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The governance of family companies in Tunisia

The governance of family companies in Tunisia. Mondher Ben Ayed Karim Ben Kahla TMI ESCT IACE-CIPE June 20, 2007. The governance. A group of mechanisms that participate in the control and the incentive of managers and that influence the management and the performance of companies.

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The governance of family companies in Tunisia

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  1. The governance of family companies in Tunisia Mondher Ben Ayed Karim Ben Kahla TMI ESCT IACE-CIPE June 20, 2007

  2. The governance • A group of mechanisms that participate in the control and the incentive of managers and that influence the management and the performance of companies. • intervene several stakeholders (interest groups)

  3. Stakeholder 1: Investors Finance Stakeholder 2: State Tax system Governance Stakeholder 4: Citizens CSR Stakeholder 3: Partners Partnership

  4. Workshop 1: Banking financing alternatives The reason of the meeting • The financial structure: • Influence how and who governs companies • Is more and more as a competitiveness vector • Questions: • What are the obstacles related to the access to the financial market? • How to develop other financing sources? • How the financing type has an impact on the governance type?

  5. The Tunisian company today • An enterprise; A person; A debt (banking) • ... however... the banks change: • The banks supported tunisian development policies. Today they have to report about their activities to their shareholders • The banking financings are wedged by NCR and by the new norms of risk management (Bâle 2) • Therefore the banks as important stakeholders of the enterprise wish to be more aware, and want to be implied in the corporate governance process.

  6. This enterprise model weakens • Reports: • Margins Decrease • Rarity (and rise) of financial resources • Under-capitalized companies (insufficiency of capital) • Weakness of the alternatives to bank financing • The companies spend too much time to manage treasury problems and they are too exposed to the unpaid.

  7. Workshop 1: Alternatives To the bank financing : Elements of the debate • Tomorrow's Tunisian company: • A company (or several… in network); many people; several financing sources • .... For this ……many conditions.

  8. Workshop 1: Alternatives to Bank financing. How to modernize the governance (1/3) • To develop the financial market • To put in a clear and concerted development strategy of the financial market (to involve all actors, to develop the stock exchange, to improve the information disclosure and the communication, etc.) • to encourage more the portfolio investments (that make the promotion of countries and prepare the direct investment) • To be conscious of financial bubbles risks

  9. Workshop 1: Alternatives to Bank financing. How to modernize the governance (2/3) • Better implication of the banking sector • to think about bank professions borders (to dissociate them from venture capital, “Chinese walls ", etc.) • to separate assetes entrepreneur of those of his company (personal and real guarantee don't replace the capital)

  10. Workshop 1: Alternatives to Bank financing. How to modernize the governance (3/3) • Capital opening, diversification of financing sources and transparency: • The transparency allows an easier access and less expensive to the different financing sources. But…it will be necessary to reduce transparency costs. • New governance model • More implication of board directors, of auditors • Creation of the corporate executive committees • more frequent and more precise Reporting to the shareholders

  11. Workshop 2: The corporate tax system the reason of the meeting • The tax system is an important issue for the economy competitiveness. What’s about Tunisian legal and fiscal framework? • Does the Tunisian fiscal regulation encourage the transparency and the good governance? • What is the impact of the tax system on the Tunisian corporate governance? (biases risks : the transparency is a previous to the good decision)

  12. Workshop 2: The company tax system. elements of the debate • Problem of laws complexity (interpretations divergence) and the necessary convergence between book results and fiscal result • Fairness and efficiency of taxes to implement the confidence between fiscal administration and taxpayer • General remarks: • The tax is not the only way to encourage companies to be listed • Importance of accounting standards (The IFRS are designed for big enterprises)

  13. Workshop 2: The company tax system : some findings / recommendations • To make so that the tax system does not penalize competitiveness and good governance • A misunderstood or a non accepted tax system is source of "myopia" (duality fiscal and accounting balance) • To accelerate the adoption of the International Financial Reporting Standards (the IFRS): • To operate the necessary investments (data processing and other) • To find some compromises for the small enterprises • Training of experts and accountants but also of the judges and the auxiliaries of justice

  14. Workshop 3: The company and the partnership. The reason of the meeting • The survival or the adaptation is often through partnership.- the partnership is base on transparency and good governance. A minimum of good governance and transparency secures the partner • The good governance facilitates the partnership. • The partnership influences the governance • Possibilities to take more advantage of the geographical and cultural proximity of Europe

  15. Workshop 3: The company and the partnership. Elements of the debate (1/2) • Several advantages, several forms: • Advantages: to reinforce local positioning; to develop the activities to abroad; know how transfer, to perpetuate the company • Forms: direct in the capital, commercial, technological, subcontract, etc. • To accept to share or to give up the decision power is never easy

  16. Workshop 3: The company and the partnership. Elements of the debate (2/2) • In Tunisia • The Tunisian companies don't have clear partnership strategies (or would be ready at any partnership!) • governance mechanisms of several companies don't encourage potential partners • The fear of the absorption or the simple opening • There is some" success Tunisian stories" that confirms the opposite

  17. Workshop 3: The company and the partnership. some findings / recommendations (1/2) • On the side of the public authorities • A legal and institutional environment up with international standards attracts potential partners • Necessity to promote the public and private partnership and the south-south partnership • Need of technical studies and data bases • Requirement of an educational effort to sensitize companies

  18. Workshop 3: The company and the partnership. some findings / recommendations (2/2) • On the side of companies: necessity • To improve the system of corporate reporting • To examine different cases related to the shape of interesting partnership • to better negotiate the different details and terms of the contract • To develop the companies coaching

  19. Workshop 4: The involvement of the employees and the CSR the reason of the meeting • The enterprise must report to the whole society and not only to the shareholders • In internal side, the employees participate to the decision making and management control . • The participation is source of incentive, engagement, self control and control • In External side, the company image and its reputation constitute an important capital • Some international investors attach a great importance to the social engagement of the company

  20. Workshop 4: The involvement of the employees and the CSRElements of the debate • The social responsibility is an ethical, moral, cultural and economic issue • Beyond the rights and duties of the company, the citizenship implies an engagement in the life of the society • The competition is more focused on the capacity to attract, to keep and to develop expertise • The engagement and the fidelity of the employees can result from relatively simple and no expensive actions

  21. Conclusion • The company doesn't confuse itself with its manager. • it has an objective and a responsibility towards all stakeholders and the partners: The shareholders; the bankers; the state; the employees; the society; etc. • To understand it, it is equal to transform its governance • To not understand it, implies running corporate management risks, as well as legal risks for the managers their self !

  22. Thank you for your attention Mondher Ben Ayed Karim Ben Kahla TMI ESCT IACE-CIPE June 20, 2007

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