A survival guide for business: The role of corporate governance and sustainability

1123

Autor InvitadoEscrito por:

By Rocío Budetta and Andrea Ortega

Químicas Veterinarias is a small producer and distributor of veterinary products in Nicaragua. The Hoigjelle family founded the company in 1999, and since then it has met with success in this Central American country with a market of more than 120,000 micro, small, and medium-sized enterprises.

Corporate governance plays a key role in long-term survival of family businesses

Corporate governance plays a key role in long-term survival of family businesses

Some years ago, Ricardo Hoigjelle, owner and founder of Químicas Veterinarias, found himself in a situation that is common for family businesses. In order to continue being successful in the long term, he saw that he would have to define the roles of the family members then working in the business, and that he would also have to start planning the transfer of the business to the new generation.

With that in mind, the Hoigjelles sought support from an expert for establishing a family protocol to help articulate the relationship between the family, the business and the shareholders. They established their mission and vision as a company and as a family; policies for hiring family members to work in the business; and a succession plan for future generations, all of which are key for keeping a business running successfully in the long term.

With help from that expert, the company established a board of directors and a family council in order to deal separately with family issues and business issues, which before were simply discussed over dinner.

Small businesses with a big impact

The concept of the “family business” is generally associated with small businesses like Químicas Veterinarias. However, these businesses account for between 70 and 90 percent of the world’s GDP, according to a 2014 study by PricewaterhouseCoopers.

Family businesses fuel the economy with their dynamism, which also helps keep them going during more difficult times. And although they may not seem very important in terms of size, these businesses can be found across virtually all industries. Two-thirds of all businesses in the world are family businesses, said John Davis, a professor at the Harvard School of Business, during an interview with the Harvard Business Review.

The problem is that if they aren’t managed properly, family businesses have a hard time surviving long-term. These businesses are by nature more complex in terms of their shareholder, management, and leadership structures. A lack of planning and preparation for succession therefore leads to the closure of 70% of these businesses in countries like Mexico, according to Forbes.

“The key to having a solid, trustworthy and durable family business is corporate governance,” said Rebeca Sánchez de Tagle White, senior corporate governance specialist at the Inter-American Investment Corporation (IIC).

Corporate governance includes all the policies and processes needed to manage and lead a company. Governance bodies, policies to ensure operational transparency and proper internal oversight are some of the elements that provide a company with the checks and balances necessary to operate efficiently, raise capital and improve competitiveness.

The protocol and governance bodies that Químicas Veterinarias established after receiving training from the IIC and completing a technical assistance project enabled it to improve communication among family members and foster a willingness to deal with possible conflicts. Also, the groundwork was laid to ensure a successful generational transition. The company has met with such success that in 2014 it was named “Best Family Business” at the annual Science and Technology Council of Nicaragua awards, setting a precedent for the country’s family businesses.

Ricardo Hoigjelle is convinced that the road to a sustainable future for his business must lead through good corporate governance practices. “We have to invest professionally in our businesses and our families if we want our businesses to stand the test of time,” he said.

About the authors

Rocío Budetta is a consultant with the corporate governance program of the Inter-American Investment Corporation (IIC), where she works in the Development Effectiveness Division. Her work includes coordinating technical assistance on corporate governance and family governance for IIC clients and participating in the organization of the training workshops for family businesses offered by the IIC. Before joining the IIC, she did research on the corporate social responsibility of Latin American multinationals and social-oriented work with Argentine and Brazilian NGOs. Rocío Budetta received an undergraduate degree in international relations and business from the University of Miami and completed the Hispanic and European studies program at the Universitat Pompeu Fabra in Spain.

Andrea Ortega is a journalist, a graduate of the Universidad de Chile and a writer. She worked for Chilean newspaper El Mercurio for five years and received the Capa/Alltech Quality and Innovation in Journalism award in 2012. She has specialized in business and economy and published a book on Chile’s retail sector entitled Chile: El Negocio del siglo XXI (Chile: The business of the 21st century). Prior to joining the Corporation, she worked as the national press coordinator for the Agricultural and Livestock Service of Chile’s Ministry of Agriculture. She is currently studying for a Master of Professional Studies degree in public relations and corporate communications at Georgetown University.

Last modified: Septiembre 9, 2016

Deja un comentario

Tu dirección de correo electrónico no será publicada. Los campos obligatorios están marcados con *