EY'S FIVE-PRONGED APPROACH
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