Family business: The delicate challenge of good governance

The organization of governance within a family business is of paramount importance in ensuring its longevity across several generations. An overview of family businesses around the world highlights the omnipresence in numbers of these entities, which vary enormously in terms of size, structure, and legal form.

« They represent between 60% and 90%, depending on the country, of the total number of companies in the world. It is essential to revisit the notion of the family business in order to differentiate it from the non-family business», said Abdelkader Boukhriss, President of SFM Conseil, on the sidelines of a recent seminar on «Appropriate governance for the long-term survival of the family business».
Although there is no universal definition, several criteria converge to characterize these entities, three of which seem to constitute a consensus. First, the ownership aspect: a family business is held by a single family. Secondly, the family’s involvement in the company’s management is a decisive criterion. Finally, the desire to pass on the company to future generations to ensure its longevity also marks this specificity.
Overall, the governance of family businesses is concentrated in the hands of the head of the family. This is often explained by culture, tradition, history or simply by the expertise developed within the company over the years. «This being the case, governance as a set of decisions, rules, and practices designed to ensure the optimal functioning of a company can no longer, in our view, suffer from such concentration. Particularly as governance is a key determinant of a company’s performance «, Boukhriss points out. He adds that «this is one of the reasons why it is now recommended to distinguish between the company and the family, and to set up collective decision-making bodies responsible for formulating, executing, implementing and monitoring decisions «. In fact, numerous studies have shown that good governance within family businesses enables them to achieve both family and business goals at the same time.

Khadija MASMOUDI