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Canadian family businesses ‘overwhelmed’ by succession and governance

Family businesses are the bedrock of Canada’s strong economy, but many are “overwhelmed” by succession and governance challenges.
Canadian family businesses ‘overwhelmed’ by succession and governance

Family businesses are the bedrock of Canada’s strong economy, but many are “overwhelmed” by succession and governance challenges.

That’s according to Beverly Johnson, partner and national chair of KPMG Enterprise and the Centre for Family Business, who was commenting after research found that almost half of Canada’s family businesses expected next-gens to take over management or ownership within the next five years.

However, 80% of respondents had no formal plans in place to manage succession, said the study by KPMG Enterprise and the Canadian Association of Family Enterprise.

Johnson said many of Canada’s family businesses were putting off dealing with succession because “it’s too overwhelming”.

“They often don’t know where to start and they are concerned with the potential conflict – that there might be some difficult discussions that are needed between family members,” she told CampdenFB.

The report, entitled Family Ties – Canadian Businesses in the Family Way, said family firms were doing well in “professionalising their businesses”.

However, it also found that family members held the chief executive role in 93% of companies examined, which Johnson said could be explained by the age of the businesses.

“A lot of businesses are still in their first or second generation. So they are still very closely held and therefore the key positions are [held by] family,” she said, adding this was changing as companies “mature and become larger”.

According to the study, just 28% of the companies questioned had a formal board of directors. Governance is one of the toughest issues family businesses face, said Johnson, with many struggling to find “appropriate” procedures for their company. But she added there are various ways to improve governance, not just through a board of directors.

Family businesses, she said, are playing a “very significant” role in Canada – providing about three-quarters of new jobs and accounting for about 60% of gross domestic product.

The study interviewed 195 next-gens, as well as 322 family business members. Most of the businesses examined were small or medium-sized. Over 40% had revenues above $10 million (€7.85 million). 

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