Date of Award
Doctor of Juridical Science (SJD)
In small villages, in cities booming with commerce, in remote fishing communities, and massive marketplaces, in tropical destinations, and in corners of the globe few have ever visited, one is always able to find family businesses. From small wares being sold to neighbors, to huge corporations with billions in assets, families hold and always have held a segment of the global market that cannot be ignored. While family businesses have existed throughout history, legal advice and governance specifically geared toward them, which holds the success of the family business at the center of the laws, has never been a focus of those regulating the family corporations.
This research studies the best corporate governance frameworks and focuses on finding the best practical solutions for family businesses in Saudi Arabia which operates under Sharia Law. Sharia Law defines “The entire religion (Islam), which Allah has chosen for his servants to bring them forth thereby from the depths of darkness into the light. It is what He has prescribed for them and what He has explained to them of commands and prohibitions, halaal and haraam.” A family enterprise governed by local, national, and global laws and also operating under the beliefs of Sharia Law faces a whole host of potential conflicts. While family businesses of all sizes, listed or unlisted in the Stock Market, will face these similar issues and challenges, for the purposes of this research high-mid and larger businesses will be the primary focus, but it should be noted that the problems described here are not exclusive to the highest earning family corporations, but do in fact affect them all. Appropriate governance of family enterprises will keep the entrepreneur, their family, the employees, partner or investors, stakeholders or shareholders, suppliers, and contractor’s best interests in mind, while also staying aware of the unique relationships within the founding family, and ideally be applicable across many markets including those governed by Sharia Law, such as within Saudi Arabia.
Lawyers have a responsibility to understand the businesses they are advising, and lawmakers have to serve their constituency by vesting themselves in understanding all aspects of the laws they consider. To consider laws regarding businesses, they must research the various businesses they will potentially be passing or denying laws over. This paper serves to show how a better knowledge of the beliefs, culture, and traditions a family holds closely to, along with focusing on the success and growth of enterprises specifically held by families, can give lawyers and consultants new and valuable insights. This more well-rounded perspective is sure to benefit the family owned businesses and lead them into a better future.
When lawyers consider the unique challenges faced by family businesses, they will be better able to both advise and guide them. Agency cost, relationships between family members, ownership vs management, and other issues all affect family businesses more acutely than corporately owned enterprises. As lawyers recognize these factors, they will develop a great understanding and also be more prepared to help the families they work with.
Alrowaished, Saad Abdulmohsin, "The Impact of Corporate Governance on the Continuity of Family Businesses in Saudi Arabia" (2021). Maurer Theses and Dissertations. 90.
Available for download on Thursday, March 21, 2024