Family firms have long been excluded from the debate on good governance, since corporate governance is conventionally viewed as applicable only in the domain of public corporations. Yet only 15 percent of family-owned businesses survive until the third generation, indicating a great need for improved governance.
In his Feature Service article, Mr. A. Razak Dawood, Chairman of the Pakistan Business Council and the former Federal Commerce Minister of Pakistan, addresses crucial problems faced by family firms, such as inadequate focus on preserving their human and intellectual capital rather than just financial assets. He also talks about the ways in which governance in family firms can be improved, starting with the formulation of a statement outlining the purpose, values, and goals of each family business. He notes that, “The objective of a system of family governance must be to align the aspirations of each individual family member with the goals of the family as a whole.”
Committing to good governance practices for all generations to come may seem like a daunting task for a family business. But, as Mr. Dawood concludes, “The result of good governance within the family and its companies is a family-based, professionally-run, continually growing institution.”
Article at a Glance
- Family-owned businesses face unique problems with continuing their operations successfully over several generations due to governance issues.
- While corporate governance is conventionally regarded as applicable to public corporations, family-owned companies are equally in need of sound governance mechanisms.
- Creating and applying a system of good governance is crucial for the preservation of not just financial wealth, but also human and intellectual capital of family firms.
Published Date: July 25, 2008