In family owned businesses, the owning family’s
values and culture often translates into the
corporate culture of an organization. How active
was the role of the Bin Mahfouz family, i.e., the
owning family, in actual implementation of
SEDCO corporate governance?
I have worked with the Bin Mahfouz family for more than
22 years. They really are a remarkable family. They are what you might these days call - responsible investors. In
their roles as owners, as board members and as trustees of
their business and future generation, they were effective
and far sighted.
Responsibility is in their DNA, and this manifests itself
in their sense of duty of loyalty, duty of care as well as in
candor. There is a high degree openness and dialogue –
people are free to discuss things, and the chairman is very
accessible. I would say that they have a culture of listening,
and listening is a key skill in corporate governance. And
this has helped the transformation of SEDCO by building a
platform for an effective governance framework.
Together we looked at what makes family businesses
more sustainable, and what are potential risks for the
long term. They view good corporate governance as
a great tool for sustainability encompassing both risk
management and better performance. They have been
pushing the separation of ownership from management
by themselves, by hiring the best people (directors and
executives), and I believe they are very disciplined about
this principle. I would say that these are deeply rooted in
their values.
Let us move to the boards and subsidiary
governance. As you mentioned, Hawkamah
worked with SEDCO and we were impressed by
the openness of the boards and their competence.
How did this come about – what, in your view,
were the crucial pillars in the process? And why
did you set up boards in the first place?
The setting up of the boards was quite natural for SEDCO
given the values of the owners and their long-term view
as I have just described, recognizing the benefits of
openness and discussion in decision making. We believe
that good boards drive performance and instill a culture
of accountability and controls.
Firstly, we focused heavily on getting the best people for
the boards. Secondly, with the Chairman’s support, who is a
remarkable and wise person, we managed to focus the board
on the right priorities, and this was reflected in their agendas
– i.e., strategy, risk management, performance reporting,
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succession planning and sustainability. We encouraged open
debate and high degree of stakeholders’ engagement.
We also focused on empowering the boards by providing
them with clear mandates. As part of this process, we
felt it was important to appoint independent chairmen.
We hired Hawkamah to ensure that each board member
was fully aware of their role and responsibilities. And as a
result, the companies are much more focused because of
these measures than they were when all the subsidiaries
were reporting to the CEO of the parent company. The
proof of this can be seen in the results and performance of
the companies. In some cases, the profits have quadrupled.
It seems to me that your corporate governance
efforts were very much focused on instilling the
right culture.
Absolutely. When I assess a company, I look at three
things. The first one is leadership. The second is strategy.
But the third one - culture, is the most important. There
is a saying that “culture eats strategy for breakfast”. If
you don’t get the culture right, no matter how good your
strategy is, the company will not perform. Culture is
about doing the right thing. Doing the right thing has to
come naturally rather than having to open up a manual
and read about various policies and procedures. And this
culture has to come from the top, from the board level,
but ultimately from the owners. And at SEDCO it was very
much the family values and culture that were translated
into the business culture.
You are a board member of number of different
types of companies – but you are also from the
academic world – how would you compare the
University culture with the boardroom dynamics
of businesses?
It offers an interesting comparison. On one hand, many
universities are governed very much like a corporation.
They are essentially focused on the delivery of services,
regardless whether the university is for profit or not for
profit, and ensuring the quality of those services. But a
university culture is typically very collegial and more
heavily governed. Decision making in universities is slow.
It takes a long time to debate major decisions, which are
typically made through councils such as the Department
Council, the Faculty or College Council, and then the