How Good Governance Helps Family Businesses in Smooth Transition from Generation to Generation
Around the world family-owned businesses play a vital role in a country’s economy, but such businesses face a unique set of challenges that are rooted in an organizational structure that may hinder these enterprises from attracting and retaining high quality human capital, obtaining lower cost debt and equity capital, and ensuring long term competitiveness and sustainability.
Statistics show that over 70 percent of businesses in Pakistan are either family-owned or controlled, demonstrating that this business model is the essence of local societies and regional economies. As such, they play a vital role in economic development not only through their business contributions but also by creating an investment environment that is open, safe, secure, and transparent.
“To address challenges posed by the unique business structure and its assimilation in mainstream economics, adoption of corporate governance measures is the only route to ensure long term success of such businesses. From an investor perspective, the key is to establish the right corporate governance conditions so that the positive aspects of family ownership are coupled with assurances that investor interests will be recognized and addressed.”
Governance Challenges for Family Owned Business, IFC