RIYADH, 19 December 2005 -- The economic boom in the Kingdom, coupled with its accession to the World Trade Organization (WTO), has thrown up a lot of opportunities for family-owned enterprises to go public. However, quite a few of them are not yet ready for flotation.

This was the broad conclusion that emerged from the first "Forum for Leading Family Businesses to an IPO" held at Riyadh Marriott yesterday. The one-day forum, which was attended by over 300 business executives and experts, was organized by BMG Financial Advisors and sponsored by the Saudi Investment Bank and Family Business Academy in collaboration with Arab News and Al-Eqtisadiah as media partners, among others.

The thrust of the seminar was on the ability of family-owned businesses to capitalize on the economic boom in the Kingdom created by the rise in oil prices. Arguments flew back and forth, with a cross-section of opinion arguing that family enterprises were in a position to go public. This view was challenged by others.

In this context the observations of Dr. Abdul Rahman Al-Zamil, chairman of Al-Zamil Group and a member of the Shoura Council, and Sobhi A. Batterjee, president and CEO of Saudi German Hospitals Group and Family Business Academy, provoked a debate among the women participants who felt that their ability to run family businesses had been called into question.

They objected to Dr. Al-Zamil's remark that women in the Al-Zamil Group are entrusted with responsibilities like managing charitable associations only. On the other hand, Batterjee's elaboration of "CEO" as "Chief Emotional Officer" evoked comments from the women's section that it was uncalled for.

What Batterjee meant was that women could play an effective role at home by providing emotional support to the family, while delegating the responsibility of running business affairs to men. His view was challenged by women participants who have been running family businesses successfully.

Setting the tone for the deliberations, Dr. Al-Zamil said that it was not advisable for one family member to control a group. He stressed the need for setting up a family business council consisting of shareholders from the family. This would ensure that no single member dominated the group.

He said that an important factor for the success of a family-owned business was good management practice.

He also called for greater transparency and accountability in the operation of the company. In fact, this was a recurring theme during the discussions, in which many speakers emphasized this aspect in the interest of gaining the trust of shareholders.

Batterjee later told Arab News that family enterprises should go public eventually to safeguard their own interest. This way they could raise capital for addressing financial requirements or for reorganizing family businesses internally.

"When a company goes public, it forces itself into transparency and openness through restructuring by splitting the ownership from the management. This is very important, because what brings an organization down is actually a family feud. When the family members grow older and younger members also come in, there will be a conflict of interests. This situation could be handled not only by going public but also by having a system of internal governance spelling out the responsibility of each board member."

Basil M. Al-Ghalayini, CEO of BMG, said going public was not every company's cup of tea. "Lots of issues have to be considered before going for an initial public offering (IPO). They have to make sure that they are transparent in their operations by disclosing financial statements on time and in terms of dealing with shareholders."

He said the forum has invited lawyers, financial advisers and management experts to deal with various issues concerning family businesses.

Asked about the challenges facing such enterprises, Al-Ghalayini said they relate mostly to the speed and need for adjusting family businesses to the requirements of the Capital Market Authority (CMA). "There is a long list of rules and regulations that apply to these companies. A lot of companies believe that it is just a matter of switch on, switch off process before going public. It is not that simple. They have to go through a long process to fulfill CMA's requirements," he said adding that many companies have come forward for flotation.

By Khalil Hanware & Javid Hassan

© Arab News 2005