Corporate transformation: Enhancing the success of family-run businesses

Historically, only 30% of family-run businesses make a successful transition from the first generation to the next. PHOTO: FILE

Historically, only 30% of family-run businesses make a successful transition from the first generation to the next. PHOTO: FILE

THE EXPRESS TRIBUNE, KARACHI, 18th SEPTEMBER 2013: For many people, family-owned businesses symbolise bad governance, micro-management and use of company assets to bolster personal life styles. However, if managed properly, such businesses have the potential to grow into fast-growing corporate entities while retaining their concentrated shareholding patterns, according to speakers at a seminar titled, “Corporate Governance Implications for Companies with Concentrated Ownership” held on Thursday.

The objective of the conference was to discuss whether the ownership structure of companies should influence the board of directors in carrying out its duties and responsibilities, and its impact on the management and performance of the companies in the long-term.

Corporate governance offers a practical solution to the challenge of a good relationship between owners and other stakeholders which becomes more complex when a business expands, be it family or a non-family business.

“Corporate governance system puts in place the policies and procedures to manage effective organisational setup that defines roles and responsibilities,” said Pakistan Institute of Corporate Governance President and CEO Fuad Hashimi.

Majority of the businesses are concentrated ownerships in Pakistan. Concentrated ownerships or closed companies, including family businesses, and are represented by a small number of shareholders, all of whom have the ability to participate in the management, directions, and operations of the entity.

While the chief guest Securities and Exchange Commission of Pakistan Acting Chairman Tahir Mahmood was not able to make it to the conference, Hashimi delivered Mahmood’s speech on his behalf, saying that the majority of businesses in Pakistan are structured in a similar manner and corporate governance is often construed as the exclusive domain of large corporations with scattered shareholding structures.

Hashimi went on to say that the need for professional business approach was far more important in a family than in a non-family business, especially in the context of Pakistan.

Historically, only 30% of family-run businesses make a successful transition from the first generation to the next. The success rate can only be boosted when there is a written and clear policy for the selection of the right family members for future leadership roles.

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