He also expects some family companies to come the markets soon, either in the Nasdaq Dubai in the DIFC, or on the Dubai Financial Market (DFM), (where Kazim is chairman). “The companies that come to the markets will be those that understand the nature of the changes that they will face as they go forward and have to cope with the conflict between the original entrepreneurs and the next generation,” he said.
Kazim supports the benefits of good corporate governance
Dubai: Proper corporate governance would have helped several of Dubai’s large family companies weather the financial crisis better, and listing helps support good governance while also making ownership succession infinitely easier, Eisa Kazim, Governor of DIFC, told Gulf News.
If a family company is listed, the business need not suffer when the ownership changes as generations change. “If a company is listed, heirs can sell their shares in the group as they wish and the institution can move on without any impact on its operations,’ said Kazim.
“This is important in today’s environment when a family business is often very diversified, and typically includes auto, real estate, and logistics, and many other businesses,” said Kazim, who added “How can you beak down the company to distribute its inherent value. Good governance is about sustainability, keeping the brand intact.
Kazim spoke out strongly in favour of the benefits to the companies of the good governance that is required by the markets. “We have seen numerous examples of companies losing value as well as brand equity and goodwill. Some understand the importance of good governance and are getting ready to go to markets like the DFM, but others are still run in a very traditional manner and have not yet built institutional systems. They need a board structure, and good corporate governance, but if they are still run by individuals, they put the whole group at risk.”
Better governance also allows companies better access to finance. “Some of the family companies are comfortable with their relationship bank but that relationship can be quite fragile,” said Kazim, pointing when some companies found their banks unable to help as the height of the recent financial crisis.
“The first quarter of 2009 was quite difficult for some family companies, particularly as the banks would not help. I told several companies that if they were publicly listed, more transparent with quarterly books, they could have easily tapped the debt market by issuing bonds or sukuks, or used their better governance to find a strategic investor who will invest in it,” Kazim told Gulf News.