The Arabian Gulf as we know it did not exist more than 50 years ago, as far as world maps were concerned, and while the region emerged in wealth due to oil and gold, the wealth was concentrated in tribal families.
Today 85% of the wealth of the United Arab Emirates (UAE) is concentrated in well-known inter-married families and these are the families that are building family business structures to protect themselves. However, Sharia law works to their disadvantage, which is why we have noticed the disappearance of certain families from the business domain in the last 25 years. With the predetermined chairs of children in one family, the business is dissoluted by people who do not get along together in a business. People start selling out and they start losing money.
I know many families in the region who went through early structuring just to hold themselves together after the death of a father. Usually when the patron goes, it is chaos.
This has been the debate here—how to convince elder patriarchs that succession planning will fit with their life and afterlife. When they reach their 70s or 80s, they are preoccupied with facing God, not legacy, and so this region is at risk of losing big businesses.
What they should be told is: 'There are many stakeholders and you should worry about your employees and the community that grew because of this business, so let us keep it together'.
Now some people are working with lawyers to rescue the situation and one of the initiatives we've taken is the Arabian chapter of STEP, an organisation set up to improve public understanding of the issues families face in relation to inheritance and succession planning.
We are also advocating the use of waqf, the Islamic origin of a trust. You will find waqf in Malaysia and Indonesia, and it is trying to be revived by many scholars, but in Saudi Arabia it hit a wall because waqf is regulated by the government. Islamic trusts may be an option too but when the Rule of the Third Only is the pre-set test, all options lose viability. The rule means the deceased may have freedom to gift a third of the inheritance by a will while the remaining two-thirds is to be distributed among the inheritors who are predetermined by the Quran as well as their shares.
The other challenge in family businesses is the integration and involvement of women. Since the regulators are all men they never think of inclusion. We do not have one woman sitting when a law is drafted which always renders us victims of whatever law is published. I urge Gulf family businesses to invite women to sit on their boards, to become involved and engaged, because there are so many women who are going to fall when succession planning fails. And have already.