#ThrowBackCSRFiles: Corporate Governance Challenges: Building Multigenerational Corporations and Enterprises in Africa

Multigenerational family businesses are one of the foundations of the world’s business community. Their creation, growth and longevity are critical to the success of the global economy. There are many distinguishing characteristics of what a multigenerational family business is, and the single most obvious point of difference, of course, is the ownership structure, and while this tends to take the form of direct and total family control, some organizations also have non-family shareholders and/or executives, and a stock market listing is quite common.

The family ownership framework also leads to significant differences in Corporate Governance provisions. Despite facing many of the same of the same day-to-day administrative issues as publicly-owned companies, they must also manage many issues that are specific to their status. A company operating within widely different and cultural and social contexts needs a governance framework that mirrors this, especially in relation to delicate issues such as board strictures and succession. Since multigenerational family businesses are among the most important contributors to wealth and employment creation in many countries of the world, their state of governance is a cause for concern.

The financial and economic crisis in 1997 shook many leading businesses in the world, leading to a disintegration of their business base and also wiped out some of the most notable family business groups in the world. If the need is long term continuity, this points to the need to institutionalize the roles and relationships that are present in the family business, rather than simply rely on current relationships.

As family businesses enlarge from their entrepreneurial beginnings, they face unique performance and governance challenges. To be successful as both the company and the family committed to be capable of carrying on as the owner. Hence, 5 dimensions of activity must therefore work well and in harmony:

  1. Balanced relations within the family and a knowledge of how it should be involved with the business;
  2. An ownership framework that provides adequate capital for growth while allowing the family to control essential parts of the businesses;
  3. Strong governance of the company and a dynamic business portfolio;
  4. Professional management of the family’s wealth;
  5. Philanthropic foundations to promote family values across generations

Source: CSRFilesTM

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