Governance key to family businesses

Abdulaziz Abdullah Al Ghurair, Chairman family Business Council-Gulf

Succession planning is critical to family businesses in the GCC and without strong family and corporate governance procedures in place the future of businesses in the region will be at risk, Abdulaziz Abdullah Al Ghurair, Chairman of Family Business Council-Gulf, said on Monday.
Speaking at the launch of the first GCC Family Business Governance Code, Al Ghurair said governance within family businesses is increasingly becoming a necessity as organisations evolve and grow.
"Setting family business governance structures, in the form of rules, policies, and procedures is the key solution to managing the growing complex dynamics of GCC family businesses."
Stressing the signficance of succession planning for the survival of family business Al Ghurair cited a research report that pointed out that only two-thirds of large family businesses in the GCC had initiated building blocks for effective family business governance structure. Only one-thirds of those participants have fully implemented the structures effectively, he said.
The "GCC Family Business Governance Code," which will serve as voluntary guide on how to organise the family and business together, is a bi-lingual guide to help family businesses set governance structures, in the form of rules, policies, and procedures
The code policies will also serve as a key solution to managing the growing complexity of family businesses in the region, said Al Ghurair.
"We have taken best practices from across the world and applied our local GCC wisdom to create a governance code specific for our region. While each family may have different visions and goals, the GCC Family Business Governance Code, just like the astrolabe, can serve as a common compass to help family businesses navigate through their own process and reach their true north," said Al Ghurair.
The guide seeks to serve family businesses in the area of succession planning which is proving to be a focal point of discussion in many family business meetings. The guide has a focus on established large businesses that are going through either first, second or third generation transition --- a critical segment with major risks accompanying succession.
The FBCG Family Business study conducted late last year in collaboration with Mckinsey showed low adoption of governance policies to support next generation development integration. It stated that only 44 per cent of businesses had an employment policy in place, while 32 per cent had clarity on roles and responsibilities. Around 22 per cent had effective training programs while 17 per cent had effective assessment methods for next generation succession.
While many governments around the world have developed and issued governance principles and codes focused on corporate governance, only a small number of countries around the world, mainly in the Americas and Europe and to less extent in the Mena, have established governance codes specific for family businesses, Said Al Ghurair.
The code addresses a wide range of family business governance areas. It covers five governance areas: Family Governance, Ownership Governance, Corporate Governance, Wealth Governance, and Public Engagement.
It also provides practical advice on relevant areas such as developing the next generation and succession planning. It also includes a checklist, which can be used as a simple framework to assess and guide the family governance development journey. The Code is a comprehensive guide and reference for GCC families.
The code was collaboratively developed with 10 leading regional and international governance experts, with the write up commissioned by Al Tamimi & Co.
- issacjohn@khaleejtimes.com