THE CONCEPT OF INDEPENDENT DIRECTORS IN FAMILY COMPANIES
In the era of family capitalism, family-run businesses play an important role in Morocco’s economic development, and include everything from the smallest companies to the largest groups. Their particularity lies mainly in the fact that they are entities in which the majority of the capital is held by members of the same family who occupy the most sensitive positions and sit on the governing bodies.
However, these structures, although apparently solid in appearance, are confronted with a set of problems specific to their “family business” nature. Indeed, a strong involvement of the family in strategic and organizational decision-making leads to a monotheistic vision of the mode of governance.
– Lack of diversity in governance bodies ;
– Recruitment based on family ties: in disregard of the technical skills and needs of society;
– Impact of emotions in strategic decision-making;
– Impact of family conflicts in the management of the company.
As a result, the management of family structures requires the adoption of an optimal system of governance to counter the barriers they face. Indeed, governance theories maintain that the quality of a deliberative body is judged by its composition.
From this perspective, good governance practices recommend the recruitment of independent directors within governance bodies (Board of Directors, Supervisory Board).
The independent director represents any director free from any situation that could create a conflict of interest and affect his or her independence of judgment.
The independent Director is free from any employee relationship and from any close family ties with controlling shareholders that would enable him or her to guarantee the effective exercise of independent and objective judgment.
Good governance is certainly a value system at two levels, strategic and control.
At the strategic level, the contribution of the independent director would be :
– The creation of value: The integration of new perspectives through a cognitive contribution by means of his technicality and skills;
– Diversity: Allowing better management and innovation efficiency.
In terms of control, the contribution of the independent director would be :
– Transparency: A better sincerity of the financial results, allowing the reinforcement of the confidence of the potential investors;
– Symmetry: The director would act as a counterweight to the stakeholders of the governance body. (Agency Dilemma).
Therefore, the involvement of an independent director in the management of family structures will ensure good governance within the family and improve performance in the interest of the company.
Following the amendment of the Law No. 17-95 relating to public limited companies by the Law No. 20-19, the law requires the appointment of one or more independent directors as members of the board of directors of companies making public offerings. Their number may not exceed one-third of the total number of directors and they must meet certain conditions laid down by the same law.
The law has also allowed public limited companies, other than those making public offerings, to appoint one or more independent directors to their board of directors, subject to compliance with the conditions set forth in the said law.
Written by Nezha BELKHADIR Legal Manager