Tuesday, May 24, 2016

Dubai: The Family Business Council-Gulf (FBCG), the regional association of Family Business Network International (FBN), launched the first-ever GCC Family Business Governance Code which will serve as voluntary guide on how to organise the family and business together.

The bilingual code will help family businesses set governance structures in the form of rules, policies, and procedures, which is one of the key solutions to manage the growing complexity of family and business dynamics in the GCC.

“Governance within family businesses is increasingly becoming a necessity as organisations evolve and grow. Setting family business governance structures, in the form of rules, policies, and procedures is the key solution to managing the growing complex dynamics of GCC family businesses,” said Abdulaziz Al Ghurair, Chairman of FBCG.

Last year FBCG in association with McKinsey & Company conducted a study and concluded that family businesses in GCC have made significant progress in putting corporate governance structures in place, but are still lagging in strict implementation, which could eventually challenge the very existence of these entities.

The comprehensive governance guide launched on Monday is expected to help region’s family businesses in implementing governance structures in areas such as succession planning.

“Succession planning is critical to family businesses in the region and without strong family and corporate governance procedures in place the future of businesses in the region will be at risk,” said Al Ghurair.

“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-thirds of those participants have fully implemented the structures effectively.”

The FBCG-McKinsey study last year showed low adoption of governance policies to support next generation development integration. It stated that only 44 per cent of businesses had an employment policy in place, while 32 per cent had clarity on roles and responsibilities. Around 22 per cent had effective training programs while 17 per cent had effective assessment methods for next generation succession.

While many governments around the world have developed and issued governance principles and codes focused on corporate governance, only a small number of countries around the world, mainly in the Americas and Europe and to less extent in the Mena, have established governance codes specific for family businesses.

The code addresses a wide range of family business governance areas, it covers five governance areas: Family governance, ownership governance, corporate governance, wealth governance, and public engagement. The code provides practical advice on relevant areas such as developing the next generation and succession planning. It also includes a checklist, which can be used as a simple framework to assess and guide the family governance development journey. The code is a comprehensive guide and reference for GCC families.

The code was collaboratively developed with 10 leading regional and international governance experts, with the write up commissioned by Al Tamimi & Co. Other partners included Al Futtaim Group, International Finance Corporation (IFC), KPMG Germany, Hawakmah, Pearl Initiative, Coutts& Co, BNY Mellon, Hadef and Partners, FBN, and Okeili & Co.

“We have taken best practices from across the world and applied our local GCC wisdom to create a governance code specific for our region. While each family may have different visions and goals, the GCC Family Business Governance 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,” concluded Al Ghurair.

Number box (may use number box along with Al Ghurair’s pix as visual element)

44 per cent family GCC businesses have employment policy in place

32 per cent have clarity on roles and responsibilities

22 per cent have effective training programmes

17 per cent have assessment method for next generation

By Babu Das Augustine Banking Editor

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