THE NECESSITY OF A BOARD IN FAMILY-OWNED ENTERPRISE

Upcoming Events

  • The Board (Part 2 DDP) Arabic

    27 Sep - 28
    27 Sep - 28

    The Board (Part 2 DDP) Arabic

    Location: Dubai

    Categories: Director Development Programme Events 2017

    more Learn More
  • The Board (Part 2 DDP)

    27 Sep - 28
    27 Sep - 28

    The Board (Part 2 DDP)

    Location: Dubai

    Categories: Director Development Programme Events 2017

    more Learn More
  • Finance for Non-Financial Professionals

    04 Oct - 05
    04 Oct - 05

    Finance for Non-Financial Professionals

    Location: Dusit Thani Dubai

    Categories: Events 2017

    more Learn More
  • Strategic Leadership (Part 3 DDP) Arabic

    15 Oct - 16
    15 Oct - 16

    Strategic Leadership (Part 3 DDP) Arabic

    Location: Dubai

    Categories: Director Development Programme Events 2017

    more Learn More
  • Certified Board Secretary Workshop

    16 Oct - 18
    16 Oct - 18

    Certified Board Secretary Workshop

    Location: Dubai

    Categories: Events 2017

    more Learn More
  • Financial Stewardship, Accountability & Planning (Part 4 DDP) Arabic

    17 Oct - 18
    17 Oct - 18

    Financial Stewardship, Accountability & Planning (Part 4 DDP) Arabic

    Location: Dubai

    Categories: Director Development Programme Events 2017

    more Learn More
  • International CG Study Tour

    23 Oct - 27
    23 Oct - 27

    International CG Study Tour

    Location: United States

    Categories: Events 2017

    more Learn More
  • Essentials of Corporate Governance and Boards (Arabic)

    08 Nov - 09
    08 Nov - 09

    Essentials of Corporate Governance and Boards (Arabic)

    Location: Dubai

    Categories: Events 2017

    more Learn More
  • Strategic Leadership (Part 3 DDP)

    12 Nov - 13
    12 Nov - 13

    Strategic Leadership (Part 3 DDP)

    Location: Dubai

    Categories: Director Development Programme Events 2017

    more Learn More
  • Financial Stewardship, Accountability & Planning (Part 4 DDP)

    14 Nov - 15
    14 Nov - 15

    Financial Stewardship, Accountability & Planning (Part 4 DDP)

    Location: Dubai

    Categories: Director Development Programme Events 2017

    more Learn More
View All Events
Click Here For Full Journal

Interview with Francois de Montaudouin

How do you establish corporate governance in a family owned business?


As the expression states, we have to deal with a corporation which means that the private wealth has to be separated from the company’s assets. In most countries, it is more or less automatic because the tax burden is different between individual owners and corporations. In the GCC, this exercise needs to be thought through, particularly in relation to real estate which typically is an important part of the wealth. The creation of one or several holding companies rationalizes the ownership. The funding of the company’s activities and the family cash flow requirements have to be looked at before deciding on a legal structure.


Before a Board is actually created, the Company needs to have certain management tools in place, such as budget, quality reporting, strong processes for key areas, and a delegation of authority framework.


What do you mean by delegation of authority?


Typically the owner of a company or a group of companies controls by himself, all expenses and investment decisions. The creation of a Board will require that those decisions on expenses and investments will be shared between Shareholders, the Board and the Management. With delegation, higher controls are necessary.


What about the Board?


A Board without proper legal organization and management tools cannot function. The role of the Board is to provide entrepreneurial leadership with appropriate controls. Each word is important. Entrepreneurial because the decision making has to be in sync with the business opportunities to identify and implement a growth strategy; a company that does not aim to grow is dying, in particular in countries open to market forces, like the UAE for example. Leadership, because the Board is not actually implementing the strategy; it is guiding the Management. Controls, because the various stakeholders need to be protected.


The Board does not only represent the family shareholders?


The Shareholders are providing the capital and the vision and without those, the company would not exist. However a number of other stakeholders are important to the success of the business such as employees, suppliers, creditors, regulators and etc. The controls in place will protect the wealth of the shareholders and secure the other stakeholders.


Who should be on the Board of a family owned business?


You can see from the previous answers to your questions that having automatically all members of the family on the Board is not the best solution. To become a Board member, you need first to qualify. It is not about passing an exam - It is about making sure that a potential Board member understands the dynamics of the business, the risks and rewards associated with it, and the separation of duties between the Shareholders, the Board and the Management.


How to decide who should be on the Board?


The Board members are chosen by the Shareholders. Depending on the number of members of the Family, not everyone can be on the Board; the Family needs to choose the most qualified to sit on the Board and to organize various channels of communication with non-Board members of the Family, through a Family council for example. In addition, the Board members should not have a conflict of interest which could create a bias in their decision making.


What is a conflict of interest in a family group?


