Special Report: Saudi Arabia - Family firms enter a new era

16 October 2008

The decision of the Saudi stock exchange (Tadawul) in August to reveal the names of all individual shareholders with a stake of more than 5 per cent in any single company may not have revealed the full picture of Saudi families’ strategic investments.

But it does represent a significant step towards greater transparency in the kingdom’s private sector, 90 per cent of which is made up of family-owned businesses.

For Saudi family firms, transparency is increasingly important, as the need to avoid disputes between family members - a feature of family businesses being handed down generations - is being addressed by changing their power structures.

A new, business-educated generation are overhauling the traditional corporate structures and handing management responsibilities to professionals.

The majority of family businesses have stopped there, however, confident that the improved governance structure will avoid further sibling rivalry.

A few have opted to list on the stock exchange, opening the business up to external investment - and external scrutiny.

This may be anathema to most traditional family-owned businesses, but with the profitability of listed businesses available for all to see, it is possible that more of Saudi Arabia’s merchant families will take their business to the Tadawul.

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