2 May 2012 ... Family Businesses in the. GCC. Understanding Family. Dynamics & Family
Conflicts www.pwc.com/middle-east ...
www.pwc.com/middle-east
Family Businesses in the GCC Understanding Family Dynamics & Family Conflicts
What we will cover today • Overview of Family Businesses in the GCC • Why do conflicts occur in Family Businesses? • Core issues likely to cause tensions / conflicts in a family business • Impact of conflicts on family wealth and how to successfully minimise conflicts
PwCIL
May 2012 Slide 2
Overview of Family Businesses in the GCC • The GCC is predominantly a family business market . • Family Business continuity is a major concern in the Middle East. • Businesses do not have formal structures in place to address ownership governance issues. • Many businesses will go through a generational change in the next 5 – 10 years. • Family businesses are keen to professionalise their business.
PwCIL
May 2012 Slide 3
Why do conflicts occur in Family Businesses?
PwCIL
May 2012 Slide 4
Why do conflicts occur in Family Business? The greatest threats to family business continuity: • Family and business continuity • Succession planning
Family
• Family conflicts
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Family Dynamics • The three circle model • Active vs passive shareholders
PwCIL
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7 Business/ Management
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6 5
Ownership
May 2012 Slide 5
Core issues likely to cause tensions and conflicts in a family business
PwCIL
May 2012 Slide 6
Core issues likely to cause tensions and conflicts in a family business • Decisions about future strategy and vision. • Decisions around who can and cannot work in the business. • Performance of family members actively involved in business. • Setting remuneration for family members involved in the business. • Family members actively involved in the business not consulting the wider family on key issues. • Deciding between reinvestment of profits and dividends. • The role ‘in-laws’ should or should not play in the family business. • Family shareholders exit and basis of valuation. • Relationship between family members from different branches.
PwCIL
May 2012 Slide 7
PricewaterhouseCoopers Family Business survey revealed … • Nearly half of families have argued about the future strategy of their businesses • More than 40% argued about performance of family members in the business. • More than 25% argued about the setting of remuneration levels for family members. • Over 70% did not have procedures dealing with family disputes
PwCIL
May 2012 Slide 8
Impact of conflicts on family wealth and how to successfully minimise conflicts
PwCIL
May 2012 Slide 9
Impact of conflicts on family wealth • Destroys successful family businesses • Negative impact on family harmony • Freezing of assets and family wealth
“I hope that we’re all still talking and not killing each other” “ A family row can ruin a company” PwCIL
May 2012 Slide 10
How to successfully minimise conflicts Unity of vision and future strategy • formulate a common vision and philosophy
Establish family rules • •
protocols / constitution bring in clarity and transparency
Set up good corporate governance • • •
PwCIL
corporate board involve independent non – family directors accountability
Partitioning of ownership issues from business issues • create separate forums for family and business • engage passive family members
Commitment to fairness • family members to be treated in a consistent and fair manner
Conflict resolution mechanism • involve third parties • independent voice May 2012 Slide 11
