Sitting on the board of a family business is as much a privilege as it is a huge responsibility. Our 62-year-old family business, the Easa Saleh Al Gurg (ESAG) Group, recently underwent a smooth succession process, the groundwork of which was put in place over many years and benefited hugely from a growing focus on governance – an essential factor in the success of any business family-owned or otherwise.
The new family business law states that a family business does not cease to exist due to the death, interdiction, bankruptcy, or insolvency of one of the partners will take effect in January with the intention of increasing the economic impact of family businesses on the nation and luring more companies to base their operations in the United Arab Emirates.
Good governance is truly significant in a region like the GCC, where family businesses play a critical role in the economy, account for more than 90 percent of the private sector and generate almost 70 percent of employment. From multigenerational conglomerates to neighbourhood concepts, family businesses in the Gulf play an instrumental role as innovators.
Of course, the foundation of every family business is built around a set of values and a huge part of a company’s legacy is also ensuring longevity and resilience. From my experience, it is important for founders to create companies with the intention of growing it into a conglomerate with a continual focus on sustainable business continuity.
For this reason, it is essential to constantly work towards creating clear guidelines on roles, responsibilities, and benefits of all stakeholders, from shareholders to family to non-family member employees.
At ESAG, we recently developed ESAG2025, a roadmap outlining our purpose and core strategic objectives for the next three years. We involved all members of the leadership team in the process to outline future goals and reinforced the values with which we will conduct business, namely empowerment, integrity, and diversity.
Why is governance important?
A PwC survey conducted last year indicated an increase in family conflicts in our region, therein highlighting the importance of a well-defined governance structure to facilitate succession planning and conflict resolution, among others.
From passing the baton of leadership to clarity on shareholder participation and role definition of family and non-family member employees, clear guidelines are key to the success of family businesses. Reinforcing the importance of governance, the UAE has issued a law regulating family business ownership to ensure a smooth transition for successive generations.
How to build a business that will last?
Although there could be gaps, family businesses in the Middle East generally take governance seriously with 84 percent having some form of family governance policy in place, according to the PwC survey.
That itself is a step in the right direction to build a purpose-driven and profitable business – especially since business growth is a top priority for the next generation of family business members (65 percent). Reassuringly, a PwC Global NextGen Survey conducted this year found a similar percentage (64 percent) value sustainable business practices.
Family businesses have a fundamental responsibility to create value for future generations, who are often the driving force behind innovation and impact-making. Open communication with them is vital to create policies and processes that will empower them to leverage new growth opportunities.
Being mindful of this at ESAG, we have several knowledge-based upskilling initiatives such as sponsoring MBA and executive education courses at London Business School. These are open to family and non-family member employees. In the past 12 months, the initiative helped a senior female colleague undertake an intensive 11-week programme to equip her with the knowledge required to fulfil a new role within the organisation.
At a time when the world faces tremendous uncertainty arising from supply chain disruption, emerging geopolitical risks, and the ongoing disruption from digital, it’s time to embrace a family business formula for lasting success. While a one-size-fits-all model is a myth, good governance hinges on a collective sense of purpose, people, and community centrism.
I strongly believe that the time is now to focus on legacy for future generations and deliver on promises to nurture businesses that will last. That is what we are doing at ESAG, and I believe the future will reward Gulf family businesses that succeed.
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