Africa-Press – Uganda. International Finance Corporation (IFC) has said family businesses must always seek to fulfil the four pillars of good governance, among which include financial transparency, accountability and fairness if they are to attract capital.
Speaking during a discussion on corporate governance and succession planning for family businesses in Kampala, Ms Anita Louise Mwandha, the IFC country officer, said family businesses must establish good corporate governance by bringing in the right mix of skills as well as establishing mechanisms that encourage fair treatment of minority shareholders.
“The board [must] be talented with the right mix of skills, and the team [must] be motivated with a clearly defined risk appetite. The board contributes to fruitful and constructive meetings, and there is full support for the organisation’s strategy because they are empowered and understand the company,” she said, noting that good corporate governance reflects on a company’s performance.
For instance, she noted, companies in emerging markets with good governance are rated 8 percent points higher than their peers, which means improved operational performance.
A study by McKinsey shows that investors are willing to pay a premium of up to 40 percent for companies that have good corporate governance.
Mr Sam Ntulume, the I&M Bank executive director and chief operations officer, said in the banking sector, family businesses have largely been urged to have good governance principles and succession planning, which creates business continuity and reliance on individuals.
“It is always in our best interest to extend say, a seven-year loan facility to a business that we are certain will continue in existence as a result of proper leadership change,” he said, noting that banks are also interested at looking beyond individuals to understand whether a company has a proper plan, on which credit extension can be based.
“Depending on the information received, we can use internal and external resources to guide our clients on how to plan for continuity,” he said.
Many family businesses in Uganda have collapsed within months of the death or disability of the founder.
Mr Paul Mbuga, an advocate with S&L Advocates, said most family businesses are formed with a strong sense of attachment to individuals, which breeds poor corporate governance.
“While with time, there is immense internal and external pressure to scale up, it can only be achieved with an accommodative and expansive governance framework,” he said.
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