Governance for family businesses in the Middle East

I have seen a growing trend in many Middle East businesses to develop proper rules on how to govern the relationships between family members in their respective roles as shareholders, board members and employees. This awareness of the rules has greatly improved, and more families are becoming cognizant of the challenges they might face and how they can deal with them.

Indeed, I see more family businesses starting to draft a family constitution or charter and develop governance bodies to help with the process. Typically, family businesses develop rules on how to make decisions at different levels in the organization and within the family. The constitution or charter codifies issues such as the entry and progression of family members in the business, how to deal with conflict, the family’s philosophy and values, and how to structure charitable giving.

Other structures and strategies to smooth out the transition and ensure continuity include:

  • Family council – where all family members meet and discuss family-related issues. This is an important council for bonding and instilling family values in younger generations.
  • Family offices – initially, they are set up to take care of family members’ administrative needs. They can develop to ensure that sound investment advice is given to family members as they manage their personal finances.
  • Family talent committee – this works to ensure continued success and growth of the business by identifying, developing and retaining family talent.
  • Philanthropy – efforts are made to ensure that effective giving has a real benefit for the communities in which the family business operates.
  • Exit plans – such plans make it possible for family members to leave the business smoothly, without harming the relationship between family members. In the Middle East, I see more businesses adapting the family discount concept when it comes to exits. This helps to make sure that there is a financial incentive to stay together as one unit.

Better governance structures will continue to evolve in the Middle East. They will help family businesses to succeed for the coming generations.

Adib Rashid, EY Family Business Center of Excellence, Middle East and North Africa

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