Seventeen family enterprises in Southeast Asia have joined a list of the 500 largest family businesses in the world, according to the EY and University of St.Gallen Family Business Index 2023, which ranks companies by revenue.
Five Filipino family-owned enterprises have joined the list while Malaysia and Thailand account for four each. Two family enterprises each from Singapore and Indonesia have been included in the index.
Southeast Asian family-run businesses have hired nearly 850,000 individuals, and the board members’ average age in these organizations is 62 years.
“Having board members of an average age of 62 years highlights the need for Southeast Asia’s family enterprises to examine board renewal and transition to the younger generation – and this needs to happen within the next few years. As family enterprises grow in size and complexity, a good succession plan becomes an imperative,” said Low Bek Teng, EY Asean Family Enterprise Leader in a release.
“They will need to understand the relevant risks and how each of these risks may impact their businesses,” said Low. “Bringing in the next generation to work and learn alongside the current board and management will help the younger team better appreciate the intricacies of the business.”
The proportion of family businesses from Asia Pacific included in the list has consistently risen since the first edition of the index in 2015 from 12% to 16% this year as it was not exposed to a negative trend during the period. The combined revenue of Asia-Pacific companies has also surpassed the $1 trillion mark, hitting an 8-year high this year.
Accounting for 18% of the APAC region, Hong Kong holds the highest number of family enterprises while South Korea generates the largest revenue of 30% of the region’s combined revenue of $1.16 trillion. The second largest South Korean family-owned conglomerate SK Group ranks at the top of its country.
Global family enterprises altogether generated a revenue of $8.02 trillion and provided jobs to 24.5 million employees across 47 jurisdictions worldwide. The amount is substantial enough to rank them as the third-largest national economy globally, trailing behind only the US and China.
Although Europe-headquartered companies take up 46% of the companies featured in the index, US companies are the leading individual jurisdiction with a proportion of 24%. Half of all the total businesses included in the index are situated in Europe, the Middle East, India and Africa (EMEIA), while 34% are based in the US.
India made the first entry into the top 10 largest companies in the index thanks to Reliance Industries which climbed from 12th place to 10th place.
In terms of the industry sector, consumer-based family enterprises are at the top of the index (37%) mainly due to the dominant share in the US. Companies in the advanced manufacturing and mobility sector come in second (29%) as it leads in EMEIA and Asia Pacific.
The 2023 index shows that longevity and stability remain prevalent among family-owned businesses, with over three-quarters (76%) being in existence for more than 50 years, and almost one-third (31%) having a century-old legacy. This also points to its board compositions with almost a quarter (23%) of all board seats being held by family members, and nearly half (45%) have family members serving as CEOs. Around 6% of global companies in the index have a female CEO while women hold only 23% of all board seats.
“The overall composition index is stable, with only 7% new entrants this year, proving the resilience of family firms. The growing prominence of Asia-Pacific companies is also striking and a sign of the economic power these family-owned enterprises wield in the region… The role of the next generation in tackling these challenges will be absolutely critical,” said Thomas Zellweger, Professor from the Center for Family Business at the University of St.Gallen, in a release.