More than two-thirds of high net worth entrepreneurs globally do not believe that a family governance code is necessary before they are able to transfer their businesses, according to the second instalment of BNP Paribas Wealth Management’s fifth annual Global Entrepreneur Report.
“Because succession issues embody both human and business elements, they can be incredibly complex and the succession journey can often be lengthy,” Anton Wong, head of key client group, Asia at BNP Paribas Wealth Management, told Asian Private Banker. “We therefore encourage clients to always start early and to engage in dialogue with both peers and professionals.”
Respondents in Asia are more inclined to agree with Wong’s stance, with two-thirds (66%) of survey respondents in the region believing that a family governance code could mitigate the risk of discord by clarifying the long-term strategy, given the presumption that different generations and branches of the family could have diverging ideas for the future of a family business.
“To varying degrees, all successful entrepreneurs are aware of the need to consider succession planning — not only for asset ownership, but more importantly, for the transmission of roles, power, and responsibilities to ensure their businesses are sustainable,” Wong said.
A codified approach to family governance is particularly favoured by business owners living in China, Singapore and Taiwan, where more than seven out of ten are driven by this motivation.
“Family governance is often a key element of succession planning when personal wealth and the family business has reached a certain scale, and when there is a degree of complexity to the family itself,” Wong added.
Meanwhile, other financial motivations amongst Asian respondents include the wish to determine the dividend and salaries of family members (53%) and the desire to set up a framework managing the potential sale of company shares (52%).
Softer personal motivations are also at play, with 60% of respondents in Asia seeking to ensure the successful integration of family members, 55% looking to define the future role for each family member in the business, and 48% wanting to resolve potential family conflicts.
BNP Paribas Wealth Management’s 2019 Global Entrepreneur Report — the first instalment of which was released in November 2018 — was based on a survey of 2,763 U/HNW business owners who are worth a total US$16 billion.