• 3:50 PM
  • 18 January 2022

Family businesses in Saudi Arabia

  • home
  • Family businesses in Saudi Arabia

Family businesses in Saudi Arabia

The beginning:

Family businesses began with the Kingdom of Saudi Arabia at the time of the reign of King Abdulaziz bin Abdulrahman al-Saud (God bless his soul) and did not exist before that, where the stability of government and the emergence of State institutions to encourage traders to establish their companies, and family companies have contributed a very important role in the economy Kingdom.
Family businesses in numbers:

98% of GCC companies are family businesses
SR 250 billion the volume of family business investments in Saudi Arabia alone
22%-30% share of family businesses in domestic product
45 family companies among the top 100 companies in Saudi Arabia with revenues exceeding 120 billion riyals in 2013 and employing 200,000 people
Definition of family company:

An individual institution or company wholly owned by one family or voting power in the board of directors under the control of a single family. Family businesses often start with an individual institution and evolve into different corporate forms.
Development:

The first generation (the founder-family companies start their lives through an enterprising and ambitious person who bases the company, manages it, works on its expansion and spread and may share his family in the work to manage it.)
Second generation (this stage begins at the death or incapacity of the founder or forced to forfeit his administrative powers to the second person in the family and usually they are the sons or wives who replace the place of the founder in the administration)
The third generation (starting from the second generation the manifestations of family disagreement on the management of the company and these differences evolve to the third generation in which the severity of family problems on the management of the company)
Fourth generation (few family businesses reach the fourth generation stage in the management of the company and mostly lose control over the management significantly in the fourth generation)
33% of total family businesses run by the second generation
15% of total family businesses run by the third generation
4% of total family businesses run by the fourth generation
Problems:

The biggest dilemma facing family businesses is the management of the company from the fourth generation period. The new manager may not be competent to manage and has neither the vision nor the strategy to plan properly for the company and owning money does not necessarily mean being skilled in management. In addition, the actions of second-and third-generation members to recruit family members in the company greatly affect the low level of management of the company and significantly affect its business activities. Family disputes, many of which reach the court, have also caused the dissolution and termination of the company.
Examples

NCB is the largest bank in the Middle East, a solidarity company between the House of Ibn Mahfouz and Bait al-Kaaki, then became Sheikh Salem bin Mahfouz. When Sheikh Salem bin Mahfouz died sharing the estate, the National Commercial Bank was the share of the son Khalid bin Salem bin Mahfouz and the day the bank was exposed to storm problems, then the government was forced to intervene to protect the country’s economy and formed a board of directors managing the bank’s wheel.
Ahmed Hasan Fitaihi, a friend Ahmed Fitaihi wanted to escape the defects of family businesses by transforming his institution into a closed joint stock company, but he made it between the family company by 80 percent and the closed shareholding company by 20 percent.
The third type of example is the company Zagzoog and the Vaporoli, a company between two intimate friends, widened as the size of sons and daughters, taking the children flock to the higher positions, then the authorities began to grow and tend the cuff to the benefit of the sons of the boys at the expense of Alan, then took the differences inevitable them grow bigger, then they get aggravated and compete for power.