IFC Handbook Recommends Ways to Help Family Businesses Improve Governance, Survival Odds

Washington, D.C. — A new handbook from IFC, a member of the World Bank Group, finds that the complexity of many family businesses, including their informality and poor employment policies, can lead to inefficiencies and internal conflicts that threaten their survival. The Family Business Governance Handbook (second edition) recommends ways to help family businesses improve their sustainability by establishing good governance practices.

Family businesses constitute the world’s most dominant form of business organizations, playing a key role in economic growth and employment generation in many developing countries. Yet, most have a short life span and about 95 percent do not survive the third generation of ownership due to lack of discipline and preparation of subsequent generations to handle the demands of a growing business and family.

The handbook focuses on corporate governance challenges facing family businesses and proposes structures and practices that can help mitigate these challenges and ensure business viability. It also recommends that family businesses establish an independent and well-organized board of directors and a professional management team, which is essential to running a company.

“This handbook helps you prepare for transition to the next generation,” said Haroon Javed Qureshi, Managing Director of East West Infiniti (Pvt) Ltd, a family business in Pakistan. “It seems as though parts of it were written particularly for me.”

Sanaa Abouzaid, IFC Corporate Governance Officer and author of the book, said, “The handbook is a valuable market reference for family businesses and practitioners alike. The suggested governance structures can be tailored to local requirements and regulations of family businesses in any given country.”

There is high demand for the handbook from IFC clients and other international organizations, as well as interest in using it as a textbook in universities in Latin America. The handbook is available in Albanian, English, French, Macedonian, Portuguese, and Spanish and is currently being translated into Arabic, Chinese, Russian, and Serbian.

The IFC Corporate Governance Program provides a range of services to investment clients, including assessing and developing programs to help advance their corporate governance practices. It also supports IFC’s corporate governance advisory services. The IFC Global Corporate Governance Forum helps raise awareness globally and improves capacity through its toolkits, publications, events, and research sponsorship.

For more information about the handbook, visit http://www.ifc.org/corporategovernance.

IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our next investments totaled $16.2 billion in fiscal 2008, a 34 percent increase over the previous year. For more information, visit www.ifc.org.