Corporate governance in Lebanese family-owned businesses -

Abstract

Family businesses are the oldest and most predominant form of organization in the world, constituting 65percent to 90percent of worldwide enterprises. Family businesses play an important role in job creation and economic development, contributing around 70percent to 90percent to Global GDP. In Lebanon, family businesses are considered the base of the economy, constituting around 90percent of the private sector. One aspect of family businesses is that they are short-lived and only around 10percent transfer to the third generation. In most cases, this failure to transfer across generation is attributed to a lack of solid corporate governance structure. However, given the complexity of family businesses and the overlapping family, business, ownership and management systems, standard corporate governance principles cannot be readily applied. In order to reap the best family and business outcomes, both business governance and family governance structures must be put in place. Given the prominence and economic impact of family businesses in Lebanon and the importance of corporate governance in the survival of these businesses, it seems relevant to gain an empirical understanding of the extent to which Lebanese family businesses implement good corporate governance practices, in line with international best practices. For this purpose, a questionnaire on corporate governance practices was developed and distributed to a sample of 35 family-owned businesses. The results revealed that Lebanese family businesses have emergent business governance structures and underdeveloped family governance structures. This suggests that unless these family businesses start adopting corporate governance practices, they may not be able to transfer across generations. Policy-makers, public organizations, the banking sector and family businesses themselves must collaborate and make changes in order to reform corporate governance practices.