Planning to Preserve Saudi Arabian Family-Owned Companies for Future Generations: What We Can Learn from Corporate Governance Laws and Practices in the US and the UK
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Alsabt, Hisham Ali
Family-owned companies in Saudi Arabia often fail in the third generation due to lack of succession planning, family conflicts, and communication gaps among family members. In addition to the distress and economic insecurity that failure brings to individual families, failed family companies cause instability for the Saudi Arabian economy where they constitute about 95% of registered companies, provide around 80% of employment opportunities, and provide about 25% of the gross domestic income. In this research, I propose that family-owned companies should implement corporate governance roles and principles to oversee and prevent potential family conflicts; provide a mechanism for communicating with all family members; and most importantly, anticipate the need for successor directors or CEOs by recommending candidates and training successors to run the business. The proposal will suggest amending the Saudi 2015 companies law to require any company meeting certain threshold adopted by the legislator to have in place a governance committee with majority independent people, along with the adoption of comply or explain principle. Thus, if a company believes or decides not to have the committee or not consisting of majority independent people or believes not to give it the function of implementing corporate governance roles and principles, then, it must explain why it is going against these guidelines, roles and laws. I will support my argument by analyzing existed published empirical research studies on succession planning and conflict of interests in family-owned companies as well as drawing from scholarship written on the topic. I hope that my research will contribute to the scholarship of succession planning and conflict of interests in family-owned companies as well as offer a roadmap for family-owned companies to survive for future generations.
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