Chinese businesses grapple with succession

Chinese businesses grapple with succession

Staff Reporter

2013-05-19

Several Chinese companies established after the country introduced economic reforms in the 1980s, are facing succession issues, as company founders and key executives near the age of retirement, the mainland-based China Times reports. Some of the first-generation entrepreneurs, who successfully built their businesses or state-owned companies, see the company as their own personal assets and find it difficult to leave their positions quietly to make way for the next generation, the paper said.Ge Wenyao, former chairman of Shanghai Jahwa United — a listed cosmetics company — has long been credited with developing Jahwa into a consumer product giant, but he was fired from his position on May 11, following conflict with the company’s major shareholder, Ping An Insurance.

China Merchant Bank President Ma Weihua, announced his retirement on May 8, after months of speculation and uncertainty. He is credited with bringing the bank back from the brink of bankruptcy 14 years ago after he was appointed to the position and evolving the formerly regional bank into the country’s sixth largest.

Abrupt changes in a company’s leadership can create a period of chaos, China Times said, citing an unexpected computer system failure that temporarily paralyzed China Merchant Bank on May 13.

There are businessmen who have carefully planned their succession years in advance, however, such as Lenovo founder Liu Chuanzhi. According to the paper, Lenovo — China’s second-largest smartphone manufacturer by market share — which was created with state funds, is a rare example of the transformation of a state-owned company through a management buyout.

Liu has already named several candidates to head the company’s various departments, and will reportedly select a successor based purely on their performance, suggesting in 2011 that the company will eventually be handed over to Lenovo’s current CEO Yang Yuanqing.

Mao Lixiang, founder of Fotile, a private kitchenware maker, has also successfully handed the business to his son Mao Zhongqun after a nine-year transition. Though he has said that it was initially hard to stay away and not to get involved in the company’s operations.

During the first three years of the transition, Mao Zhongqun was put in charge of new product development so he could familiarize himself with the business. Mao then spent the next three years running sales and distribution operations, before taking over management and the top position within the company. 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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