The stakes are rising for business groups seeking to preserve wealth as their heirs multiply.

No company’s stock market listing is as eagerly anticipated by Bangkok investors as Thai Summit Group, especially since it secured supply contracts with every major Chinese electric vehicle maker setting up shop in Thailand. The family-owned auto parts manufacturer considered going public a decade ago, but scrapped the plan when political turmoil made market conditions unfavorable.

The company will stay privately owned for now, senior vice president Chanapun Juangroongruangkit told Nikkei Asia in September. And that is likely to remain the case while her generation remains in control.

“My parents set up the business with just two people. Then we had five brothers and sisters, but only two of us work here. With the third generation, five became ten,” Chanapun, the eldest child of the founders, said. “It might not be as easy to talk, so how do you manage transparency and governance? Choosing the next executive from these ten, who would be eligible? So one way to be transparent is to be listed, then you’d have a board and governance standards.”

But while Chanapun is only 48, a decision on the company’s future cannot be put off forever, as many families are finding out with their businesses.

Wealth does not last for more than three generations, according to a Chinese proverb, as the third generation squanders wealth whose creation they had no part in. But Southeast Asia’s relatively young corporate dynasties are looking to challenge that wisdom as many approach the transition from the second to third generation of management, a handover critical not only for family relations but also for the markets they dominate.

Around 60% of listed companies in Indonesia, Malaysia, the Philippines, and Thailand are family owned, according to Credit Suisse. In these businesses, family members hold either the roles of chief executive or board chairperson, or control at least 5% of the shares. Half the businesses in Credit Suisse’s “The Family 1000” global report in 2023 were in the Asia Pacific region excluding Japan, followed by Europe at 24%, and North America at 15%.

Without a succession plan, a family’s wealth and control of the business face risks as the number of heirs increases with each generation. That leaves the business susceptible to takeover if some family members sell their shares, or to reputational damage in the case of acrimonious litigation between relatives.

“If you leave it to just inheritance law, the natural result is fragmentation of ownership,” said Marleen Dieleman, professor at IMD Business School in Singapore and an adviser to family firms on succession planning.

Fragmented ownership can also leave the successor with less power than the founder. In the wider Asia Pacific region, family firms have, on a compounded annual growth rate (CAGR) basis, outperformed non-family businesses annually by an average of 3.3% from 2006–2023, according to Credit Suisse. But that premium applies to earlier generations, reflecting the strong early growth of entrepreneurial ventures.

In January 2019, the declining market share and stock price of Hong Kong-listed SJM Holdings reversed when Pansy Ho formed a pact with major shareholders to wrest control from the fourth wife of her father, Stanley Ho. The Macao casino magnate died in 2020 survived by three wives and 17 children. Pansy Ho’s power grab signaled clearer leadership of the group, but the company’s share price has since fallen by 65% amid setbacks for Macao’s casino industry.

In the Philippines, the Tan family’s succession was disrupted by the sudden death at 53 of Lucio Tan Jr, known as Bong, son of Fortune Tobacco founder Lucio Tan. Four years later, in 2023, the older Tan appointed his 30-year-old grandson, Lucio Tan III, to take over parts of the empire, including Philippine Airlines.

By contrast, Lee Shin Cheng, founder of palm oil maker IOI Malaysia, had been preparing for succession since 2014, enabling a seamless transition to his sons, Lee Yeow Chor and Lee Yeow Seng, when he died in 2019. The elder son, Yeow Chor, became chief executive of the group’s legacy palm oil business, while Yeow Seng took over its property development arm.

Taking a page from the Lees’ book, more Southeast Asian families are introducing constitutions or charters that govern how the family makes decisions, including leadership appointments, who can work in the firm and how members are remunerated.

Thailand’s Central Group is known to have a family charter and council. The conglomerate is now in its third generation of leaders, including group chair and CEO Tos Chirathivat. His cousins Wallaya and Thirayuth are chief executives, respectively, of property developer Central Pattana and hotelier Centara, both Bangkok-listed subsidiaries.

