Impact Study of Applying Governance Mechanisms on the Sustainability of Family Businesses to achieve the Kingdom of Saudi Arabia's Vision 2030

10.2478/bjlp-2023-0000012

Abstract

Diversification of income sources is one of the most important goals of the Kingdom of Saudi Arabia's Vision 2030, and family businesses are one of the most important sources of income, representing 60% of the national economy, and statistics of the National Center for Family Business in the Kingdom of Saudi Arabia indicate that more than 90% of private sector companies in KSA are family businesses. The corporate governance underpinned by a set of principles issued by the Organization for Economic Co-operation and Development (OECD) is one of the best mechanisms adopted to ensure the sustainability of family businesses due to governing principles that regulate the relationship between the segments of ownership and management. Given the importance of family businesses and their influential role in the journey of the country’s economic growth, the governments, especially the government of KSA, have set rules and controls to be considered to ensure the continuity of these businesses due to their influential role in economic development. The Ministry of Commerce and Industry believes in the importance of family businesses and their contribution to the national economy and their leading role in the business community. The Ministry has issued a Governance Guide for Family Businesses that includes the principles and controls that family companies shall observe to ensure their sustainability and the regular transfer to other generations of the family businesses (Governance Guide for Saudi Arabian Family Businesses, 2013, p. 4). Hence, we set out to do this research in order to study the impact of applying governance mechanisms on the sustainability and continuity of family businesses, and we concluded that there is a relationship between the application of governance mechanisms and the sustainability of family businesses in a way that ensures a smooth succession of generations.