It is not unusual that some family members have their own businesses which could compete with the Family group or, to the contrary, which rely on the Family business for their survival and reputation. You have some Family members that are employed by the Group and therefore are receiving a remuneration while others do not. All these situations have to be identified clearly to avoid conflicts.


Do you think that independent Board members are necessary?


An independent Board member would be someone who has no material business relationship with the group, who is not a significant shareholder and, who has no family ties with the shareholders. The main role of an independent Board member is to bring additional business knowledge and judgment to the Board. They could be very valuable because within a Family you may not have all the skills available for the proper leadership of a sometimes complex organization. Their experience, wisdom, previous dealings are additional assets for the Group. However it is difficult for many Families to accept to open the books to a non-Family member! Indeed, it is often difficult for Family members themselves to have clear view of the books.


What is your recommendation?


Corporate governance is a journey and there is no need, unless forced by events, to rush into “best practices”. You have to start and gradually make the governance work. It could imply that the Family starts with an advisory board before it evolves into a full board, it could be that the Board opens up progressively to non-Family members. Each Family has its own history and DNA, corporate governance can be adjusted accordingly as long as the basic principles of transparency, fairness between the shareholders, and accountability are respected. The best one to start the process is the Founder of the Family group because all options are open. When the second generation becomes involved, the options are restricted by the decisions taken by the Founder and by the number of siblings. In any case, someone has to drive the process diligently; otherwise the problems will come, as it happens in every family around the world, and everyone will be in crisis mode!

Testimonials

  • The Director Development Program is great way to gain insight and improved understanding in areas such as corporate governance and board functionality. I would highly recommend the program as a foundational step before they begin their board experience.

    Bindu Ann Joseph - Chief Operating Officer - 3W Networks
  • Director Development Program was invaluable learning experience for me which has elevated my knowledge and broaden my understanding mainly on the corporate governance practices and board of directors role. It has addressed the main concepts from theoretical and practical perspectives. The material is comprehensive and provides the key information of the different aspects of the course. I strongly recommend the program for individuals who play role in corporate governance and seek to enrich their knowledge of companies’ board of directors.

    Sumaya Alshaer - Acting Head of Strategy & Corporate Governance - DUBAI SOUTH
  • The Director Development Program is being run with an effective balance between theory presented by knowledgeable staff and interactive discussions among the participants. This makes it into a recommendable program for aspiring and existing Board Members alike to get up to date on Corporate Governance as relevant for our GCC Region.

    Johan H. Brand – Owner – Johan Brand Leadership Advisory DWC – LLC
  • My favorite part of the DDP program is that it teaches you more than academics. It gives you insights on the skills you need as a board member.

    Noora Mahfouth A Mohd Alshehhi - Manager- Contract Review Audit - Dubai Electricity & Water Authority
  • The program was a great opportunity for me to learn about best practices of governance and board dynamics both globally and locally. Having diverse and experienced colleagues brought new and different   perspectives that added value.

    Majid Al Mail - Senior Manager & Head of INNOVATOR Program - Abu Dhabi Technology Development Committee (TDC)
  • Building corporate governance capability is vital for board members, and eventually can help create financially healthier businesses, and more sustainable over the long term. I encourage all seniors to look beyond traditional forms of governance and explore new techniques and patterns that “Hawkamah” has tailored for its unique associates. PDD program has given us the horizon to use these tools on real business cases and prepare us to set in board meetings with self-confidence and sensibility.

    Ekram Al-Yacoub - Saudi Business Analyst and Columnist
  • The DDP course striked the right balances between academic governance literature, class discussion, and trainer background. This was a great course to get more depth in governance with discussions on regional case studies drawn from Hawkamah, class Trainers, or Participants.

    Jasem Alawadhi - Manager CTO - Commercial Bank of Dubai
  • The Directorship Development Program (DDP) provides a structured overview of the skills and responsibilities required by the board member.  The material is interesting and comprehensive in nature, yet practical and immediately implementable.  The instructors add practical insight into the topics, and the diversity of the attendance provides multiple viewpoints.  This program is highly recommended for individuals looking for a structured framework to develop skills instrumental for serving boards.

    Nathalie Sfeir Bsaibes - Legal Consultant - MEG Legal Services
  • I thoroughly enjoyed Mudara’s Director Development Programme and found it to be very beneficial. The content was both well-structured and comprehensive, providing us with an in depth view of global best practices and arming us with the necessary skills to effectively disburse our duties. I highly recommend it for all current and aspiring board members.

    Omar Al Shunnar - Chief Executive Officer - Majid Al Futtaim Healthcar
  • An excellent course, and highly recommended for all Board Members.

    Abdulqader Obaid Ali, Director

Latest tweets

@Hawkamah
@ashrafge on how to minimize third-generation family business challenges. Read the full article:… twitter.com/i/web/status/9…
twitter
@Hawkamah
May your new year be filled with peace, happiness, and joy! pic.twitter.c...om/x3XZazojtZ
twitter