Interview with Steve Tan – Family and Business Exemplar
Persis Hoo (heritance’s Business Development Director) chatted with Steve Tan (not his real name) to learn about his views towards passing down of values in his business and family. A former medical doctor turned Chairman and CEO of a public listed company, Steve has been in the business for more than 30 years.
PH: Tell us more about yourself and your current role in the company.
ST: I am the eldest of three children in my family. My father started the business in the early 1960s in Singapore and Malaysia. We are in the business of the manufacture and distribution of healthcare products. Prior to joining the business, I had practiced as a medical doctor. Sometime in the 1990s, my father became ill and it fell upon one of us to take over his work.
I decided to leave medical practice and joined my father. At that point I decided to do a Master in Business Administration to learn more about business. Through many ups and downs, and along with good counsel from partners, we listed the company some 20 years back. Upon my father’s retirement, I took over as Chairman and CEO of the group.
PH: Since this was a business started by your father, do you envision your children or grandchildren succeeding you in the business or helping out in any way?
ST: I have two adult children and several nephews and nieces. I do not believe in bringing family members into the business just because they are my family. My philosophy is that the best man should do the job. If a professional is more suited for the task, then I will bring in professional managers.
Family members must prove their mettle if they want to be executives in the business. This is not the only way to be engaged as they can be involved as shareholders or as non-executive directors on the Board of non-listed companies. However, if any family member aspires to join the Board of a publicly listed company which the family controls, that person will go through the standard process of being appointed by the Nomination Committee comprising mainly independent directors.
My children know my stance and I have advised them to pursue their own passions. They can spend as long as they need exploring their own businesses and careers, while still having a foot in the private family holding companies to learn and grow. Along the way, if they start to develop interest and acquire relevant capabilities in the business, they can join the business, work their way up and earn their respect and promotions just like everyone else.
PH: This is a very independent and objective approach towards family and business. When did the conversation with your children on your views towards their involvement in the business first start?
ST: We first had this conversation when my sons were choosing which universities to go to and which courses to pursue. I choose to engage them early and keep them updated on the business. For example, I would send them quarterly reports that come out and talk to them about any new developments in the company, so they are kept aware as they decide their own career and business. In this way, my sons can decide for themselves eventually if they want to join me. I am glad to have the opportunity to discuss and share career options with my sons.
PH: What are some of the values you have received from your father and intend to pass on to your successors as they take over the business, be they your sons or others?
ST: My father founded the company with three core values that remain till today – Service, Quality and Integrity. These three core values have permeated every aspect of running the company, be it through quality of the goods we produce, integrity in governance and management both internally and externally, as well as the mantra to always put the customer first. I would like to pass these three values on to my children and any successor as well.
PH: Did your father or yourself capture the business family values in a document to be passed down to the successor? For example, a family constitution, heirloom or verbal instructions.
ST: The values were part of the logo of the company from day one and a lot of who I am and how I run the business today is guided by these values and what I observed in the way my father managed the business, his staff and business partners. I have not written a family constitution as these values are now institutionalized into the company culture.
PH: There is a saying that “Wealth does not pass down three generations”. What is your view on this and what do you think can be done in the second generation to ensure that the business continues to the subsequent generations?
ST: I believe that this is a lot about business management and managing expectations in the family. The main aim is to preserve wealth and prevent in-fighting within the family. Therefore, it is my principle that only the best member will run the business, while everyone else can remain as a shareholder and earn dividends. I do not agree with equal division of assets regardless of merit. As the saying goes, being fair is not the same as being equal. We cannot provide jobs for every family member. However, a minority shareholder can be compensated in other ways too. Ultimately, someone will have to retain control of the company so that decisions can be made.
PH: Thank you for this very insightful session. Do you have any concluding words or advise for second generation business owners?
ST: We have a close overseas business associate who chairs his large family trust. I learnt a lot from him about family business succession. Someday, I may do something similar. It is also important to consolidate the direction of the founder and determine how you expect further generations to benefit from and grow the business. From the onset, you should put in place systems and culture on the family’s role in the business, instead of pandering to the feelings of the members at the expense of the company. At the end of the day, you cannot make everyone happy. However, there will always be ways to be fair to each individual according to his capabilities.
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