father’s long-time adviser, Dr Catherine Wu. However, on March 4, the older Mr Kwek announced Dr Wu’s “irrevocable resignation” from CDL’s hotel arm, Millennium & Copthorne Hotels (M&C), as an “unpaid independent adviser.”
Mr Vissa said making family governance frameworks public could help with appointing independent directors, adding that those with professional, not personal, ties to the family are better suited to step in during conflicts.
Ellyn Tan, licensed insolvency practitioner and a partner at Forvis Mazars, said that family companies’ independent directors should have strong mediation skills. She said they should also know when to bring in outsiders when needed.
Ms Tan said succession planning is often “clouded” by personal preferences and bias. She noted that third-party professionals, who bring a more objective view, often use a method called “visioning”. It allows family members to share their goals and expectations, helping different generations align their direction for the business.
As family businesses grow, managing them becomes more complex. Mr Vissa said that at some point, companies should think about hiring professional managers. Meanwhile, if the family prefers to maintain management, he suggested asking tough questions, such as how family CEOs are evaluated, what criteria are used for promoting family executives, and how to ensure achievements are genuine, not fabricated.
Ms Tan said the days of passing the business by birthright are over, and succession now needs to be based on merit.
“Perhaps this is the right time for business families to think more broadly about succession,” Mr Vissa added.
Mr Vissa said that while passing on the business is common, long-term success requires a renewed entrepreneurial spirit. He said, “Rekindling the founder mindset in the next generation is perhaps important; in today’s world, it is also much more feasible.” /TISG