But the group has also brought in professional outsiders and people from overseas to help manage its listed segments. This usually happens when the business grows too complex, or the next generation is not interested in or capable of running the operation, or the family wants to focus on entrepreneurship and building new businesses instead of management, said Dieleman.

“Fast-growing companies don’t tend to create stable organizations. They’re very lean, and dependent on the power of the patriarch,” she said. “Strengthening that organization will make it easier for the next generation to take over.”

Some studies suggest that, as they become less lean, older corporate dynasties become more risk-averse and less entrepreneurial. The global companies in Credit Suisse’s report spend less on R&D than non-family companies.

But in Southeast Asia, new generations being groomed for legacy business are active in innovative segments that will eventually be absorbed by their group companies.

AC Mobility, a Philippine distributor of EVs and developer of charging stations, is run by Jaime Alfonso Zobel de Ayala, the 33-year-old scion of the Ayala Group, a rare Southeast Asian family conglomerate founded in the 19th century. In Malaysia, Ruth Yeoh, a daughter of YTL Corporation chairman Francis Yeoh, is spearheading the utilities conglomerate’s carbon credit and sustainability division.

In the most recent study of family firms listed on the Singapore Exchange, DBS Bank attributed the higher return on assets at family firms compared with non-family firms to most families’ long planning horizons and leadership continuity.

“Having a family leader or face is actually beneficial. It generates trust because the management is not motivated by remuneration but by the values of the family,” Dieleman said.

In Indonesia,  Anthoni Salim, the youngest son of Liem Sioe Liong, navigated the Salim Group’s survival following the 1997 Asian financial crisis and fall of Suharto in 1998, during which the government took over its pivotal Bank Central Asia. The group’s business had benefited from Liem’s close ties with the late dictator.

“Anthoni became the successor [because he is] more talented and focused than his older brothers,” said Richard Borsuk, an adjunct senior fellow at Singapore’s S Rajaratnam School of International Studies and a chronicler of the Salim Group.

Anthoni has turned the company’s Indofood into one of the world’s largest instant noodle manufacturers and the family has interests in various other sectors through its First Pacific Holding Company. Anthoni leads both entities and his eldest son, Axton Salim, is a director of both businesses.

Family firms also have longer track records with other stakeholders, including lenders, brokers, and investors. “It helps companies have better access to other types of capital and debt financing on fixed-income markets,” said Asadej Kongsiri, president of the Stock Exchange of Thailand.

Whether family control means more transparency and stronger governance standards remains a subject of debate. Family-owned companies are more likely to have dual-share classes than non-family firms, according to Credit Suisse.

But the DBS study of Singapore-listed companies found that family firms stepped up disclosures during rough patches to preserve the family’s reputation. Independent directors outnumber executive and non-executive directors on the boards of both family and non-family firms, but occupy fewer board seats in family firms.

Christian Stewart, founder of Hong Kong-based consultancy Family Legacy Asia, said family firms could empower more independent directors, not only to reassure minority shareholders but also to be a bridge between family members in management roles and their uninvolved relatives.

“It’s important to have directors who are trusted by the family shareholders but who are still objective and have good commercial sense to provide a bridging role between the family chair and the family members who aren’t involved in the entity,” Stewart said.

Independent directors are even more crucial in the absence of a clearly communicated succession plan. Such is the case for Robert Kuok, the Malaysian “sugar king” who founded Hong Kong-listed Kerry Holdings, owner of Shangri-La Hotels and Resorts. At 101, Kuok has not announced a formal succession plan, but his children and nephews hold leadership roles across the Kuok Group, including his sons Khoon Ho, 73, and Khoon Ean, 69, and daughter Hui Kwong, 46.

“The role of independent directors is really to ask what are you doing in terms of grooming a successor—mentoring, exposing them to different business units, and giving feedback,” said Stewart.

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