KUALA LUMPUR: Eighty five per cent of Fortune 500 companies that are family owned and managed do not survive long, but Malaysia’s YTL group has thrived since 1955 and flourished since Tan Sri Francis Yeoh has taken over the helm when Tun Dr Mahathir Mohamad was premier.
The YTL Group has also survived the age-old famous Chinese curse: Family wealth cannot last more than three generations. As a matter of fact, 27 members of the fourth generation of the Yeoh family are now involved actively in the diversified conglomerate.
YTL, which started as a small contracting business by Yeoh’s grandfather, is now a high-profile multinational corporation with interests in construction and properties, cement making, power generation, hotels, water, railway, and telecommunications.
The group has also gone beyond the shores of Malaysia, with a presence in the UK, France, the United Arab Emirates, China, Thailand, Singapore, Indonesia, and Australia.
“This is a miracle of YTL … We are still united and still love what we do,” said Yeoh at a Performance Management & Delivery Unit (Pemandu) talk last week on “We Are Family: We Are Global”.
According to Yeoh, who is YTL Corp Bhd’s group managing director, YTL has put in place a “family constitution” or accord, similar to a country’s constitution, to safeguard family unity.
Before the advent of the family constitution, Yeoh’s mother had played a key role in uniting the family by making sure that members live near one another and meet for family meals once a week, according to a Chinese Forbes feature article.
Yeoh told the audience last Tuesday: “Our family constitution states the kind of leaders we want. It reminds us of the principles of stewardship that the wealth we produce is never our own. We want to preserve unity and this godly purpose of stewardship.”
Yeoh, a devout Christian, said with the 27 highly-educated “talents” from the fourth generation in the YTL group, succession by meritocracy is needed.
“In my time, it was easy. My father [Tan Sri Yeoh Tiong Lay] appointed me as managing director and that’s it,” he said. The remark drew laughter from the 200-strong audience.
“But since YTL is a public-listed company now — all six of them — you have to have a meritocratic way of making sure all of the next generation is visible and capable.”
He said YTL’s succession plan is also enshrined within the family constitution.
“We are giving them opportunities to be under the shadow of existing CEOs [chief executive officers]. The first step is that they have to manage the operations very well as they are the understudy of all the CEOs. If they make it as CEOs one day, the one who makes the cut will be managing director [of YTL].”
Yeoh said the family’s Christian values, such as those on stewardship, are embedded in the written “family constitution” to ensure there is transparency and awareness among the future generations.
“There is no hiding about what they can or cannot do,” he said.
Apart from the family constitution, Yeoh said there is also a family trust to provide for all members.
“We have provisions in the trust. Should you [future generations] not want to follow the family constitution, they will still be looked after by the trust,” he said.
“If someone wants to be a Muslim, it does not mean they will be spun out of from the family trust. They can still receive dividends from the family trust.”
Indeed, Yeoh is much credited for expanding the YTL group into a global conglomerate, particularly during Mahathir’s time.
After a major power blackout in Malaysia in the mid-1990s, he persuaded Mahathir’s government to allow YTL to build the first independent power producer (IPP) in Malaysia. The project has been lucrative as Tenaga Nasional Bhd (TNB) is compelled to buy power from YTL’s IPP at a high price.
During the 1997/98 financial crisis, YTL also mopped up prime properties in Bukit Bintang at low prices. These included Lot 10 Shopping Centre, Starhill Gallery and the adjoining JW Marriott Hotel Kuala Lumpur.
Subsequently, Yeoh took YTL to bid for UK’s Wessex Water and most recently, PowerSeraya in Singapore.
His siblings — the other six children of Tiong Lay — are involved in the operations of the family business, with most of them sitting as executive directors on the boards of YTL companies.
Today, the family’s fourth generation includes Ruth Yeoh, the eldest daughter of Francis Yeoh. She is the executive director of YTL Singapore. Her brother Jacob is the deputy CEO of YTL Communications Sdn Bhd while Joseph, another brother, is the vice-president of YTL Hotels & Properties and YTL Land & Development.
With such an extensive involvement of the Yeoh family within the YTL companies, it is a wonder if YTL could avoid the pitfalls of family-based businesses, which had plagued Kian Joo Can Factory Bhd, Tan Chong Motor Holdings Bhd and even Kamdar Group (M) Bhd.
The limelight was also recently cast on the family feud of the American Pritzker family who owns the Hyatt Hotel chain business and the family of Malaysia’s richest man, Robert Kuok.
“You can see a lot of problems of unity facing family businesses …When you reach my son Jacob’s level, there will be plenty of attrition among the cousins as there will be 27 different ideas,” he said.
But Jacob, who appeared with Yeoh at the function as one of the panellists, gave the audience an impression that YTL will continue to be solid in his generation.
He said at a young age, he had understood very clearly the concept of stewardship. He attributed his moral upbringing to his father.
“They did a fantastic job conditioning us to believe that nothing was given, and that everything had to be earned,” he said.
He also said that he has been taught to hate evil, corruption and other activities that do not benefit people’s lives. These values enable YTL to have a purpose; be a force for good, not personal greed.
But many people see the YTL success as more than just family values. The group’s political connection with top politicians is seen as an important factor.
However, Yeoh stressed that in everything YTL pursued, the group introduced innovative ideas to succeed. Under the present administration, YTL appears to have started to shine again after a lapse of time.
Just last weekend, YTL Power International Bhd in a consortium with TNB and SIPP Energy Sdn Bhd was awarded the Project 4A power plant by the Energy Commission of Malaysia without going through an open tender process.
If the family values continue to thrive and the group is able to win more mega projects, there may be reasons to believe that YTL may survive the fifth genetic line or even more generations.
This article first appeared in The Edge Financial Daily, on June 9, 2014.