CHAPTER 4 Inside family-owned and state-owned enterprises

State-owned enterprises (SOEs) and family-owned enter-prises (FOEs), which dominate in most emerging markets’ economies, can be difficult for journalists to penetrate.

Their structures may mimic those of publicly traded companies, with boards of directors, similar management structures, published financial reports and shareholders. Many SOEs and FOEs are listed on stock exchanges.

But these companies may operate with few checks and balances and limited disclosure, making it tough for journalists to unravel complex internal operations.

Increasingly, international watchdog and financial organizations are pressuring SOEs to operate more like public companies, especially when it comes to disclosure.

In the Middle East, for example, there is increasing inter¬est in expanded transparency for FOEs and SOEs. Financial experts observe that SOEs and FOEs are critical to the economy, yet in some cases, they operate without adequate internal controls and proper oversight.

“Private companies and family-owned enterprises (FOEs) constitute the backbone of the corporate sector and account for a large fraction of employment. It is this sector that needs to grow if the region is to tackle the unemployment crisis and create jobs,” says Dr. Nasser Saidi, chief economist and executive of the Hawkamah Institute for Corporate Governance in Dubai.

The organization of family firms can take various shapes:

  • Wholly owned and managed by founders or their families

  • Public or private companies in which the founder’s family has a controlling stake and a leading role in executive management as well

  • Companies in which families still have a significant influence