More non-family members find place in boardrooms

January 30, 2013 - 1:47:43 am

 



From left: Rashid bin Ali Al Mansoori, CEO, Qatar Exchange; Imelda Dunlop, Executive Director, Pearl Initiative; David Dhanoo, Group Chief Legal Officer and Board Secretary, QFC Authority, and Amin Nasser, Partner, Middle East Family Business Advisory Services Leader, PwC,  during the roundtable on Governance Practices in Family Firms at St Regis Hotel, yesterday. (Kammutty VP)

By Satish Kanady

DOHA: Family businesses in the Gulf region are witnessing an increasing trend of appointing non-family members to the board.  To bring in wealth of experience and ensure objectivity in decision making, sans family-related emotions, many family firms   are accommodating non-executive members in the board,   a corporate governance  expert told The Peninsula yesterday.

“There has been an increasing interest in appointing independent and non-executive directors to the board. I think there is a business case in this growing trend”, Imelda Dunlop, Executive Director, Pearl Initiative said shortly after releasing the Pearl Initiative-Pwc joint study report on GCC family businesses.

The  family firms have realised the fact that  it is vital that Board directors are appointed on an appropriate merit and specific skill set rather than sentiment and family hierarchy. In the changing dynamics of global market, they have realised it is wise to choose a candidate with right mix of skills, she said.

Citing the findings of the study, Imelda said that 55 percent of GCC family firm respondents have non-family board members. Just over half, 54 percent, have non-executive directors who are family members and 42 percent have non-executive directors from outside the family. Fifty-one percent have non-family shareholders and a further 12 percent are likely to offer shares to people outside the family in the next five years.

Imelda said the succession story of family businesses in the region is quite different from the rest of the world. In  the case of Europe and Asia, we hear stories of breakaways after the second or third generations. In contrast, the family businesses in the region has a history of just 50 years. The second generation is quite young and there is a better emotional bondage between family members, she said. 

GCC families share a powerful cultural tradition of respect for older generations, which can clearly impact the way a family business is run, especially at the moment when control and management pass from one generation to the next. Of course, there is some sort of friction when the second generation brings in new business models and innovations, but it is a positive sign, she said.

Another encouraging development is the entry of more and more female members into the board room. Of those interviewed, 32 percent of the family firms   said they have female board members. “This is encouraging. But the key question is how much they are involved in the decision making,” she noted.

It is important for firms in the region to implement higher standards of corporate governance. Just 12 percent of the family businesses publicly disclose any financial information. Better transparency will allow GCC family houses to access finances at more favourable terms and attract more customers.

Of the total 100 family businesses interviewed across the region, four percent were from Qatar.

The Peninsula

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