April 11, 2012—
A panel discussion held March 29 at LAU Beirut, “Building Family Business Constitutions,” featured influential members of Lebanon’s family business community weighing the rewards and challenges of passing on values, business principles, and governance structures from one generation to the next.
Sponsored by the School of Business’s Institute of Family and Entrepreneurial Business, the forum drew together family business owners, leaders and members, as well as their senior executives and close advisors, to discuss common experiences and learn from peers who have already established constitutions.
A constitution, according to keynote speaker Raphael Debbane, chairman of Desco Holding SAL-Debbane-Sakaily Group, outlines and clarifies the rights and responsibilities of family shareholders to the business and to each other. It provides “long term guidance and balance to family shareholders, creating a cohesive group that speaks with one voice, thereby ensuring the competitive advantage of a family-run business,” he told the audience.
After 55 years in business together, Debbane and his five brothers decided to create a constitution to “prepare the new generation to take our place.” With 18 children between them, it was no easy task.
With the help of an experienced consultant, the family met multiple times to design a document that would withstand the test of time. They put their shared values, family vision and key principles down on paper, tackling the often-sensitive issues of bloodlines, inheritance, and exits from ownership.
Nothing was left off the table during the two-year process. “There can be no hidden agenda in a family business,” he said. “Either the business is for the family or the family is for the business, and we decided on the latter. This means that entry into it is an opportunity, not a birthright,” said Debbane. Family members must perform to the same high standards as non-family members, work within a defined role, never report directly to an immediate family member, and have the appropriate education and experience for the post, he clarified.
“This is the finished product,” he added, holding up a thick book. “Fifty-one pages long, and all of us have signed it — after discussing every article, line by line.”
IFEB Director and Associate Professor of Management Dr. Josiane Fahed-Sreih gave further insight into the process and theoretical framework behind forming constitutions. They should deal with three main phases of business life, she said — entry to business, life together, and exit policies.
“No one size fits all,” Sreih said, “and you must look at the culture of a family when trying to set up the right governance structure, for example, or the right composition for the board of directors, in order to succeed in the long term.”
Carl Bistany, board member of SABIS and president of SABIS Educational Systems and Services, said his family also grappled with the corporate governance structure of their business. “Should we allow non-family members on our board? (We did, in the end.) It sounds easy but when you get down to discussing it and signing a document that will live on for generations to come, it’s a daunting task,” he said.
Other guest speakers included Wafa Saab, CEO of Tinol Paints International Co. SAL, who touched upon her personal experiences as a liaison between the first and second generations of her family business; Georges Mallat, partner at Hyam G. Mallat Law Firm, who discussed the legal aspects of drafting a family constitution and a shareholders’ agreement; Nicos Sarris, visiting from Cyprus, who talked about the need and use of a family business constitution from his experience as general manager of Eureka Group; and Georges Azar, managing director of GA Consult, who highlighted family business valuations.
Youssef Abillama, board member of Abillama Group and CEO of MMG Overseas Ltd., served as the forum’s moderator.
“Family businesses are the fabric of business anywhere in the world, and Lebanon is no exception,” SOB Dean Dr. Said El Fakhani told the audience, adding that Lebanese are known entrepreneurs.
LAU Provost Dr. Abdallah Sfeir thanked the IFEB for systematically addressing “all of the problems these families face as their businesses grow and succession looms on the horizon.”