Board governance shunned by 17% of family businesses, Chamber survey finds

Malta’s “family businesses” which employ over 20 persons and command large revenues and operations, are surprisingly bereft of functioning boards of directors.

According to a survey of its members, the Chamber of Commerce found that 17% of family businesses do not have a functioning board of directors, neither do they have a written strategic plan.

50% of family business who declared that they have a functioning board, then said they do not have a written strategic plan or do not need one.  73% of family businesses that declared that they do not have a written strategic plan also have no written succession plan; but 51% of those family businesses that declared that they have a written strategic plan also have a written succession plan.

The Chamber Family Business Committee held a business conference entitled “Charting the Course for Your Family Business” and discussed the results from a survey of 100 family businesses.

The survey presented findings on such companies’ governance as a snapshot of situations where just one director takes decisions on proposals from management, where corridor meetings dictate day-to-day decisions, or other ad hoc arrangements.

In fact, the number one priority of these businesses was not ensuring this level of governance at the top, but retaining their present workforce.

Of those family businesses who did not have a functioning board of directors, nearly all of them (95%) had no written succession plan. “It is clear that those family businesses having a functioning BoD give great importance to timely financial reporting as they would need to report to the board, as opposed to those not having a board. Also, those family businesses having a board give importance to re-think and adapt their business model, while those not having a board do not give great importance to this,” the Chamber’s findings read.

Family businesses that have a written strategic plan also give more importance to the training and reskilling of their workforce and the re-thinking of their business model, than those family businesses with no written strategic plan.

And family businesses that have a written succession plan give more importance to the training and re-skilling of their employees and the increased involvement of the next generation, than those family businesses who do not have a written succession plan.

Chamber president Marisa Xuereb said: “The survey results make for some alarming reading, with many of our family businesses falling short of implementing basic and vital elements of good governance which are a necessity for their continued success. I hope that one of the outcomes of today’s event is that we start the process of rectifying this situation for our collective good.”

The president’s sentiments were echoed by Silvan Mifsud, chair of family business committee, as he presented the survey results and delivered his analysis. “The challenging external environment means that Family Businesses need to shape up to grow and survive. The survey undertaken with over 100 different family businesses outlines the areas which require improvement and adjustment of priorities.”

Enterprise Minister Miriam Dalli, present at the conference said, the government understood that continuity of family businesses is essential, requiring owners to make choices and take difficult decisions. “We also understand that the process of succession and continuity of businesses does not happen overnight. It takes time, pain staking efforts and strong relationships which aren’t always easy to nurture in view of the internal dynamics underlying each and every family business. It is for this reason that a long-term strategy is required to understand the needs of family businesses and to identify support is needed the most.”