At the conference on “Enhancing Growth through Governance in Family-Controlled Businesses”, organised by the Thai Institute of Directors, panellists stressed the need to bring experts into the board of directors. With their clearly defined role in helping shape business direction, these directors can guide the next generations towards sustainability, they said.

Pricha Songwatana, chairman of FN Factory Outlet, a maker of fashion and home items and an operator of seven factory outlets in Thailand, said independent directors are a buffer between him and his children who prefer to listen to outsiders than their own father. Five independent directors were recently appointed to the 10-member board as the company gears towards listing on the Stock Exchange of Thailand (SET). The listing is also a tool to ensure his children would run the business under SET rules and meet shareholder demands.

“They [the directors] cause some hardships in running the business, but they are lifting corporate governance. Since we agreed on the listing plan, I have never had a good night’s sleep. But this is a desirable misery. We are striving to become professional, listening to outsiders’ evaluation. Once standards are in place, it will be less worrisome,” he told the audience.

Sara Lamsam, chief executive officer of Muang Thai Life Assurance where independent directors account for one-third of board members, said the directors possessed expertise in areas where support was needed. They help screen business plans and come up with ideas not included in business plans. He said the structure works well as he, assigned by the family to take care of the business, still maintains the top management role.

“They are helpful in spotting business challenges,” he said. “A key is there must be a mechanism through which they can perform their role effectively.”

Andrew Sheng, distinguished fellow at the University of Hong Kong’s Asia Global Institute, said that family businesses generate better returns than institutionalised enterprises. Yet, performance tends to decrease over generations due to different challenges, which highlight the need of outsiders and governance practices.

The board of directors’ role must be clearly defined, he said, or family businesses will always end up in a mess when accidents happen. It is necessary to have someone say who is responsible for a mishap and why it happened.

“You must invest in sustainable practices. Sustainable and ethical practices are high in priority,” he said.

Thirapong Chansiri, chief executive of Thai Union Group, a global company still about 20-per-cent owned by his family, noted that corporate governance was a priority for the group after the 1997 financial crisis.

It was only after the crisis that the financial authorities demanded the appointment of independent directors to counter decisions by directors representing shareholders.

However, most Thai companies have not yet fully reaped benefits from independent directors, he said. They are appointed to the board in compliance with rules and regulations, mainly to oversee governance and risks. None, however, has challenged the management team.

He added that TU’s businesses in Europe instead seek directors who can increase the company’s efficiency in marketing, logistics and financial products.

“If directors are picked according to our goal of achieving greater efficiency, we will reap immense benefits. The company’s business will expand, become more competitive and post higher profits,” he said.

Sheng also urged family businesses to look for outside creativity.

As more businesses globally apply e-commerce, and Facebook becomes a nation with a 1.65-billion population, the business environment has changed and this leads to a game change. Family businesses can no longer rely only on internally grown initiatives and family members.

“If you don’t invest in start-ups or the young outside the family, you will have no future,” he said. “We live in the age of destruction, but it’s creative destruction. Investing in the young is a cheap option.”