African family businesses have significantly outperformed those in the Middle East and Asia when it comes to good corporate governance, exclusive research conducted by Campden Wealth reveals, with 71.4% employing non-family key decision makers in executive positions.
In Asian and the Middle Eastern family businesses, non-family members account for only 18.2% and 22.2% of key decision-making executives respectively.
Andrew Porter, director of research at Campden Wealth, says the regional differences were surprising.
“Businesses and families developed differently in Africa,” Porter said. "There, we see business leaders forming close relationships with non-family members, whereas in the Middle East and Asia there is more emphasis on family ties.”
He says employing non-family members in key decision making roles is important for good corporate governance, resulting often in increased transparency and competitiveness in the market.
“Globally, business families adopt a variety of approaches in preparing the next generation for succession, from apprenticeship to business school, which encourages industry exposure outside the business or even entrepreneurial initiatives. What we’ve seen in Africa is a more deliberate effort to professionalise the family business before the next generation takes over."
The research also found external key decision makers in African family businesses were likely to remain with the company for a long period of time, with 100% of businesses employing a non-family executive for more than eight years.
In comparison, 52.4% of businesses in Asia employed an external key decision maker for eight years and only 33.3% in the Middle East.
Despite these findings, there was still a high proportion of family member involvement in African family businesses, with 62.5% of the second generation involved, compared with 53.3% in the Middle East and 23.8% in Asia.
The research, released exclusively to CampdenFB, was conducted as part of Business before wealth: Understanding high net worth business owners in Asia, Africa and the Middle East– a report released by Campden Wealth and Standard Chartered Private Bank, which examines the complexities of personal and business wealth in emerging markets.
The report found that family businesses in Asia, Africa and the Middle East give priority to building successful and sustainable businesses, perceiving wealth as a by-product of this success. According to the report, there is a commitment to local philanthropy in emerging markets, which often prioritises active involvement over traditional patterns of giving or donation.