All posts by : ghamdan alhedabi

A gigantic ship whose engine had failed, the owners of the ship pursued the help of the existing experts, but none of them could figure out how to fix the engine. They brought in an old man who had been repairing ships since he was a young man. The old man was carrying a bag with some tools. When he arrived, he set to work. He checked the engine from top to bottom. During the examination, two of the ship’s owners were with him, watching him. After completing the examination, the old man went into his bag and took out a small hammer. Softly knock on a specific part of the engine. Then the engine immediately returned to work. Carefully he put the hammer back in its place and said, “The engine has been fixed.”

After a week the owners of the ship received the repair bill from the old man; And it was a surprise, he asked for ten thousand dollars!!

The owners of the ship said, “This amount is very large, as he did nothing but hit with a hammer.” So, they wrote the old man a note saying, “Please send us an itemized bill.” The old man sent the following bill:

Hammer knock = $1.

Find out where to knock exactly = $9,999.

When I prepared this article, I did not find anything better than this introduction, which summarizes for us the status of advisory services in the Arab business market in general and in Yemen in particular. In fact, the culture around the importance of advisory services in general and governance, in particular, is still weak and is viewed by many owners and managers from two narrow perspectives. One of them is that governance is an additional cost, and others view it as a matter of catching errors and theorizing ideals that will not be transferred into practice. If we checked a little, we would find that the costs and funds spent by institutions in correcting administrative and financial errors, addressing corruption, and resolving conflicts after it was too late, could have been shortened through the governance guides that organize oversight and guidance and guarantee disclosure, transparency, justice, and others. From a practical point of view, what the governance tools stipulate is what directly meets the needs of the institutions, through practical experiences and many applications that enable us to start improving the work environment. Therefore, generating convictions about governance applications and best practices is not an easy task for us.

Through the tools of gap analysis and the diagnosis of practices within institutions, we draw attention to imperfections in performance and the need to remedy the risk and find appropriate solutions to the expected problems surrounding the institution, which, by the nature of daily work, are not perceived by the owners and managers of institutions, as they are not within the category of emergency. Forgetting that the accumulation of these problems and ignoring them will lead to the collapse of the institution and its exit from the market at the first bump or change in the nature of the market.

As a house of expertise in the field of governance since 2007, we are constantly keen through all our channels of professional programs, guides, publications, conferences, and seminars to convey the idea that the diagnosis of governance practices and consulting is the first way to know the internal situation of institutions from a tripartite perspective. First, organized general assembly and the extent to which all shareholders are protected and treated equally, and the existence of policies for transactions with related parties and conflicts of interest and trading based on correct and useful internal information and recognition of the legal rights of stakeholders. Second, the board of directors’ roles and responsibilities assigned to them and whether are they doing what is expected from them toward the company as they are legally responsible for the company. Third, the executive management roles, practices, and procedures applied in the institution, the existence of control tools and code of conduct …act.

Therefore, knowing all this objectively and clearly drawing where we want the institution to be in the future, helps us greatly in preparing a sound plan for governance for all levels and thus mobilizing sufficient efforts to implement that plan and adopt reforms from all concerned and stakeholders in the institution. In addition, the existence of a plan for governance and its practices avoids conflicts and confusion and distances us from the decision of personal opinion in order to ensure the rights of all and the sustainability of the institution through successive generations smoothly.

It’s not surprising to see researchers and governance institutions put more weight on the type of firms with the most impact on the economy, which is where the family firm represents 90% of companies operating in Yemen. The family firm is a mixed combination of business, family, and ownership, and the constant intertwining of these three groups may result in different points of view of the members within these groups of the same business. Family firms are also different from each other regarding different generations’ styles of management, the authority assigned to the managing/owning family members, and the family culture since only one family often owns each family firm in Yemen.

This difference leads to the heterogeneity of governance structures among family firms which yields different performances and therefore confuses family firms that wish to govern their businesses while raising a question as to the best practices in that regard.

However, family culture is one of the most important factors affecting the success of family business governance. Family culture functions as an informal governance mechanism through the values ​​ emphasized in formal and informal family meetings, family councils, and the family’s vision as stated in the family constitution, which in turn can influence the strategic choices of the family firm. More specifically, values ​​act as a guide for the three pillars of family firms: the family, the business, and the owners which define a desirable performance output that often reflects the philosophy of the business founder as seen in some successful family firms in Yemen such as Hayel Saeed Anam Group.

Informal governance structures can also enhance a family culture by emphasizing family values ​​that help these structures (family gathering/family council) in resolving conflicts, formulating strategies, and maintaining family unity through family values ​​and the company’s vision.

Despite the reluctance of many family firms to engage in developing governance structures needed to maintain business sustainability and continuous improvement as they grow, the name of the family firm which is usually derived from their family name is treated as a legacy that must be preserved by the owners and so becomes part of the family culture. This is later translated into relevant policies and procedures to which the family members are committed.

Hence, the role of family culture emerges as a crucial input for developing family governance structures, initially helping to preserve the values ​​of the founder and the family that influences decision-making and eventually contributing to the development of formal governance structures for the family business.

Finally, many recent studies have proven the paramount importance of family culture and its impact on organizational innovation of family firms that developed governance structures in which family culture and values are emphasized and so yield the best practices in the course of their businesses which is pretty much needed by many family firms in Yemen.

The legal importance of corporate governance lies in the fact that it represents the safety valve guarantor of governance. Legislation and regulations governing the work of companies are the main axes for activating corporate governance frameworks. They regulate the laws of the relationship between the concerned parties in the company and the economy in general. When compliance with the legislation in force is achieved in the application of the principles of governance Etc., which makes this practice or document immune to be subject to nullity, and legal accountability, especially jus cogens whose violation entails invalidity, and then assumes civil liability towards the violator, and even criminal liability in some cases. Observance of the principles of governance consistent with the legislation in force also entails the fulfillment and fulfillment of rights.

While dealing with the subject of corporate governance has been linked to the sciences of economics, management, and accounting, especially in the field of accounting disclosure, corporate governance since its inception has been one of the topics of private law in general and corporate law until it has become today one of the most important topics in corporate law; it has become the field in which the sciences of law, economics, accounting, and management are fused together.

With the multiplicity of different interests of knowledge rights, the concepts of governance vary according to the field in which they are addressed. The newly issued amendments to the Companies’ laws included a definition of corporate governance and considered the adoption and promotion of the principles of governance in general. Corporate governance is defined as A set of principles, standards, and procedures that achieve institutional discipline in the upcoming amendments to the Yemeni Companies Law included taking this approach, which is a positive trend, and at the same time requires concerted efforts to come up with amendments that meet all desired aspirations and consider international best practices in this context.