Successors - born or built?

IN February 2026, one of the richest men in the world, Warren Buffet orchestrated a rather unique succession plan – he gave the role of chief executive officer (CEO) of Berkshire Hathaway to Greg Abel.

Unlike Buffet’s children, who were his successors in his other entities, Abel was an outsider with a 25-year track record in the world of business.

Many called it a multi-faceted plan, in which Buffet demonstrated his commitment to matching competence with roles, rather than just handing it over to the next-of-kin.

This begs the question: should businesses focus on succession plans that involve family or look for the most competent person for the job?

In Malaysia, succession planning is often viewed as a family matter.

For stakeholders, it is also a question of corporate governance, business continuity and shareholder value.

Take YTL Corp Bhd for instance. Founded by Tan Sri Yeoh Tiong Lay in 1955, the group went from infrastructure developer to a world-class business with a combined market capitalisation of RM94bil today.

What’s interesting is – it remains a Yeoh-led family business. All seven of his children hold senior positions, while a growing number of his grandchildren are entering its boards and management.

More recently, the group in a statement announced that 12 members of the Yeoh’s next generation have been appointed as alternate directors.

The group’s executive chairman, Tan Sri Francis Yeoh Sock Ping said the appointments were more than just passing responsibilities to the next generation, but rather, an opportunity to deepen the next generation’s understanding of the businesses.

“Our responsibility is to prepare them to lead with integrity, humility and sound judgement, and to recognise that leadership must be earned through dedication, service and accountability.

“Above all, we want them to understand that stewardship carries a responsibility to our shareholders, employees, customers and the communities we serve.”

But, what does this mean to shareholders? Should they be more trusting of companies that have clear succession plans with family involved?

Well, yes and no.

Areca Capital Sdn Bhd CEO Danny Wong says it can help strengthen investor confidence because of the clarity factor – investors want to know who will resume leadership.

He says investors are generally more focused on company profits, dividends and share prices than on future leadership.

“Investors often become concerned only when problems emerge or when there is an unexpected change in leadership,” he tells StarBiz 7.

Nevertheless, rather than just pick a family member, Wong says institutional investors will expect leaders to demonstrate that they can manage the business effectively, sustain profitability and take the business to greater heights.

Tradeview Capital Sdn Bhd portfolio manager Ng Tzyy Loon reckons the most critical factor in taking over is the successor’s capability.

He says the background of a successor is key – how long the successor has been around, his working experience, and level of industry wisdom are vital.

“We often see successors placed in business development or marketing positions for a short span of time and then promoted to the core management team.

“Think of it from the perspective of a commercial pilot training programme. The minimum flight hours that must be fulfilled are to ensure that the pilot has the experience to handle most of the scenarios. The same goes for company succession planning,” Ng explains.

This is what founder of Sunway Bhd, Tan Sri Jeffrey Cheah Fook Ling, did when his three children, Datin Paduka Sarena Cheah Yean Tih, Evan Cheah Yean Shin and Adrian Cheah Yean Sun began moving into leadership roles.

Sarena serves as executive deputy chairman, while his son, Evan, has held senior management responsibilities.

According to Ng, the appointment of a family member is not uncommon, especially when it’s a family-run business.

“However, extensive appointments of family members to the company’s management team will place a career ceiling on professional executives, ultimately disincentivising them from bringing changes to the company,” he says.

Wong agrees, stating that resistance to change could be

the biggest challenge faced by successors.

“New leaders may introduce fresh ideas and new approaches to the business, which could support further growth. Resistance could be from the existing management or older risk-adverse generation,” he says.

It doesn’t necessarily impact how businesses are valued, adds Ng.

“It is hard to price this risk into their valuation. The point at which succession risk starts to increase is more correlated with the management’s health conditions.

“On the flip side, we don’t ascribe a higher premium to those companies that have better succession planning.”

When it boils down to how an investor should view the change in leadership roles, Fortress Capital Asset Management Sdn Bhd CEO Datuk Thomas Yong says some of the main things to look at include early capital-allocation decisions, particularly acquisitions, borrowing and expansion into unfamiliar businesses.

Yong says there are clear indications of management quality than the ambition of the growth targets alone.

Within local businesses, he says he has observed three broad models – hybrid-phased model, broad-bench and apprenticeship model, and the formalisation model.

“The first one is where the founder remains in leadership with family members placed in senior deputy roles, the second is when a cohort of next-generation members are brought onto boards across different branches of the family while the third is a successor who has already been running the board for years is given a top tittle,” Yong explains.

Regardless, Yong says succession plans are necessary.

Even if a well-planned transition doesn’t prevent every setback, investors will want to see that top leadership has done everything it can to preserve what made the business successful.

South Korea’s Lotte Corp serves as a lesson to many – the succession struggle between founder Shin Kyuk-ho’s two sons proved how a lack of clear leadership can trigger a barrage of other problems.

“For any listed company where the controlling generation is in its late sixties or beyond, succession planning is not optional.

“It is part of the board’s fiduciary responsibility to all shareholders, not just the controlling family,” Yong says.