Middle Eastern family businesses facing the challenges of planning succession are set to benefit from the region's first bilingual governance code.
The voluntary guide is aimed at large businesses that are going through either first, second, or third generation transitions.
It is a response by the Family Business Council-Gulf (FBCG), the regional association of Family Business Network, to the growing issue of succession in the six countries within the Gulf Co-operation Council (GCC).
“Succession planning is critical to family businesses in the region,” FBCG chairman Abdulaziz Abdullah Al Ghurair said.
Al Ghurair is also the chief executive of Mashreq and the son of Mashreq founder-owner Abdullah Al Ghurair.
“Without strong family and corporate governance procedures in place the future of businesses in the region will be at risk.
“Our research shows that only two-thirds of large family businesses in the GCC have initiated building blocks for effective family business governance structure, and only one-third of those participants have fully implemented the structures effectively.”
In the next 10 years, more than $1 trillion of family businesses will pass to a generation of owners, according to Badr Jafar, founder of the Pearl Iniaitive – a not-for-profit Sharjah-based institution focused on improving corporate governance and transparency across the GCC.
A FBCG-McKinsey family business study late last year revealed a low adoption of governance policies to support next-generation development integration.
Only 44% of businesses had an employment policy in place, while 32% had clarity on roles and responsibilities. About 22% had effective training programs, while 17% had effective assessment methods for next-generation succession.
Campden Research reported 75% of economic activity in the private sector of the GCC was controlled by family businesses in Beyond Convention: The QFC/Campden Wealth Middle East Wealth Study 2013.
Campden Research estimated there are just over 100 family office-like structures in the GCC.
Al Ghurair said while many governments have codes on corporate governance, only a few countries have governance codes for family businesses - mainly in the Americas and Europe, and to a lesser extent in the Middle East and North Africa.
The GCC Family Business Governance Code covers family governance, ownership governance, corporate governance, wealth governance, and public engagement.
“We have taken best practices from across the world and applied our local GCC wisdom to create a governance code specific for our region,” the chairman said.
“While each family may have different visions and goals, the 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.”