EY'S FIVE-PRONGED AP­PROACH

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THE METHOD­OL­OGY AT EY EN­TAILS A FIVE-PHASE PROCESS TO AS­SIST FAM­ILY BUSINESS CLIENTS THROUGH THE GOV­ER­NANCE TRANS­FOR­MA­TION JOUR­NEY.

Un­der­stand­ing the fam­ily his­tory, fam­ily tree, cul­ture, founder's vi­sion and val­ues, fam­ily business struc­ture, strat­egy and di­rec­tion. Hold­ing pri­vate meet­ings (of­ten oneon-one) with fam­ily share­hold­ers to bet­ter as­sess their ex­pec­ta­tions, ar­eas of con­cern, as­pi­ra­tions and wor­ries about the fu­ture of the business. Serv­ing as fa­cil­i­ta­tors and mod­er­a­tors in work­shops held with the work­ing group who fairly rep­re­sent all branches and gen­er­a­tions. Doc­u­ment­ing and pre­sent­ing the fam­ily char­ter to all fam­ily mem­bers and fa­cil­i­tat­ing the cer­e­mo­nial event for sign­ing the fam­ily char­ter. Re­view­ing the cor­po­rate struc­ture and gov­er­nance frame­work to en­sure that it is aligned with the fam­ily char­ter. Also, as­sist­ing in the de­vel­op­ment of the nec­es­sary gov­er­nance bod­ies and defin­ing their roles and re­spon­si­bil­i­ties. De­vel­op­ing an au­thor­ity ma­trix and ar­tic­u­lat­ing the mech­a­nism for the decision mak­ing process.

of Sharia looms heav­ily over busi­nesses in the re­gion and un­der it, the al­ready limited op­tions for lead­er­ship is fur­ther nar­rowed. “Ob­vi­ously, in the Mid­dle East, suc­ces­sion plan­ning has a dif­fer­ent dy­namic to suc­ces­sion in, say, civil law coun­tries (which is of­ten about mit­i­gat­ing tax) be­cause of the way in which dis­tri­bu­tion of es­tates oc­curs on death due to Sharia law. When you have fixed heir­ship pro­vi­sions, your plan­ning op­tions are re­duced,” says Nier­ada. But there are ways of get­ting around it and a hand­ful of com­pa­nies choose to take the own­er­ship off­shore (reg­is­ter the company abroad) to get around the Is­lamic law. “This way you can mit­i­gate the ef­fects of Sharia and plan the business suc­ces­sion with a free hand,” he con­tin­ues. “But this can be a del­i­cate sub­ject be­cause of the Sharia is­sue and the ques­tion of whether peo­ple, es­pe­cially Mus­lims, should be seek­ing to avoid its pro­vi­sions.”

Lo­mas is skep­ti­cal of th­ese “back­doors” be­cause, though you get away on a tech­ni­cal­ity, he feels fam­i­lies would still have to an­swer to pub­lic opin­ion. “I per­son­ally would like to help cre­ate a lead­er­ship cul­ture within Sharia law; this will prove to be more suc­cess­ful,” he ex­plains. “Of­ten it's about the per­cep­tion among friends and fam­ily. So we have to craft a story for the fam­ily to ac­cept and tell their peers.”

Watts ar­gues that Sharia law is not at odds with suc­ces­sion plan­ning and is, in fact, en­tirely in har­mony with it. “How­ever, there is con­fu­sion in the minds of some be­tween Sharia in­her­i­tance rules and the dis­tri­bu­tion of as­sets dur­ing the lifetime of the founder, which are two en­tirely dif­fer­ent things. This con­fu­sion does some­times lead to paral­y­sis and hes­i­ta­tion in deal­ing with im­por­tant business is­sues, which are usu­ally best tack­led dur­ing the lifetime of the founder.” The other al­ter­na­tive avail­able for fam­i­lies is to bring in an ex­pe­ri­enced per­son to run the business un­til a fam­ily mem­ber is suf­fi­ciently groomed to take over. “We ex­am­ine the skills within the fam­ily, some­times one of them has clearly got lead­er­ship skills and we sug­gest work­ing with them. In some cases, it is not as ob­vi­ous. Ei­ther there is no po­ten­tial or it'll take longer to build,” Lo­mas points out. “In th­ese in­stances, we sug­gest find­ing out­side help. We rec­om­mend bring­ing some­one in for a fixed pe­riod of time, like two to three years, who can coach and men­tor the next in line. We have a large data­base of ex­ec­u­tives who have worked in the Mid­dle East and have a pas­sion for

LOUTFI ECH­HADE Part­ner MENA Fam­ily Business Leader Ernst and Young “Fac­tors re­lat­ing to the tra­di­tion and cul­ture in the re­gion that hin­der ef­fec­tive gov­er­nance. Re­luc­tance of the founder to let go of con­trol, power and man­age­ment of the business; Lack of pro­fes­sional and com­pe­tent top and mid­dle man­age­ment re­sources; Poor util­i­sa­tion of the women's role; And the lack of good un­der­stand­ing and knowl­edge of fam­ily gov­er­nance frame­work and pro­to­cols.”

“Our goal is to de­velop a cul­tur­ally sen­si­tive Arab lead­er­ship model. The re­gion has a huge lead­er­ship his­tory but this might not nec­es­sar­ily res­onate with the mod­ern world. But we also can't im­pose lead­er­ship mod­els from Amer­ica or Europe.” ADAM LO­MAS Part­ner Cas­tor & Part­ners

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