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structures take the form of political environments from which the firms emerge.
The outlook of corporate structures and governance in Zimbabwe is set to change through the implementation of indigenisation and empowerment laws.

Equity participation, where 51 percent of ownership in companies will be indigenous, is set to reinforce family owned entities as a major type of business in the country.
The concept of family owned business is one where there is a dominant family, which owns and controls the business.

In addition, there is also a clearly established vision within the family grouping, to keep business in the family across generations.
The word family, in this sense includes immediate and extended family members including friends and associates.
Businesses being referred to here are major economic entities.

Family owned businesses are not a new trend in Zimbabwe or across global economies.
Locally, dominant families in major business such as Econet, Kingdom, Croco Motors and many others can be traced through to ownership and control.
Family owned businesses are ingrained in Asian economies. Corporate giants such as Mitsubishi and Toyota in Japan or Samsung in South Korea are all family owned businesses.

Famous global corporations, such as Ford Motor Company, Cadbury, House of Rothschild, Fiat, De Beers, and Acer Computers were founded through family ownership.
Although family owned businesses have been common to many economies for centuries, this fact is not adequately reflected in the development corporate governance.
For instance, the Anglo-Saxon model from which Zimbabwe derives its corporate governance structures defines a company as a legal entity, separate from its owners.

Some environments might have successfully upheld this legal truth, but in Zimbabwe, this is not always apparent. Over the years, the nature of Zimbabwe’s business environment has been changing.
The dispersed type of corporations gave way to more centralised family business units where there is fusion of ownership and control, or even management.
As the country gears itself for a major economic shake-up through indigenisation, there are concerns about corporate governance policies and frameworks.

Can the current corporate governance regime carry the new wave of family owned businesses and the inherent governance challenges?
This article is intended to provoke debate on corporate governance problems peculiar to family owned businesses, in light of the indigenisation process.
It highlights the concept of ownership and control; continuity; succession; employment and economic power wielded by family owned businesses.

These discussions are based on the observation that in Zimbabwe, corporate behaviour among family owned businesses tends not to separate ownership and control, in a legal environment that assumes separation.
It is expected that through these discussions, policy makers and researchers will stand informed to address corporate governance issues.
Current challenges being faced by the ReNaissance Group reveal some of the nature of corporate governance problems inherent in family owned businesses.

Through observation, managerial omnipotence, through ownership and control is not unique to ReNaissance Group.
This has become a general corporate behaviour in Zimbabwe.
This omnipotence can be seen in who actually has the last word on these four principal activities of a business; direction through strategy formulation; executive action including decisions on who should be employed; supervision and accountability.

It has been said that one cannot be their own referee.
When supervision and accountability in business are carried out by one and the same person, then this is a one man game.
Corporate governance assumes independent supervision as well as role clarity in order to define accountability lines.

Where a shareholder or owner, controls and performs day to day tasks in the business, such as the appointment of employees, then corporate governance problems will exist.
More pertinent to the indigenisation and empowerment process are concerns about entrusting ownership and control of national resources to family owned businesses, which are accountable to themselves?
If family owned businesses are the future of this country, is it not prudent to craft corporate governance policies, systems and culture that will enhance supervision and accountability in these types of entities, this time not after a crisis, in order to avert crises?

The Asian financial crisis of 1997 was attributable to uncontrolled corporate behaviour of powerful family owned businesses.
Economic power wielded by family businesses can be enormous. In a study by Claessens, Djankov and Lang using 1996 data, it was found that the top 15 family groupings in Indonesia controlled a massive 61,7 percent of the total value of listed assets, representing 21,5 percent of gross domestic product.

The same study also found that in the Philippines, the top 15 families controlled 55,1 percent of listed assets (representing 46,7percent of GDP) while in Hong Kong, the top 15 families controlled 34,4 percent of listed assets (representing 84,2 percent of GDP).
The Oppenheimer family for a long time now has carried massive influence within the mining sector in Southern Africa.

The indigenisation process in Zimbabwe could either introduce new players and therefore decentralise economic power, or fortify power in existing family owned businesses.
Whichever way, this power should be harnessed for the good of all. Corporate governance is one way in which corporate power may be controlled.
Continuity is of major importance in wealth creation and economic growth. Yet, continuity is among the major corporate governance threats to family owned businesses.

The demise of corporations brings about job losses, lost savings, lost businesses and indeed economic stagnation or downturn, adversely affecting people or stakeholders in one way or the other.
Going back to pre-independent Zimbabwe, brand names such as Farai Uzumba, Ruredzo, Matambanadzo and others defined the transport sector of the economy.
Through lack of continuity, they missed on an opportunity to offer stability to the socio-economic development of the country.

The transport sector is still struggling. This is a developmental concern.
Lack of continuity could be due to various reasons; such as the demise of founding members, family conflicts and lack of interest in the business by other family members.
Perhaps, most prevalent in Zimbabwe, is the absence of successors. The modern day heirs are sent abroad for education, and a few come back.
Or, when they do, even fewer go into family businesses.

Family owned businesses are unique in that family governance often finds itself in corridors of company business.
Family governance includes for instance, family traditions and values, family feuds including divorce and inheritance and many other dynamics which weigh heavily on the smooth running of the business.
This is why corporate governance systems are necessary, to systematically separate family issues from business issues in order to ensure continuity.

An often quoted saying about Mexicans on family owned business is, “Padre noble, hijo rico, nieto pobre”.
This means father, the founder works and builds the business, the son, the rich takes it over and is poorly prepared to manage and make it grow, but enjoys the wealth.
The grandson inherits a dead business and bank account.

Succession is a corporate governance concern and, it is key in the success or otherwise of family businesses.
Even the mafia is aware of this fact and often grooms successors to ensure that family values and interests are protected.
Economic growth without employment growth is futile.

Employment in family owned businesses is not always based on merit, but on lineage and association.
If not carefully managed, growth of family owned businesses could result in higher unemployment and marginalisation of talented people.
It is in the interest of the family and the business to have clear cut employment policies on employment and promotion of staff.

Non-family members should remain motivated to work hard and remain in the family owned businesses.
Culture is also an important catalyst for sound corporate governance.
It is clear that family owned business take on the culture of a family unit, which in turn takes on the culture of the community or society.

Using Hofstede culture terminology, the culture in Zimbabwe is mainly collective. The Anglo-Saxon model has an individualistic tone, even when the stakeholder aspect is added on.
Given the pot pourri of ideologies, skills, experiences, trading partners and many others that have since shaped the business culture in Zimbabwe, the writer believes that there is need for more studies to help redefine the Zimbabwean business culture.

I suggest this in corporate governance, because the current single tier system of corporate governance seems inadequate for family owned businesses.
Perhaps, a two-tier system of corporate governance, such as the one used by Germans or Japanese and other countries in Asia and Europe would be more appropriate.
The aim of corporate governance in family owned businesses should be to create a social consensus among the many social networks inherent to these structures.

Secondly, it is meant to ensure continuity and protect the great entrepreneurship among family owned businesses.
Within family owned businesses is some great entrepreneurship, which must be allowed to develop.
This type of business is here to stay.

Through the indigenisation and empowerment process, this type of business will further be embedded in the economy.
With it are strengths and weaknesses, as well as opportunities and threats, which have not been provided for by current corporate governance frameworks.
The economic power of family owned businesses can be enormous.

This means that their downfall or lack of continuity can be disastrous to the economy.
Rather than wait for calamity to strike, our corporates, policymakers and researchers should now consider corporate governance mechanisms appropriate to family owned businesses in Zimbabwe.
The writer is a consultant and can be contacted at e-mail [email protected] or +263 (0) 772738811.