17% of family businesses do not have the most basic form of governance – The Malta Chamber
A survey carried out by The Malta Chamber of Commerce, Enterprise and Industry showed that 17% of family businesses do not have the most basic form of governance or a functioning board of directors (BOD).
The results of the survey were revealed by the Chamber on Wednesday whilst celebrating its 175 year anniversary. The survey received replies from 120 family businesses.
President of The Malta Chamber Marisa Xuereb spoke about the important role family businesses have in Malta’s economy.
She said that the Chamber has been committed to supporting them through a number of initiatives, such as the training courses for family businesses which were launched in June 2022.
She said that in spite of all the challenges many family businesses face, especially right now, these businesses have a tendency to fall short of the basic need to have good governance.
Energy and Enterprise Minister Miriam Dalli was also present at the press conference and she said that this survey was another milestone marking the continuation of what was started six years ago with the beginning of the family business office.
She mentioned how there were 259 family businesses registered with the Chamber, and in reality there are actually more operating in the country. She added that family businesses make up 75% of the businesses in Malta which make them the “backbone of our economy”.
Therefore, she said, the government will continue providing support to give more importance to good governance. She said that through the family business office, there is a lot of guidance and incentives which help support family businesses.
She said that the government is focused on making sure that these family businesses carry the meaning of continuity as the vision is a long-term strategy. She said that family businesses must give more importance to good governance in order to achieve this.
She also said that under the family business grant the support more than tripled in a year.
Chairperson of The Malta Chamber Family Business Committee Silvan Mifsud presented the results of the survey.
In the survey, respondents were asked whether the family business has a functional BOD, out of 115 respondents to this question, 96 respondents (83%) reported that they have a BOD that meets regularly to discuss whilst the rest (19 respondents, 17%) said they did not.
Mifsud said that those who said that they did not have a functional BOD had a very backwards-looking mindset when making decisions about the future direction, such as taking matters as and when they arise and as necessary and informal discussions.
Mifsud said that family businesses need to find a balance and compromise when there is conflict. He said that these businesses can only survive if the “’we’ is greater than the ‘me’ ”. He added that it is extremely important that family businesses find a place to discuss business matters.
In order for family businesses to transform themselves they need strategic planning to make sure that they are all on the same page.
Asked whether they have a strategic plan, out of 114 respondents, 38 respondents (33%) said that they have one which is regularly reviewed. 57 respondents (50%) said that they do not have one but they want to get there, and 19 respondents (17%) said that they do not need it.
Mifsud also spoke about the importance of resilience which comes through succession planning, and it was important to note that businesses understand that this needs to be treated as a journey, not an event.
Asked whether they have written a succession plan, out of 108 respondents, 38 respondents (35%) said that they have and 70 respondents (65%) said that they do not have one.
He said that this is important as it gives peace of mind to business owners, and allows businesses to scale up through governance whilst making sure that there are enough checks and balances to do so.
He said that it is never too early to start the succession planning journey.
Asked about family business priorities, retaining one’s present labour force, having regular and timely reporting of financial performance and key KPIs and improving financial performance to survive, he said that these were all very much inward-looking, here and now.
He mentioned how it was encouraging to see that improving digitalisation and being environmentally friendly are pretty high up.
He pointed out that anything linked to future thinking, like increasing the involvement of the next generation was too far down on the importance list.
Pursuing strategic acquisitions or mergers, Beefing up your board of directors with independent and non-executive directors and increasing investments in innovation and R&D were given the least importance.
More statistics revealed that 50% of family businesses who declared that they have a functioning BOD, then do not have a written strategic plan or feel that they do not need one.
95% of those family businesses who declared that they do NOT have a functioning Board of Directors, do not have a written strategic plan.
73% of family businesses that declared that they do NOT have a written strategic plan also have no written
succession plan.
51% of those family businesses that declared that they have a written strategic plan also have a written succession plan.
When comparing the priorities of family businesses with a BOD as opposed to those who do not, the ones with a functioning BOD gave greater importance to timely financial reporting as they would need to report to the Board as opposed to those not having a Board.
Also, those with a board gave more importance to adapting their business model.
When comparing the priorities of family businesses that have a strategic plan, those that have given more importance to the training & reskilling of their workforce and the re-thinking of their business model than those family businesses with no written strategic plan.
Lastly, when comparing the priorities of family businesses with a succession plan, family businesses with a succession plan gave more importance to the training and re-skilling of their employees and the increased involvement of the next generation than those family businesses that do not have a written succession plan.
Dr. Joseph Gerada, Regulator at the Family Business Office, drew attention to the vital role that family businesses play in the Maltese economy. In his remarks he pointed out that “Facts now show us that family businesses locally have developed, and some have grown to become great businesses over the years. However, it is also clear that this growth requires planning ahead and this is one aspect that family businesses must focus on. This is what we mean by charting your course, it is ensuring the continuity of your business and its continued success”.
During the first panel on the importance of good corporate governance and planning, Marthese Portelli, CEO at The Malta Chamber, discussed the survey results and how they show that many family businesses lie at either end of the corporate governance and strategic planning spectrum. In this respect she pointed out some family businesses have a highly developed governance and planning structure with a succession plan, a functioning board of directors and a strategic plan while almost all of those family businesses with no functioning Board of Directors also have no written strategic plan.
Speaking on the same panel Kurt Muscat, Senior Advisor, EMCS, spoke about the service that EMCS Advisory together with AIS Environment have developed to give business leaders and owners a 360-degree view of their business. This service, based on the experience and knowledge of the EMCS team, enables businesses to link the various elements within their organisation, understand where they need to improve and ultimately perform better.
The survey also shows that family businesses are starting to list green initiatives and digitalisation amongst their priorities, points which were highlighted during the second panel of the event based on these subjects. Yasmin Schembri, Senior Consultant at AIS Environment, spoke about the fact that green businesses are not just good for the environment, but they are also cheaper to operate. During the event she spoke about how switching to energy and resource efficient practices is a simple way for businesses to get ahead of their competitors. In this respect she remarked that experts at AIS Environment and EMCS Advisory are skilled at finding the best and simplest solutions to help businesses thrive.
In addition to above mentioned individuals the event was also addressed by George Debono, CCO at BNF Bank, and Joanna Gatt, Executive
Director at Vivian Corporation, all three of whom took part in the first panel discussion. The second panel debate was also addressed by Mr. Reuben Debono, Director at Maypole Holdings Ltd, Kurt Farrugia, CEO at Malta Enterprise and Hadrian Joseph Sammut, Chief Officer Advisory & Projects at iMovo. Both panel were moderated by Rachel Attard, Head of Media and Communications Strategist at The Malta Chamber.
The event was sponsored by EMCS Advisory and AIS Environment and Supported by BNF Bank, the Family Business Office and iMovo.