Sound corporate governance essential to family businesses' success

According to the International Chamber of Commerce (ICC), whilst corporate governance issues have mostly focused on listed companies with dispersed shareholding, issues such as financial transparency, access to investment capital and resolving internal conflicts are just as important for non-listed and family owned companies.

Dean Rowan, Chief Risk Officer, Gulf One Investment Bank, Bahrain, said, "Family controlled businesses account for 95 per cent of all private sector companies throughout the Middle East and as such play a vital role not only with their contribution to their respective economies but also contribute considerably to creating a safe and transparent investment environment. Data from the ICC, confirms that SMEs and family run businesses who exercise sound corporate governance on average tend to grow faster and live longer."

Family firms are distinctive in that they have to manage their business as well as their family relationships. In order to manage growth it is important that the right members of the family are chosen to manage different aspects of the business. Succession management then becomes a question of ability as opposed to the cultural norm of 'eldest son'.

It is also vital to provide attractive opportunities to managers from outside the family, if they feel they do not have a stake in the future of the company this will hinder growth. In addition, demonstrating impartiality in training, promoting, compensation and benefits not only to individual family members but also to non-family employees is integral to good governance practice.

If family firms are to manage growth successfully, they have to adopt a clear organisational structure, by electing an effective board of directors to concentrate on policy and strategy. Logical management with clear reporting lines and delegation of authority and responsibility, enable family members and other employees to respect the chain of command, irrespective of their 'family' status.

Other topics to be addressed on the forum programme are Corporate Governance And The Role Of Regulation - Effectively Dealing With The Multiplicity Of Government Laws; The Role Of Corporate Governance In Developing Sound Capital Markets; Building Effective And Transparent Boards; International Stock Exchange Mergers And Their Impact On The Middle East.

An unrivalled line-up of local, regional and international experts has been assembled and includes amongst others Dr. Habib Al Mulla, Chairman, Dubai Financial Services Authority (DFSA); Dr. Nasser Saidi, Executive Director, Hawkamah - The Institute For Corporate Governance and Chief Economist, Dubai International Financial Centre (DIFC); Andre Baladi, Co-Founder, International Corporate Governance Network (ICGN) and International Board Member, Euronext Stock Exchange; Mahendra Kumar Chouhan, Vice-Chairman Advisory Board, Asian Centre for Corporate Governance, India.