Business Governance Forum in Asharqia
Chamber.
Governance experts claim the need to reduce family ownership in the
company to 35% of the shares.
Hayden:
For the family company continuity it has
to determine who owns the ship, the owner or the captain or the partnership between them?
Al
Muhaidib: Some boards of directors in the world meet 12 times a year.
Al
Atishan: Family businesses are responsible for improving at least 90% of the
region economies.
Al Zamil:
The main features of the Zamil family constitution are aiming to enhance family
values.
Majed
Al Qasabi, the Minister of Trade and Investment, organized a forum of business governance
in Asharqia Chamber on Wednesday, April
19, under the patronage of the Minister of Trade and Investment, in cooperation
with INSEAD Business School and said that the growth and sustainability of
family business happens through changing the culture among the emerging generations
within the family towards accepting and respecting the views of others.
The
speakers agreed on the importance of having independent members within the
board of directors, and that the independent member bringing with him added
scientific value that can enrich the company with creative ideas, urging for the need to reduce the ownership of
the family in the company to 35% of the shares, stressing that the collapse of
family businesses comes in part happens
when neglecting the strategic aspects, and thus pointed to the importance of
the existence of strategic plans that can be implemented properly and under the
supervision of the administration council.
Governance
and Board of Directors
The
first session of the forum called for activating the role of the board of
directors in family businesses, not only by being the owner of the company, by
activating the relationship with the executive body, setting the vision and
mission, setting the criteria for success and helping the executive to achieve
them.
In this session, titled "Governance and Activating the Role of the Board
of Directors", the head of INSEAD
Global Governance Initiative Professor Ludo Van der Heyden, said that
governance is a bit difficult because it is not as active as accounting and
following as it
is a legal entity through which executive management can be dismissed.
He
said that governance is a Greek word that means sailing, which is not
necessarily owned by the master alone, although he controls the ship path,
while the board of directors owns and controls the ship, but the executives are
the ones who come and go. The
owner is the executive director and the owner is the board of directors. In the
event of a mistake, the captain may be dismissed
from his services. Therefore, the family company has to determine who owns the
ship, whether the owner or the captain or
the partnership between them. .
Companies
are more like a football team
Heiden
stressed that the board must determine what they want from the company and what
they aspire to. The members of the Council must have a framework in which to
define the criteria for success and cooperate with the executive to achieve
these standards. The Council must define the vision and mission, from
family businesses to the same family but should be formulated according to
market data and challenges, and looking to the future.
Heiden
compared the companies to football teams, everyone involved in the game,
everyone playing a part in the task, including the board, and the executive administration
playing a dual role in the process. He might be an attacker who seeks to
achieve the goals and may be a defender seeking to maintain the company, that
the responsible figures may affect the Board of Directors, and that the
Executive Director may also affect, so it is necessary for the council to
determine what he wants this company to be, and not only to appoint the
executive staff, and then demobilized and expelled, and here to ensure the
continuation of the company, The process begins
with the board of directors and its relationship with the executive body.
Hayden
emphasized that governance starts with the board of directors, and the purpose
is to comply with the laws, pointing that governance is to improve plans and
ideas for their implementation in the long term.
Dismissing
the bad elements in executive boards
For
his part, INSEAD resident director Frank Dangered reviewed some of the
successful companies stories, some of which were made by the initiatives and
decisions of their boards, stressing that members of the Board should try to
maintain the company, dismissing the bad elements in the executive boards, and
that each element is ready to serve the company, and that decisions become
producing.
He
stressed that the relationship between the board and executive management should
be positive, with some crossing in benefits, allowing for accountability and
evaluation, and boards should improve strategies for their companies to protect
them from obstacles and to have the ability to evaluate risks.
Dangirad
said that the family ownership should be reduced to 35% of the shares,
stressing that the head should be independent from the family.
In the second session, which was conducted by Daniger,
Mr. Mohsen Al Muhaidib, Vicar of Strategic Investments in Al Muhaidib Group,
Founder and Chairman of Partners, Waleed Al Banawi, Ambassador of INSEAD to
Egypt and the UAE ,
Majid Basta, who called for the need to focus on the managers and the executive
staff, who should use his experience is the most present in the process,
pointing that the existing culture of business and family harmony must be
maintained and we seek to add additional dimensions by opening up to companies In
the world, it is important to emphasize that family businesses in the Middle
East have shown success and it is important to maintain it and strive for
continuity in this success.
Al
Banawi said that the transition to a joint company contributes to raising
performance and that the effectiveness of the role of the board of directors is
pushing it forward. Some companies have failed because they neglected the
strategic aspects and therefore there is a need for proper strategic plans that
are supervised by the board of directors.
Al
Banawi pointed that in many countries in the Middle East, including the
Kingdom, a long history of family companies, before the extraction of oil, we
are pioneers in this regard and we have to entrench the concept of
institutionalization in family businesses to maintain them and to give up a
little emotional family that does not enter Her
business activity, pointing out that in Europe family businesses have decades
of work, and the reason for that is institutional, which ensures continuity.
The
number of independents not less than two members
For
his part, Essam Al Muhaideb explained that family businesses started without a
board of directors, that is, they started from a business idea. With expansion,
it is important to have a framework. Governance has become necessary, noting
that some boards of the world meet 12 times a year. The
importance of the existence of independent members, the independent member with
added scientific value, and no independent member should be added. The number
of independents should not be less than two members, and will increase the
number of independents in the board.
He
mentioned that the Board of Directors has two main roles. The first is the role
required to be played in the legal framework. The second is to play a role in motivating
the executive and improving the work.
In
the main session, speakers were honored by Professor Ludo van der Hayden and Chairman
of Asharqiyah Chamber, Abdulrahman bin Saleh Al Ataishan, who stressed during
his speech that the ideal solution for the sustainability of family business
lies in the introduction of governance procedures, Management
and ownership and take companies regardless of their size and the number of
members of their owners to progress and continuity, noting the need for family
business owners to review their policies in the management of their work in
accordance with the regulations and institutional procedures, pointing out that
the forum comes to spread awareness among owners of your family businesses What
would maintain the continuity of their different types.
He stressed the importance of family business owners to follow the governance
procedures in their business because they have positive returns not only on the
continuity and growth of their companies, but on various aspects of the
national economy, as their role in creating new jobs and approving the existing
jobs.
Tending towards governance and transformation paths
"Family
companies are an active contributor and a major factor in various economies of the world. They
are estimated to be responsible for improving
at least 90% of the region economies. However, they are particularly vulnerable
after the founding generation of many according
to Al Ataishan, more towards governance and transformation paths.
Khalid
Al Zamil, the Excutive Manager of Al Zamil Group, talked about
the success of family businesses, pointing to Zamil Group, saying that the
company governance procedures within the company and the family together
achieved a smooth transition through the generations. He pointed that the group
management has successfully moved from the founder, to the second generation of
his sons and is currently in the process of transferring the leadership to the
third generation.
Al Zamil
Group solutions are to meet the challenges of maintaining family values,
managing succession and other challenges by adopting best practices in business
governance in the Group and applying an
advanced management approach based on strategic planning, risk management,
internal plans and human resources management, also
the best administrative frameworks and practices such as balanced performance
cards and the establishment of the family governance system agreed upon by the
members of the Family Council, indicating that it is a system based on two main
pillars: the
family Constitution and behavioral rules.
Al Zamil
said that the main features of the Al Zamil family constitution aim to enhance family
values, establishing powers and authorities for family institutions, improving frameworks
and principles for the progress, and defining procedures for reviewing and
revising the family constitution and other related goals.
Recruitment
of future leaders
In
terms of succession and talent management within the group, Al Zamil stressed
that the recruitment of future leaders in the group is not an acquired right,
as leaders must meet the requirements of the family constitution and the governance
system, such as gaining practical experience outside the group and competing
with other leaders in the group. The
non family members, pointing that the unqualified people are being granted
positions.
Recruitment
of future leaders
In
terms of succession and talent management within the group, Al Zamil stressed
that the recruitment of future leaders in the group is not an acquired right,
as leaders must meet the requirements of the family constitution and the company
governance system, such as gaining practical experience outside the group and
competing with other leaders in the group. Non
family members, pointing that the unqualified people are given leadership
positions of choice to work in a community service center or head office or the non working group.
In
this context, Al Zamil pointed to the talent management program implemented by
the group and helps making remarkable talents for the present and the future
through four successive stages, starting with attracting talent through
managing performance of these talents through continuously reviewed performance
standards and improving the talent.
At
the end of his paper, Al Zamil advised family business owners to implement
family and company governance systems, especially when the family is united to
prevent any potential conflicts. He pointed the importance of balancement
between family, company and charity activities. Between
these three aspects, stressing the importance of transparency and clarity as
the seeds of a long term partnership with the need to not remind others of
their mistakes, but learning from those mistakes and continue the journey forward.
The importance of
the independent member
In
the conclusion session, titled "Balance of Power in the Board of Directors,"
chaired by Dr. Ibrahim Al Murtif, the head of the Bir Center for Studies, saying
that balancement in the board is the question that is still looking for an
answer. The
management of an independent member of that member does not have a direct
relationship with the company before joining, pointing that each board must
have the presence of an independent person, but the secret lies in how to
choose that independent person who can provide added value to the company
towards its progress and prosperity in the future, he stressed the importance of
an independent person or member being wise and based on the idea of
leadership, not authoritarianism, while noting the importance of an
independent member having the ability to exchange views and being cautious
about the misuse of power. Al
Othaim, a member of the Board of Directors of Riyadh Chamber, said that family
companies should have advisory bodies. He pointed to the importance of an
independent board member in particular and that he brings ideas from outside
the fund and thus is of great value to the company, and then he considered the
role of the organizer as an indicative rather than restricted.
